![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
Here's something that most of you probably don't care about, but it's something I've been wondering.
You ever hear of the Foreign Exchange Market? It's sort of like the stock market (more or less) except that instead of buying and selling stocks, you buy and sell shares in world currencies (sort of).
You can invest in, say, US Dollars. Just as you would a stock or a commodity. And if the value of the dollar is higher when you sell off that investment than it was when you bought it, you'll have made money. The value of the Dollar is determined, in part, by how many people have bought Dollars rather than, say, Yen.
And that's where you run into trouble. Because there's no objective measure to say how much a Dollar is worth. It's worth a dollar. And, as things go, that may mean it's worth half a UK Pound or a hundred Japanese Yen or whatever. But it's all relative. There's no single measure you can use. All you can do is compare it to another currency.
So, what I've been wondering is this:
Why not invent a currency? Call it the Credit. Or the Generic Monitary Unit. Whatever. And pick a value for it. Say, the price of a troy ounce of gold as of market opening on some arbitrary date. Or, for that matter, make it dynamic. Bloomberg has a chart with the relative values of 8 major world currencies. So let's say the GMU is worth the average of those 8 currencies. However much of currency X it takes to buy:
(1 US Dollar + 1 Euro + 1 Japanese Yen + 1 GB Pound + 1 Swiss Franc + Canadian Dollar + 1 Australian Dollar + 1 Hong Kong Dollar)/8
That's how many of Currency X it takes to buy 1 GMU. Currency X is worth the reciprocal of that in GMU.
Something like that. It doesn't matter, as long as you have a standard.
It doesn't change how the market works. It doesn't change how much any one currency is worth. If you have GBP and you want to buy USD, the relative value of the two is still what counts. (Though you can do it *through* GMU. If 1 USD = 0.75 GMU and 1 GBP = 1.50 GMU, then 1 GPB = 2 USD.)
But at least it gives you a simple objective value against which you can chart everything else. You can look and say, "Ah, the Dollar is up. Today it's worth .76 GMU." And it will make sense. You can look at the lines on the chart and see how the Dollar fared against the Pound and watch the trends of both currencies at the same time rather than only being able to track how much one is worth against the other.
It doesn't change much. But you'd think it'd be a useful tool.
So why doesn't anyone do it?
Anyone know? Anyone even have any suggestions of whom else I can ask? (Though I am going to "Ask The Experts" over at FT.com. For whatever that's worth. So to speak.)
You ever hear of the Foreign Exchange Market? It's sort of like the stock market (more or less) except that instead of buying and selling stocks, you buy and sell shares in world currencies (sort of).
You can invest in, say, US Dollars. Just as you would a stock or a commodity. And if the value of the dollar is higher when you sell off that investment than it was when you bought it, you'll have made money. The value of the Dollar is determined, in part, by how many people have bought Dollars rather than, say, Yen.
And that's where you run into trouble. Because there's no objective measure to say how much a Dollar is worth. It's worth a dollar. And, as things go, that may mean it's worth half a UK Pound or a hundred Japanese Yen or whatever. But it's all relative. There's no single measure you can use. All you can do is compare it to another currency.
So, what I've been wondering is this:
Why not invent a currency? Call it the Credit. Or the Generic Monitary Unit. Whatever. And pick a value for it. Say, the price of a troy ounce of gold as of market opening on some arbitrary date. Or, for that matter, make it dynamic. Bloomberg has a chart with the relative values of 8 major world currencies. So let's say the GMU is worth the average of those 8 currencies. However much of currency X it takes to buy:
(1 US Dollar + 1 Euro + 1 Japanese Yen + 1 GB Pound + 1 Swiss Franc + Canadian Dollar + 1 Australian Dollar + 1 Hong Kong Dollar)/8
That's how many of Currency X it takes to buy 1 GMU. Currency X is worth the reciprocal of that in GMU.
Something like that. It doesn't matter, as long as you have a standard.
It doesn't change how the market works. It doesn't change how much any one currency is worth. If you have GBP and you want to buy USD, the relative value of the two is still what counts. (Though you can do it *through* GMU. If 1 USD = 0.75 GMU and 1 GBP = 1.50 GMU, then 1 GPB = 2 USD.)
But at least it gives you a simple objective value against which you can chart everything else. You can look and say, "Ah, the Dollar is up. Today it's worth .76 GMU." And it will make sense. You can look at the lines on the chart and see how the Dollar fared against the Pound and watch the trends of both currencies at the same time rather than only being able to track how much one is worth against the other.
It doesn't change much. But you'd think it'd be a useful tool.
So why doesn't anyone do it?
Anyone know? Anyone even have any suggestions of whom else I can ask? (Though I am going to "Ask The Experts" over at FT.com. For whatever that's worth. So to speak.)
![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
From:
no subject
From:
no subject
oooh. something else I got from all his money info things... when you say "the dollar is up" it's always in comparison to something else, anyway. I don't know what they usually compare the USD to (I'm guessing the Euro), but over here, if we say "the dollar is up" it's in comparison to the USD.
From:
no subject
And yeah, I know you can only say the dollar is up or down compared to something. We don't have a definitive something here. It's always the Yen or the Euro or the Pound or whatever. Sometimes several - up against the Yen but down against the Euro or something like that.
That's why we need an objective measure. So you can put it all on one sensible chart. So you can actually just say that the dollar is up, and see how it did compared to everything else. The data is there. You can't dispute that some currencies are worth more than others, that when a currency goes up, it goes up, even if some other currency went up more. And it seems to me that being able to see and understand that could be a very helpful thing.
From:
no subject
I just asked the "expert" that I had on hand, and told you what he told me... which, when he explained how the whole thing works, made very little sense to me anyway.
You know... I don't think these money people are all that logical anyway, else they'd have thought of that and they'd be doing it. I guess.
From:
no subject
Never mind, then.
From:
no subject
From:
no subject
... How do I break this to my investment portfolio?
From:
no subject
(and I'm laughing way too much here, now!)
From:
no subject
Although... isn't the (Booster) Gold Standard a little outdated?
Or maybe it was outdated, but now it... No, wait...
Argh. Stupid time traveling financial standards.