Reply to post: Re: But today I'm a reformed character

Re: But today I'm a reformed character

I don't think you have the right handle on monetary policy there. Let's take this point by point:

"The notes that are printed by the treasury cost about 7 cents or about 6 pence to make...subtract that and the "usery" that the central banks charge for essentially loaning the money to a government who issue's the paper money and you have what the treasury/government make on actual currency."

That would only be the case if the treasury simply ordered notes printed up and started spending them. But they don't do that. The supply of physical currency is strictly controlled by various instruments of the government. Not that they couldn't start doing that, but the U.S. government, the one under discussion, doesn't and hasn't. If they did, then trust would indeed be lost, inflation in dollar-denominated markets would spike, and people would start using other currencies for international trade.

"However this is less than 10% of "money" the rest is virtual and is worth more or less what people want to believe its worth.... And are alluded to as financial instruments..."

No, it's worth what people as a whole have decided it's worth. If I decide my investments are worth ten times what they are actually worth, I won't get any more money. People disagree on the actual worth of the things, but that's why we sell things we think are worth less than other people think they're worth.

"As an example there is now. More "money" in derivatives than all the currency ever made, minted, printed or bartered for what there's a record for."

That's true. But many of those securities are in some way tied to things that aren't money. For example, stock in a company technically is backed by the assets of that company, including things that aren't money, like code written by the company or the physical items owned by that company.

"The reason the dollar is "believed" to have "value" is because energy can only be bought and sold in $ as mentioned above... The problem is that this distorts the value of the $ and devalues all other currencies...."

Energy can be bought and sold in any currency you like. The prices are usually stated in dollars because that's convenient, but dollars are not universally used. In fact, there are certain parts of energy markets where the money used is euros, because the participating governments or companies find that more convenient.

"The danger is that a systemic failure of US economy will knock through other markets...

ie the last "credit crunch" which by a large factor the was because of IGI was unable to cover what they had underwritinen in toxic credit default swaps."

That's very true. But that can happen no matter what country was involved. If China's economy collapses, we'll feel it here. And although many American financial companies dramatically worsened the severity of the 2008-2009 financial crisis, companies in other countries also contributed.

"I'm not sure how you perceive value but if you use it as a measure of what you can buy in a store ie purchasing power then the value is about 52 cents as the rest will be taken up in interest, duties, tax and fluctuations in the fx markets"

Yes, we usually decide that value is ultimately purchasing power. And your number doesn't make sense. When you purchase something, the tax and tariffs are part of the price you pay, which they tell you. So although your money goes both to the store and the government, the value is still one dollar. Not to mention that, even if you do decide to determine the value of a dollar based on the amount of the dollar that goes to the seller, the value will be very different depending on where you're spending it and what you spend it on. If you spend it in the United States on an item where the state has no sales tax (E.G. food) and which hasn't been imported or has no tariff, then you pay much less than if you spend it in a country which uses another currency (you pay for the eventual exchange into the local currency), which has a higher sales tax, and which has paid a tariff on the item. This is the reason we don't decide the worth of a dollar by who gets each part of it; we decide based on the price of the item and how many dollars need to be paid to obtain the item.