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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.)
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Never mind, then.
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... How do I break this to my investment portfolio?
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(and I'm laughing way too much here, now!)
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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.