But as you mention, the famous George Soros did manipulate the exchange with speculation, having a practical effect on the value of the currency. Thus showing that fiat money's value is heavily influenced by speculation, i am confused to where you stand on the issue now? I see contradictions in your original posts with what you write now, so please clarify if there's something i missed.
As you said earlier you had trouble even imagine how i could believe speculation being a factor, but now saying its obvious that it is?
As you said earlier you had trouble even imagine how i could believe speculation being a factor, but now saying its obvious that it is?
George Soros shorted the pound, just in case
But that's irrelevant since when I talked about the fiat value I referred to value, not price. Basically, price is what you pay, value is what you get. In this way, by value I mean the amount of goods which the unit of a certain currency can buy. If you consider the value of money (what you can buy with it), it will be hard to imagine how you can inflate it without expanding the real economy while keeping the amount of money in circulation the same. That would mean price deflation, and it is even more dangerous than inflation, but this is another question. To better understand what I mean think of the money value in terms of goods that you can buy with it. How are you going inflate this value by pure speculation?
You also wrote " I suspect there cannot be bubbles of that kind with fiat currencies. The examples you give refer to severe currency devaluations. Obviously, the latter have nothing to do with speculative bubbles, though the end result is essentially the same (i.e. dramatic loss of value)"
Well first of all, as i said earlier this was a case of hyperinflation. Hyperinflation is very connected to bubbles witch would dissprove that statement(IMO)
Well first of all, as i said earlier this was a case of hyperinflation. Hyperinflation is very connected to bubbles witch would dissprove that statement(IMO)
Hyperinflation basically means that the value of money itself collapses, but since bubbles in currencies rarely change the purchasing power of money, they are inconsequential to hyperinflation. Essentially, they are just short-term speculations when the price of money (in terms of other currencies) gets divorced from its value (in terms of goods it can buy). When the currency bubble bursts the price of money goes back to its real value (so called "fair price"), which is determined in the way I explained in one of my previous posts (namely, by the amount of money over the quantity of goods)
I mixed together the terms value and price, thats why i was confused. Thanks for clearing that up, it was interesting to discuss with you!
