What are currencies really worth? | Forex Factory

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What are currencies really worth?

  • #1
  • First Post: Jan 7, 2009 3:32am Jan 7, 2009 3:32am
I've been wondering lately what the real value of various pairs are.
If you got all the Euros in the world and divided that by all the US Dollars, what figure would you get?
I wonder how this would compare to leveraged amounts, ie borrowed Euros and US Dollars.

Does anyone know where I could find this information?

Cheers
  • #2
  • Jan 7, 2009 6:57pm Jan 7, 2009 6:57pm
I don't know how you could work that out especially as the US has stopped issuing M3 data.
Go to wikipedia and look up money supply it should give you a few ideas and links.

Are you talking about ..purchasing power parity.

That is something to consider but as the author in the link says it is long term (up to 4 years)

So looking in the link example it seems the Swiss Franc is a long way from parity with the USD..but has it reached its outer limit yet?

Purchasing parity data seems to make COT data seem virtually instant

There is also a link to the OECD that may be of use

http://fx.sauder.ubc.ca/PPP.html
The greatest enemy of a good plan is the dream of a perfect plan.
  • #3
  • Jan 7, 2009 7:36pm Jan 7, 2009 7:36pm
Currencies used to be backed by gold and where worth a certain amount of it.

Now currencies are backed by...nothing thus making them fiat currencies.

So currencies are essentially worthless.
Not all sins are created equal
  • #4
  • Jan 7, 2009 10:58pm Jan 7, 2009 10:58pm
Quoting Jay Walker
Currencies used to be backed by gold and where worth a certain amount of it.

Now currencies are backed by...nothing thus making them fiat currencies.

So currencies are essentially worthless.
Well, they are worth something compared to each other, which is our bread and butter here. Otherwise yes, they are useless in their own domestic sense. They are merely mediums of value that make it much easier to do trade than lugging around that bushel of wheat that you want to trade for those shiny miller lite cans.
  • #5
  • Jan 7, 2009 11:02pm Jan 7, 2009 11:02pm
Quoting Skyhook
Well, they are worth something compared to each other, which is our bread and butter here. Otherwise yes, they are useless in their own domestic sense. They are merely mediums of value that make it much easier to do trade than lugging around that bushel of wheat that you want to trade for those shiny miller lite cans.
It's our bread and butter allright. The only reason why it's worth something is because we give that piece of paper some worth and we decided as a society that we don't like carrying bushels of wheat. But in the end, we are trading pieces of paper, some which we decided have a higher value than others. In most cases, we're not even trading the pieces of paper but a non-tangible, electronic version of it.

It sounds like some Hippy talk I know but if we sit down and really think about what we're trading, we realize that the only relevance it has is the one we give it.
Not all sins are created equal
  • #6
  • Feb 18, 2009 1:12am Feb 18, 2009 1:12am
Quoting Jay Walker
Currencies used to be backed by gold and where worth a certain amount of it.

Now currencies are backed by...nothing thus making them fiat currencies.

So currencies are essentially worthless.
Yep, lucky to be worth the paper it's printed on.

Nixon killed it years ago.

http://en.wikipedia.org/wiki/Nixon_Shock
  • #7
  • Feb 18, 2009 2:28am Feb 18, 2009 2:28am
I have friend that said to me, go to McDonald and see what is the cost of the most expensive sandwich [McRoyal or so] and compare it in different coutries. That's the real value of money.

BTW how much does it cost in US?

Here's Japan:
http://img6.travelblog.org/Photos/57...d-s-Menu-1.jpg
[JPY 640]

And British
http://www.makeupyourownmind.co.uk/q...mac/#question1
[GBP 1.99]

France:
http://subjunctive.net/photoblog/200...roque-mcdo.jpg
[EUR 3.05]

And the long stoy mad short [not sure is it up to date]
http://www.oanda.com/products/bigmac/bigmac.shtml

And kinda WTF bugers on the right side of menu
http://chuck-lee.com/travels/wp-cont...-2007/menu.jpg
  • #8
  • Feb 18, 2009 10:25am Feb 18, 2009 10:25am
"What are currencies really worth?" - nothing more than the accepted, majority's perception of their worth. If the perception weakens or goes away entirely, currency is worth nothing.
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #9
  • Feb 18, 2009 12:14pm Feb 18, 2009 12:14pm
Seems like you are looking for the "Real Exchangerate" which is:

http://upload.wikimedia.org/math/7/9...64e4bc4519.png

With:
e = nominal Exchange Rate
P = Price Level in Country A
P*= Price Level in Country A

Example:

EUR/USD = 1,57
Price Level in Europe is set to 100
Price Level in USA is set to 120 (20% of Europe)

Real exchange rate is : 1,30
  • #10
  • Feb 18, 2009 12:34pm Feb 18, 2009 12:34pm
Quoting StockKJay
"What are currencies really worth?" - nothing more than the accepted, majority's perception of their worth. If the perception weakens or goes away entirely, currency is worth nothing.
I read an article about the Iraqi Dinar. It seems the paper used in the Dinar is excellent material for counterfeiting. People buy it, bleach it out and make more valuable currencies with it. So in the case of the Dinar, it's worth at least as much as the paper it's printed on.
  • #11
  • Feb 18, 2009 3:26pm Feb 18, 2009 3:26pm
An interesting thread so far, thanks for the imput
  • #12
  • Feb 18, 2009 5:24pm Feb 18, 2009 5:24pm
look at the big mac index:

http://www.economist.com/markets/ind...ry_id=13055650

the idea is that, depending on the price of the big mac, that's how much the currency is worth. just divide by the right currency or whatever to get the true value. I'm lovin it!
  • #13
  • Feb 18, 2009 6:03pm Feb 18, 2009 6:03pm
Similar here before WWII there were 1/100 zoty coin and one guy was arrested for piercing it with nails and use as a replacement of washer [is it correct word?] - because proper one were for 5/100 zloty


In my opinion the money are currently backed with mortgaged properties.
The bigger hauses value the bigger market value.

In this conditions USD is better than EUR or GBP, because you have plenty of cheap houses in the US. One earthquake or other diaster can blow just a little of it. [It's cruel, but in terms of market that's how do I see it]
  • #14
  • Last Post: Feb 18, 2009 6:06pm Feb 18, 2009 6:06pm
Quoting Marrethiel
I've been wondering lately what the real value of various pairs are.
If you got all the Euros in the world and divided that by all the US Dollars, what figure would you get?
I wonder how this would compare to leveraged amounts, ie borrowed Euros and US Dollars.

Does anyone know where I could find this information?

Cheers
If you could find this info (doubtful) it would change before you could even act on it.
And then change again ........... and again.
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