Cash is not trash
- From: Chim <ChimS1@xxxxxxx>
- Date: Mon, 8 Dec 2008 10:49:53 -0800 (PST)
http://www.phnompenhpost.com/index.php/Business/Your-money-matters-Currency-money-and-exchanges.html
Your money matters: Currency, money and exchanges
Written by Trevor Keidan
Monday, 08 December 2008
Your Money Matters
Currency, Money and exchanges
Comment
--------------------------------------------------------------------------------
By Trevor Keidan
PHNOM PENH - "A rich man is nothing but a poor man with money"- so
said the famous American actor and comedian WC Fields.
And although he might have been right, the fact of the matter is that
most of us need money to be able to live and to do the things we want
to.
But how many of us actually know how money really works and where it
comes from?
How many of us know how the value of money and currencies are
calculated?
The reality is that most of us never give money a second thought - we
just take it for granted as we go about our daily business.
According to the Merriam-Webster online dictionary, money is defined
as "something generally accepted as a medium of exchange, a measure of
value, or a means of payment".
For most of us money (or currency) is a unit of purchasing power that
we normally put in our pockets or deposit in our bank accounts.
We think of money and currency in terms of coins and paper bills that
we use to pay for goods and services. It can also be a number on the
statement from our bank.
When it comes to paper money, it was actually the Chinese who invented
the concept in their use of skins, bark and parchment with imperial
seals as currency.
It was then popularised and put in to serious use in Europe by the
French in the 1700s.
They issued paper money backed by gold or silver.
The idea to back the money with an amount of gold came from French
blacksmiths who began the practice of giving people a receipt for
their gold.
The bills could be exchanged for the relevant amount of gold at a
later date.
This practice of "backing" paper money by the equivalent amount in
gold became known as the gold standard. It remained the standard until
1971, when the Americans discontinued the backing of the United States
dollar by an amount in gold.
All other currencies followed the United States and left the gold
standard.
Market forces
So, today what does guarantee the value of our riel, US dollar or
euro? The short answer is ... nothing at all.
The value of our riel, US dollar or euro is decided by market forces.
This system determines the value of the money that we have in our
pockets and bank accounts, as well as its value in relation to other
countries' currencies.
--------------------------------------------------------------------------------
The reality is that most of us never give money a second thought.
--------------------------------------------------------------------------------
When it comes to currency exchanges, there are two systems in play -
the floating currency and the pegged currency. In general it is the
more immature economies that will be pegged - usually to the dollar.
The more mature market economies will use the floating exchange rate
system.
The idea behind the floating exchange rate system is that it is put to
use in stable economies.
The disadvantage is that if there is instability, there will be wild
swings in the economy.
And as we are all aware, there is a lot of instability in countries
across the world right now with the global financial crisis.
Investors have been reacting to this worldwide instability by buying
up the US dollar and Japanese yen.
They have also been dumping - or selling off - the euro and the
British pound because of fears that Europe and Britain are more
exposed to the financial crisis.
As a result, the dollar is at two-and-a-half-year highs against the
euro and six-year highs against the pound. The yen, on the other
hand, is at a 13-year high against the dollar, despite the dollar's
strength! So, what's next we might ask?
There is some speculation that the dollar could continue to rise over
the coming months, but its rise could also be affected by efforts to
settle the United States' huge budget deficit.
As for the yen, there is concern over its excessive volatility and
speculation that the Japanese government might have to step in to halt
the surge.
No matter what happens to the dollar and the yen, it appears that
currencies worldwide will not escape the financial crisis unscathed.
Countries' currencies are worth keeping an eye on - they are good
indicators for how particular country's economy and companies are
doing.
Remember ... Your Money Matters!
--------------------------------------------------------------------------------
Trevor Keidan is managing director of Infinity Financial Solutions, a
firm providing impartial, tailor-made personal financial advice to
clients in Cambodia and Southeast Asia. Should you wish to contact
Trevor, please send an email to tkeidan@xxxxxxxxxxxxxxxxxxxxxxx e-mail
address is being protected from spam bots, you need JavaScript enabled
to view it
.
- Prev by Date: a Calmette emergency line operator said that prank calls make up 80 percent of her incoming calls
- Next by Date: The U.S. Supreme Court turns down a request by a New Jersey man who says Obama can't be president because his father is from Kenya
- Previous by thread: a Calmette emergency line operator said that prank calls make up 80 percent of her incoming calls
- Next by thread: The U.S. Supreme Court turns down a request by a New Jersey man who says Obama can't be president because his father is from Kenya
- Index(es):
Relevant Pages
|
