Money is as a Medium of Exchange-why?

Medium of exchange
From Wikipedia, the free encyclopedia

Definition[edit]
Money is the generally accepted medium of exchange and its most important and essential function is that it is a ‘measure of value’…[1][2] Hifzur Rab has shown that the market measures or sets the real value of various goods and services using the medium of exchange/money as unit of measure i.e., standard or the yard stick of measurement of wealth. There is no other alternative to the mechanism used by the market to set, determine, or measure the value of various goods and services. Just determination of prices is an essential condition for justice in exchange, efficient allocation of resources, economic growth welfare and justice.Money helps us in gaining power of buying. Thus, this is the most important and essential function of money. To be widely acceptable, a medium of exchange should have a relatively stable purchasing power (real value) and therefore it should possess the following characteristics:

Value common assets
Constant utility
Low cost of preservation
Transportability
Divisibility
High market value in relation to volume and weight
Recognisability
Resistance to counterfeiting

To serve as a measure of value, a medium of exchange, be it a good or signal, needs to have constant inherent value of its own or it must be firmly linked to a definite basket of goods and services. It should have constant intrinsic value and stable purchasing power. Gold was long popular as a medium of exchange and store of value because it was inert, was convenient to move due to even small amounts of gold having considerable value, had a constant value due to its special physical and chemical properties, and was cherished by men.

Critics of the prevailing system of fiat money argue that fiat money is the root cause of the continuum of economic crises, since it leads to the dominance of fraud, corruption, and manipulation precisely because it does not satisfy the criteria for a medium of exchange cited above. Specifically, prevailing fiat money is free float and depending upon its supply market finds or sets a value to it that continues to change as the supply of money is changed with respect to the economy’s demand. Increasing free floating money supply with respect to needs of the economy reduces the quantity of the basket of the goods and services to which it is linked by the market and that provides it purchasing power. Thus it is not a unit or standard measure of wealth and its manipulation impedes the market mechanism by that it sets/determine just prices. That leads us to a situation where no value-related economic data is just or reliable.[3][4] On the other hand, Chartalists claim that the ability to manipulate the value of fiat money is an advantage, in that fiscal stimulus is more easily available in times of economic crisis.

Requisites needed[edit]
Although the unit of account must be in some way related to the medium of exchange in use, e.g. coinage should be in denominations of that unit making accounting much easier to perform, it has often been the case that media of exchange have no natural relationship to that unit, and must be ‘minted’ or in some way marked as having that value. Also there may be variances in quality of the underlying good which may not have fully agreed commodity grading. The difference between the two functions becomes obvious when one considers the fact that coins were very often ‘shaved’, precious metal removed from them, leaving them still useful as an identifiable coin in the marketplace, for a certain number of units in trade, but which no longer had the quantity of metal supplied by the coin’s minter. It was observed as early as Oresme, Copernicus and then in 1558 by Sir Thomas Gresham, that bad money drives out good in any marketplace (Gresham’s Law states “Where legal tender laws exist, bad money drives out good money”). A more precise definition is this: “A currency that is artificially overvalued by law will drive out of circulation a currency that is artificially undervalued by that law.” Gresham’s law is therefore a specific application of the general law of price controls. A common explanation is that people will always keep the less adultered, less clipped, sweated, less filed, less trimmed coin, and offer the other in the marketplace for the full units for which it is marked. It is inevitably the bad coins proffered, good ones retained.

The fact that a bank or mint has always been able to generate a medium of exchange marked for more units than it is worth as a store of value, is the basis of banking.[dubious – discuss] Central banking is based on the principle that no medium needs more than the guarantee of the state that it can be redeemed for payment of debt as “legal tender” – thus, all money equally backed by the state is good money, within that state.[dubious – discuss] As long as that state produces anything of value to others, its medium of exchange has some value, and its currency may also be useful as a standard of deferred payment among others, even those who never deal with that state directly in foreign exchange.

Of all functions of money, the medium of exchange function has historically been the most problematic because of counterfeiting, the systematic and deliberate creation of bad money with no authorization to do so, leading to the driving out of the good money entirely.

Other functions rely not on recognition of some token or weight of metal in a marketplace, where time to detect any counterfeit is limited and benefits for successful passing-off are high, but on more stable long term social contracts: one cannot easily force a whole society to accept a different standard of deferred payment, require even small groups of people to uphold a floor price for a store of value, still less to re-price everything and rewrite all accounts to a unit of account (the most stable function). Thus it tends to be the medium of exchange function that constrains what can be used as a form of financial capital.

