the value of money Flashcards
for krypto to become money it must
-SOV
-MOE
-UOA
-standard of deferred payment
it is not MOE because it is not accepted as payment everywhere
market value/price giving it up will yield you
profits
what is an assets intrinsic value is given by
the present vaue of all benefits associated with its indefinite, future ownership
IV is
owning
nominal IV
owning house then renting it out
real IV
living in house you own
what is best way to utilize house as asset
living in it then renting out a room
do stocks have real IV
very little real IV unless you own a lot
what is real IV of stock
owning a lot of stock (over 50%) which gives you decision making power in company
nominal IV of stock
money stock makes you dividends
real IV of art
eye of beholder/joy you get looking at it
nominal IV of art
if you own Mona lisa, someone is willing to pay to borrow it/see it
main value of cash is
trading it not holding it
real IV of cash
burning it
nominal IV of cash
nothing because $ loses purchasing power, physical so does not acrue interest
does cash have IV
no
nominal MV
what youre selling someone buys
real MV
money = way to buy goods + services
par
exchange rate for 1:1 (ex in US economy despoits and cash)
2 kinds of money that don’t exchange as par
dollar + bitcoin
exchange rate
nominal market value of one currency expressed in terms of another dollar
interest rate is
echnage rate between current dollars and future dollars
why is it banks best interest to accept dollars as payment
because it has legal tender
Do US businesses have to accept USD as payment
no (federally speaking no mandate)
why do we care dollars have nominal market value
ultimately to echnage for goods and services wnat other dollars because they have makret value
legal tender
less echange rate risk/less volatility like bitcoin
whichof the four functions of money is legal tender related to
SDP - can pay your debts with it
leans to it bieng mean of exchange
keynes three main motives
transaction, precautionary, speculative
trasnaction motive
need money
precuationary
hold near money like assets
speculative motive
money = bad SOV long term
-don’t hold money like that
why are people less willing to hold as much money
because interest rates = people will buy tsocks iwth it
why does dollar bill have no IV
niether yields a future cash flow nor any sort real utility
as long as it has market value it is
bubble
whats the risk when MV exceeds IV
you know market vaue level is higher than IV but still want to buy becaise you dont know when bubble will pop, so hope MV will continue to go up. Risk is if bubble pops right away especially if you know IV is much lower
what would you do if MV falls below IV
buy because price will go back up if you believe IV will revert backp
paul krugman bubble
cash is not a bubble because it is not based on inconsisnte view of the future
who has most accurate view of bubble
robert shiller
robert shiller bubble
-bubble is typically positive
-spplies to game stop, bitcoin early on, does not apply to money
formal def of bubble
MV>IV
informal bubble def
-p kriggy
-dr doom
-inconsistnet views about future
-social epidemic featring successive feedback loops
