Since money basically represents the confidence in the capacity of a countries economy to provide you with a service or good would the value of say the US dollar fall if everyone quit working overnight?
In: Economics
Money is an exchange and store of value. It’s only worth is in the two people involved in the exchange agreeing that it does have value. So if everyone quit working people could still use money they had in order to buy things from each other as long as they accepted it has value.
It’s kinda the opposite of that, actually (at least according to one theory of where a currency gets its value). The reason your money is worth anything can be seen to be derived from the fact that you pay taxes in that currency. So as long as the entity issuing the currency is there to collect taxes, the currency is useful.
That is not what money represents. Money which is tied to some material represents a specific quantity of that good. Money not tied to a material good (fiat money) gets its power directly from the government in the sense that the government will enforce the value and power of that money.
It doesn’t represent “stock” in a country. Having money gives you no legal ownership of the country, nor does it entitle you to any special rights or privileges by virtue of having it.
There is no telling what the impact to the economy would be if everyone stopped working other than to say “chaos.”
I’m some ways yes, in other ways no.
First- no country would be ok if everyone quit overnight. Every country would fail.
Second, it’s pretty rare to “invest” in a country’s money. People mostly don’t like to just hold dollars or euros or yen. It’s much easier and better to hold bonds- government debt (or corporate debt). You might think that you’re an investor in dollars since you hold them in a bank account. But your more likely to actually be negative on net in dollars- you might have $5000 in a back account, but owe $400,000 on a mortgage, or $10,000 on a car loan, or $50,000 on student loans.
But money’s value is related to the confidence in a country- or more likely related to confidence in that money. A country with a healthy economy is more likely to keep their money stably valued- but that’s not always the case. Some countries intentionally devalue their money to make exports more competitive, and some countries may arbitrarily have high or low amounts of money outstanding.
And a small wealthy country might decide to have little money issued and mostly transact in another countries currency- not because they’re poor, but out of convenience.
money’s value comes from the confidence in said value and the system that establishes the value. I have $5. I know I can go to the store and use it. That’s confidence. The relative value of that money comes from a multitude of other factors.
If stores could legally decide to stop accepting money, then I lose confidence in the money SYSTEM. money loses it’s relative value. stores that do still accept it want more now for the same stuff, inflation. on and on we go into the world of hyperinflation.
yes, the value of the US dollar would fall if everyone stopped working overnight but it would be because that would spark chaos in regard to supply and demand.
You’d tighten up your purse strings because you’re not earning money any more, so you’d value $1 more now than you did yesterday. This would slow spending which would at least theoretically make money more value. But there’d be crazy toilet paper hoarding and stuff like during covid which would cause inflaton. Nobody is working anymore (producing stuff) so even if demand settles down you eventually have 0 supply at which point having money is completely useless because there is nothing to buy anyway.
of course, there would be stuff “to buy” beyond money being useless but since nobody is working eventually even a barter system doesn’t work. so we just start stealing shit from each other instead, until eventually we come to our senses and realize we can make the things we need (aka work) but we can’t make EVERYTHING we need, so we start reforming society. barter system comes back. we realize it’s hard to determine how much a car costs in the form of chickens, so we re-establish a money system, and here we are full circle back at where we started.
We actually live in a debt based society. They print money at will and depend on sucking the life force out of the middle class with interest.
Most of the top businesses all cannibalize and own each other. Very few people at the top control the money. The Federal Reserve is actually owned by individuals and they fund our government. Think about what that means.
Confidence in a country would be shown by the value of their government ’bonds’ (you lend money to the government and they pay you interest on the loan you gave them). As with most investments, the higher the return, the greater the risk (of not getting your money back).
You also have intergovernmental loans which, as the name suggests, are just loans either from the World Bank or between governments.
If you break the analogy down to a situation between friends, if your friend packs in work on a whim, are you likely to give them money? No! They’re not to be trusted to repay it.
If all the US downed tools in your fantastical scenario, the rest of the world will look askance, decide it was not to be trusted and everyone would start pegging to the Euro instead.
Not really, owning currency conveys you absolutely no control over emission of that currency. If a central bank of the country decides to they can make your money worthless and by default they are doing it constantly little by little. Currency is a medium of exchange, a intermediate exchange token to so you wouldn’t have to barter your labor for things you need directly. You can sort of look at money as a IOU of labor, but not as a stock of a country. You don’t get to own a country no matter how many of it’s IOUs you own.
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