It was once common in the United States to widely accept a check (cheque) as a medium of exchange, several parties endorsing it perhaps multiple times before it would eventually be deposited for its value in units of account, and thus redeemed. This practice became less common as it was exploited by forgers and led to a domino effect of bounced checks – a forerunner of the kind of fragility that electronic systems would eventually bring.

In the age of electronic money it was, and remains, common to use very long strings of difficult-to-reproduce numbers, generated by encryption methods, to authenticate transactions and commitments as having come from trusted parties. Thus the medium of exchange function has become wholly a part of the marketplace and its signals, and is utterly integrated with the unit of account function, so that, given the integrity of the public key system on which these are based, they become to that degree inseparable. This has clear advantages – counterfeiting is difficult or impossible unless the whole system is compromised, say by a new factoring algorithm. But at that point, the entire system is broken and the whole infrastructure is obsolete – new keys must be re-generated and the new system will also depend on some assumptions about difficulty of factoring.

Due to this inherent fragility, which is even more profound with electronic voting, some economists argue that units of account should not ever be abstracted or confused with the nominal units or tokens used in exchange. A medium is just that, a medium, and should not be confused for the message.[dubious – discuss]

About Mubarak’s Wealth-the amount (USD Billions) he have amassed and how he got them all the 30 years he is in power..read this article below

How Hosni Mubarak Got So Rich

Rick Newman, On Friday February 11, 2011, 5:28 pm EST (Ref: US NEWS)

There are no Mubaraks on the Forbes list of the world’s richest people, but there sure ought to be.

The mounting pressure from 18 days of historic protests finally drove Egyptian President Hosni Mubarak from office, after three decades as his nation’s iron-fisted ruler. But over that time, Mubarak amassed a fortune that should finance a pretty comfortable retirement. The British Guardian newspaper cites Middle Eastern sources placing the wealth of Mubarak and his family at somewhere between $40 billion and $70 billion. That’s a pretty good pension for government work. The world’s richest man–Mexican business magnate Carlos Slim–is worth about $54 billion, by comparison. Bill Gates is close behind, with a net worth of about $53 billion.

Mubarak, of course, was a military man, not a businessman. But running a country with a suspended constitution for 30 years generates certain perks, and Mubarak was in a position to take a slice of virtually every significant business deal in the country, from development projects throughout the Nile basin to transit projects on the Suez Canal, which is a conduit for about 4 percent of the world’s oil shipments. “There was no accountability, no need for transparency,” says Prof. Amaney Jamal of Princeton University. “He was able to reach into the economic sphere and benefit from monopolies, bribery fees, red-tape fees, and nepotism. It was guaranteed profit.”

Had the typical Egyptian enjoyed a morsel of that, Mubarak might still be in power. But Egypt, despite a cadre of well-educated young people, has struggled as an economic backwater. The nation’s GDP per capita is just $6,200, according to the CIA–one-seventh what it is in the United States. That output ranks 136th in the world, even though Egypt ranks 16th in population. Mubarak had been working on a set of economic reforms, but they stalled during the global recession. The chronic lack of jobs and upward mobility was perhaps the biggest factor driving millions of enraged Egyptian youths into the streets, demanding change.

Estimates of Mubarak’s wealth will probably be hard to verify, if not impossible (one reason dictators tend not to make it onto Forbes’s annual list). His money is certainly not sitting in an Egyptian vault, waiting to be counted. And his delayed exit may have allowed Mubarak time to move money around and hide significant parts of his fortune. The Swiss government has said it is temporarily freezing any assets in Swiss banks that could be linked to Mubarak, an uncharacteristically aggressive move for the secretive banking nation. But that doesn’t mean the money will ever be returned to the Egyptian people, and it may even find its way to Mubarak eventually. Other Mubarak funds are reportedly sitting in British banks, and Mubarak was no doubt wily enough to squire away some cash in unlikely places. Plus, an eventual exile deal could allow Mubarak to retain some of his wealth, no questions asked, as long as he and his family leave Egypt and make no further bids for power.

