Value of Currency is a Cultural Symbol
SUCHITOTO, El Salvador- Money has no inherent value. Money is only worth something because we say that it is. That is all there is to it.
It was good to be reminded again that money is just a symbol — it is just the proverbial finger pointing at the moon, not the moon itself. I spent two months trying to spend a recently minted US dollar coin in El Salvador without success. The currency of El Salvador is the US dollar, and the coin I tried to use represents the base unit of this currency, but I could not spend it: it had no value because the shopkeepers of El Salvador were not aware of the value of the particular symbol that I tried to cash in. Dollar coins are not popular in El Salvador — or any other country of the world — and, even after I explained that it was a proper US dollar, the shopkeepers refused to take it because they could not be sure that they could pass it on into the next stage of commerce.
Nobody wants dollar coins in El Salvador, they say they are worth one US dollar but they have no value.
Currency is just a cultural symbol like any other. All sense of value is a social agreement. If everyone knows that something is worth X amount then it will be worth X amount. Money has value just because people, collectively, say that it does. We teach ourselves that everybody wants certain things — the representations of the gold, silver, the crap in the national reserves — so that we have a basis of comparison to determine how much of this or that commodity we should trade for another.
If nobody wants something, then it has no value.
It is funny how stupid human intelligence has lead us to become, value for values sake alone is the rule of our planet. We want certain things that we teach ourselves that everybody else wants — and things only have value in direct proportion to how many people want them. The thing itself is often irrelevant, it is the idea of value that matters.
And this is how our economy works. Stocks rise and fall in value in relation to how many people either want or do not want them. Value is just a symbol, there is little inherently valuable about many of the things that are most prized — what use is the Mona Lisa, I wouldn’t hang that ugly woman up in my bathroom if I did not know that others would be willing to sacrifice so much for it.
Value is only determined by how many people want a certain thing. Nobody wants dollar coins in El Salvador. Few people want dollar coins in the USA either. In fact, if all the neglected dollar coins in US vaults were placed in a single stack, it would rise to a height seven times higher than the international space station. Dollar coins — perfectly good US dollars — lack value, even in America, because we are not yet accustom to what their symbol really means, we are unsure if others want them.
“Americans are creatures of habit,” Mr Moy told Congress. “They are very used to using the bill. They’re not used to using coins in regular retail transactions.”
The US Mint has also identified an economic “awkward moment” in retail transactions involving the $1 coin. The buyer is afraid the cashier will reject the coin and cashiers are afraid buyers won’t accept them in change, so both are disinclined to try.
Mint and Fed officials have also identified a vicious cycle.
Retailers will not stock the coins because they do not see consumers using them, while consumers will not use the coins because retailers do not stock them. –BBC News US Dollar Coins Unused
A US law in 2007 declared that a new round of “presidential” dollar coins are to be newly minted each year. These coins have the faces of dead presidents on them — most of whom nobody remembers anymore. But these coins have been virtually worthless, as retailers and banks refuse to stock them as they fear that they will have difficulty passing them on — they fear that they have no value because nobody wants them.
And they are correct, though they keep the cycle spinning.
At the current rate of these coins being minted, there will be two billion dollars worth of them sitting stagnate in national vaults by 2016. The vaults cannot move them, because the population is unsure of their value symbol — and a symbol only has value when the group that uses it knows what it means. As of now, people do not recognize the dollar coin as a value symbol that people want, and they have essentially become nearly worthless.
Currency is a cultural symbol