I know that the value of gold is determined by the banks but what are their calculations?
Say hypothetically a meteorite with 10,000 tons of gold crashed in the middle of the US. We know the value of gold would go down, but by how much and how is that calculated?
In: Economics
I think by far one of the major educational hurdles in this country is people being under the impression that the value of things is “set” by someone or something who is in charge, and if we can just get them to change their minds then we can force them to make the “right” things more or less valuable. Why is gold worth so much? Why are athletes paid so much? Why aren’t garbage men paid more? Why are healthy things so expensive? Diamonds are just rocks stupid, etc…
The value of things depends solely on the demand for the thing, and how much of the thing there is to supply that demand. More people want something, the value goes up. Less people want something, the value goes down. If there is not much supply compared to the demand, value goes up. Too much supply and too little demand, value goes down.
It’s the same with stocks, gold, companies, jobs, food, salaries, etc…
Things are worth what people are willing to pay for it. End of story, full stop, period. If someone will exchange you something for something else, that’s the value. That’s how the market functions. Once that stops being the benchmark then everything quickly gets out of whack.
Latest Answers