Epic skimming is a common privilege of Middle Eastern despots, and Mubarak and his two sons, Gamal and Alaa, were a bit less conspicuous than some of the Saudi princes and other Middle Eastern royals seen partying from time to time on the French Riviera or other hotspots. The family does reportedly own posh estates in London, New York, and Beverly Hills, plus a number of properties around the Egyptian resort town of Sharm El Sheikh, where Mubarak reportedly went after resigning the presidency.

Mubarak also spread the wealth far and wide in Egyptian power circles–another Middle Eastern tradition–one reason he incurred the kind of loyalty that allowed him to rule for a remarkable three decades. Top Army officials were almost certainly on his payroll, which might help explain why the Army eased him out in the end–allowing a kind of in-country exile–instead of hounding him out of Egypt or imprisoning him once it was clear the tide had turned against him for good.

That money trail, in fact, will help determine whether Egypt becomes a more prosperous, democratic country, or continues to muddle along as an economic basket case. Even though he’s out of power, Mubarak may still be able to influence the Army officials running the country, through the financial connections that made them all wealthy. And if not Mubarak, the next leader may be poised to start lining his pockets the same way Mubarak did. For Egypt to have a more effective, transparent economy, all of that will have to be cleaned up. There are probably a lot of people in Cairo who have been checking their bank balances lately.

 

 

 

Forecasting the future of our economy like FOREX with accuracy is never an easy job,you need plenty of expert knowledge,experience,knowhow++..read this article from Bloomberg.

Euro Worst to Come for Top Analysts as TD Sees Parity (Update2)

Ref: Bloomberg

By Matthew Brown

July 6 (Bloomberg) — The most accurate foreign-exchange forecaster says the euro will continue to weaken and may approach parity with the dollar as the European Central Bank buys more government bonds to support the region’s economy.

Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto, said the euro will depreciate to $1.13 in the third quarter, $1.08 by year-end and may near $1 in 2011 before recovering. Osborne, whose predictions were within 4.1 percent of the mark on average, according to data compiled by Bloomberg, was echoed by the nine following most-accurate forecasters anticipating a lower euro in the next two quarters.

The euro weakened 15 percent against the dollar in the first half on speculation record budget deficits from Ireland to Portugal and Greece will force governments to cut spending and reduce economic growth. Bond yields among the euro-area’s so- called peripheral nations surged relative to German bunds even as European Union leaders crafted an almost $1 trillion aid package to avoid sovereign defaults.

“It’s going to be an immensely challenging environment for these economies to try and regain competitiveness internally within the euro zone,” said Osborne, 47, who has been head of currency strategy at TD Securities since he joined in 2006 from Scotia Capital. “The ECB is moving towards its version of quantitative easing. It suggests they’re going to be very late now to the tightening cycle.”

The currency, shared by 16 European nations, rose 0.5 percent to $1.2596 as of 8:45 a.m. in London. It has gained 5.6 percent since hitting a more than four-year low of $1.1877 on June 7, after falling from 2009’s high of $1.5144 on Nov. 25.

Diversifying Reserves

The ECB began buying government bonds from some member nations on May 10, part of the EU rescue package, to cap yields and underpin the euro. The decline threatens to break up the region, former Federal Reserve Chairman Paul Volcker said in May, while central banks are putting more of their reserves into currencies other than the euro, data from the International Monetary Fund show.

“Reserve diversification, one of the drivers behind euro strength ever since the introduction of the single currency, is therefore unlikely to be euro-dollar supportive over the next few years,” said Henrik Gullberg, a strategist in London at Deutsche Bank AG, the world’s biggest foreign-exchange trader and one of the five best predictors of the currency’s decline against the yen and the pound this year.

Most Accurate

TD Securities, a unit of Canada’s second-biggest lender, Toronto-Dominion Bank, was also the most accurate forecaster for the dollar against the yen, second best for the euro versus the yen and the dollar-Swiss franc exchange rate. The firm’s predictions had the lowest margin of error in a survey of 48 forecasts for eight currency pairs in the past 18 months.

The firm surpassed second-ranked Standard Chartered Plc, whose margin of error was 4.37 percent, third-place Wells Fargo & Co., Credit Suisse Group AG in fourth place and Canadian Imperial Bank of Commerce in fifth.

Recent euro strength is a sign traders are trimming bearish bets after wagering correctly that the currency would weaken, rather than a change in sentiment, according to Callum Henderson, head of foreign-exchange strategy at Standard Chartered in Singapore.

