My Irreversible Point of View

Unfortunately freedom of speech is not totally respected in some parts of the world. That is why I decide to express my point of view in the name of those who are not allowed to express themselves. STAND UP, SPEAK UP! STOP THE TRAFFIK

Sunday, August 27, 2006

Money and business

Imagine a world without money. In order to conduct an economic exchange, the goods being exchanged would have to be brought together in one place and traded in quantities reflecting the relative values the parties placed on them. This kind of trade, involving no money, is called barter. It still occurs sometimes when monetary systems do not operate well.
The unit of currency used in an economy is arbitrary, but it must have roughly the same value for different people. With money, goods can move directly from sellers to buyers without having to meet in a central place. In a world economy, goods can flow freely among many states. Different buyers and sellers place different values on goods, but all buyers and sellers place about the same value on money, so it serves as a standard against which other values can be measured.
Money itself has little or no inherent value. What gives it value is the widespread belief that it has value - that it can be exchanged for goods. Because it depends on the willingness of people to honor and use it, money´s value rests on trust. Governments have the job of creating money and of maintaining public confidence in its value. For money to have stable value, the political environment must be stable. Political instability erodes public confidence that money today will be exchangeable for needed goods tomorrow. The result is inflation.
Due to the nature of state sovereignty, the international economy is based on national currencies, not a world currency.


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