A very basic business question.

[BGARK]

Absolutely, well put.

It is the "add value" bit that is important, if we keep importing people with no skill and not training our children, we too will eventually go backwards and this country will become poorer. Who is "adding value" to anything these days?

Accountants, Lawyers, Bankers (IT people ) etc are all lovely people no doubt but they are simply "tools" in the grand scheme of things.

[Dr Jekyll]

trashbat said:

A fundamental part of what Dr Jekyll has been arguing is that because we pay for things in international markets using our own sovereign currency, the same value must somehow come back again like a racing pigeon and be spent here, on account of it being otherwise useless, so it doesn't matter if you buy everything from abroad.

This is obviously dim,

It is accurate to say that the currency comes back. It would indeed be dim to say that you can import everything and export nothing, but I didn't say you could. I specifically said that you can't, that exports are exchanged for imports.

trashbat said:

but if we have to get into it, it forgets what contemporary money actually is - a token of no inherent value, whose worth is decided by the market based on what your economy is doing. And if your economy is not adding value to anything, thus not growing, but instead handing wealth over to other economies that do, then it's not going to be worth very much any more.

Well obviously an economy producing nothing is going to get into trouble. As I already said an economy gets rich by producing stuff people want to buy. This does not alter the fact that the currency used to buy imports comes back via exports.

As a matter of interest, what do you thnk happens to sterling used to pay for imports?

[ATG]

The "contemporary money" comment is in danger of being dim insofar as the usual alternative proposed is something like the gold standard. This fails to recognise that gold has no fixed and intrinsic value either. The value of gold-standard money relies on precisely the same underpinning as a "contemporary" currency; people's perception of its value - nothing more, nothing less.

[trashbat]

Dr Jekyll said:

Well obviously an economy producing nothing is going to get into trouble. As I already said an economy gets rich by producing stuff people want to buy. This does not alter the fact that the currency used to buy imports comes back via exports.

You claimed that buying an entirely German car would help the British economy, and later, you claimed that buying European gadgets would help the British gadget industry just as much as if you'd bought them from a domestic source. Neither are true, which should be obvious.

Dr Jekyll said:

As a matter of interest, what do you thnk happens to sterling used to pay for imports?

On the whole, an intangible and complex set of pass-the-parcel trades that noone understands in its entirety, somewhat like the bad debt of subprime mortgages that caused banks to fail. That's why no specific party to a transaction is quite so bothered about the immediate direction of the economy in relation to the tokens the other has just handed over, because they don't have to hold on to said currency for very long.

But make no mistake: those notes in your wallet are worth what the rest of the world agrees they're worth. They're not backed by X amount of gold, or edible, or good for keeping you warm.

[trashbat]

ATG said:

The "contemporary money" comment is in danger of being dim insofar as the usual alternative proposed is something like the gold standard. This fails to recognise that gold has no fixed and intrinsic value either. The value of gold-standard money relies on precisely the same underpinning as a "contemporary" currency; people's perception of its value - nothing more, nothing less.

Gold has some inherent value, and if for whatever reason it weren't gold, it would be something else like crude or wheat. I'm not going to pretend it's that simple; for example, you could claim gold is of inherent value today because of the electronics industry, but as you implicitly identify, the electronics industry relies on global growth and demand that falls away as soon as you start to worry about food on the table rather than the next iPhone. But it is worth something, whereas as fiat currency, not so much.

The main difference is that those tangible standards are of roughly common global value. Everyone on the planet has a use for gold or oil, not at an equal personal level but it quickly levels out. Not everyone feels they have a use for pound sterling or any other particular arbitrary currency, just like shares in a company. What you do or are projected to do, rather than what you have, begins to control your value.

[Dr Jekyll]

trashbat said:

Dr Jekyll said:

Well obviously an economy producing nothing is going to get into trouble. As I already said an economy gets rich by producing stuff people want to buy. This does not alter the fact that the currency used to buy imports comes back via exports.

You claimed that buying an entirely German car would help the British economy, and later, you claimed that buying European gadgets would help the British gadget industry just as much as if you'd bought them from a domestic source. Neither are true, which should be obvious.

I said neither. I said that compared with leaving your cash under the mattress buying an entirely German car would benefit the economy. And that importing French gadgets gives the Eurozone the wherewithal to buy British gadgets. If the French do buy a British gadget I don't see why it's particularly less beneficial than a domestic sale.

[ATG]

trashbat said:

old has some inherent value, and if for whatever reason it weren't gold, it would be something else like crude or wheat. I'm not going to pretend it's that simple; for example, you could claim gold is of inherent value today because of the electronics industry, but as you implicitly identify, the electronics industry relies on global growth and demand that falls away as soon as you start to worry about food on the table rather than the next iPhone. But it is worth something, whereas as fiat currency, not so much.

The main difference is that those tangible standards are of roughly common global value. Everyone on the planet has a use for gold or oil, not at an equal personal level but it quickly levels out. Not everyone feels they have a use for pound sterling or any other particular arbitrary currency, just like shares in a company. What you do or are projected to do, rather than what you have, begins to control your value.

A currency is only worth what you can convert it into. Being told you can convert it into gold at a fixed rate tells you nothing at all about the rate at which you can convert it into the myriad other things that you actually need. If there is a shortage of biscuits, the price of biscuits will go up regardless of whether it is priced in sterling, gold or cans of WD40. Gold standards of old were fig leaves to give people some irrational basis to have confidence in their currency. If people think gold had value, great. If people think sea shells have value, great. Some culture have considered both to be worthless, others have used them as money.

[BGARK]

Look around you right now, at all the physical objects that are staring you in the face that most people take for granted.

Person to person, country to country, right back to the raw materials and minerals dug out of the ground, without these "things" there would be no currency as we know it.

[ATG]

BGARK said:

Look around you right now, at all the physical objects that are staring you in the face that most people take for granted.

Person to person, country to country, right back to the raw materials and minerals dug out of the ground, without these "things" there would be no currency as we know it.

No, you wouldn't have any economic activity without this things. You don't need a currency at all to have economic activity. Not at all sure what your point is.