Fiscal Tightening

“We do not think euro-dollar weakness is over,” Henderson wrote in an e-mail. “Growth in the euro area will remain subdued for some time due to fiscal tightening. To be sure, euro weakness will benefit the exporters in north Europe.”

Henderson predicts a drop to $1.10 to $1.12 this quarter, before the euro recovers to $1.30 by 2012.

CIBC, based in Toronto, predicts the euro will depreciate to $1.18 in the third quarter, before climbing to $1.20 by the end of the year and $1.24 by mid-2011. The next six months will be a “turning point” as traders focus on economic frailty in the U.S., said Avery Shenfeld, the chief economist at CIBC. The Toronto-based firm’s average margin of error was 5.19 percent.

Futures show a majority of traders don’t expect an interest-rate increase by the Fed until the second quarter of 2011 after the central bank said June 23 that “financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.”

“There will be an absence of enough growth to prompt Fed tightening anytime soon, and a recognition that if domestic demand cannot sustain the U.S. expansion that a weaker dollar will be needed to allow trade to fill in for some of that,” said Shenfeld, who joined CIBC 16 years ago and has been chief economist for a little more than a year.

Rate Differentials

The Fed has kept its benchmark interest rate at zero to 0.25 percent since December 2008, while the ECB’s main rate has been at a record low of 1 percent since May 2009.

The most accurate analysts were identified using data gathered for Bloomberg’s Foreign Exchange Forecasts function.

Firms were compared based on seven predictions: six forecasts as of the end of each quarter for the close of the subsequent quarter, starting Dec. 31, 2008, plus estimates as of a year ago for this year’s second quarter. Only firms with at least four forecasts were ranked in each currency pair, and only those that qualified for ranking in at least five of eight pairs were included in the overall best list.

The majority of analysts say the euro has further to fall against the dollar, dropping to $1.19 in the first quarter and ending 2011 at $1.21, according to the median of at least 26 forecasts compiled by Bloomberg.

Weakness ‘To Persist’

“Over the next six months, the market’s concern over the growth outlook is likely to persist,” said Derek Halpenny, European head of global currency research in London at Bank of Tokyo-Mitsubishi UFJ Ltd., which ranked seventh overall, with a 5.55 percent margin of error. “The scenario for the global economy is deteriorating, and in those circumstances you’ve got to prefer the dollar over countries where they are implementing austerity programs.”

The euro is most likely to weaken in the second half of this year against the Australian, New Zealand and Canadian dollars, said Nick Bennenbroek, 39, global head of currency strategy in New York at Wells Fargo, the biggest U.S. home lender. The bank had a margin of error of 4.76 percent across all currency pairs and was the top forecaster for the dollar against the yuan.

‘Continue to Weaken’

“Our overall view is that the euro will continue to weaken and Australia, New Zealand and Canada will rebound over the next year,” said Bennenbroek, who joined the bank in 2007, beginning his career in finance at the New Zealand Treasury in Wellington. “These are medium-term trades we believe people should be putting on now.” The euro will end this year at $1.20 and conclude 2011 at $1.08, he said.

Currency forecasting became easier the past 12 months after the worst of the global financial crisis, sparked by Lehman Brothers Holdings Inc.’s collapse in September 2008, passed, said Niels Christensen, 49, chief currency analyst at Nordea Bank AB in Copenhagen. Nordea was the most-accurate forecaster for the euro-dollar exchange rate.

“In March 2009, everybody was wondering whether we would get another Lehman, that the economy was extremely fragile,” he said. “In December 2009, the wave of risk appetite was abating and currencies started to trade on fundamentals and rate differentials again.”

The euro will trade at $1.25 through year-end before weakening to as low as $1.15 in 2011, according to Nordea.

Ray Farris, head of foreign-exchange strategy in London at Credit Suisse, whose margin of error in the survey was 4.81 percent, said he wasn’t able to immediately comment.

The European currency will rise versus the yen, climbing to 114 yen in the fourth quarter and 127 yen by the end of 2011, from 109.36 today, median forecasts show. The pound will fall to $1.44 this quarter, and strengthen to 81 pence per euro in the first quarter, the estimates show. Sterling was at $1.5202 and at 82.85 pence per euro today.

To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net.

Last Updated: July 6, 2010 04:03 EDT

Results not Reasons -Don’t tell me all the “cock n bull” stories-If you want to be a Great CEO,remember this always!

Ramli have learned many things in his almost 54 years of living as on 1stNov,2010 this year and maybe you too!

However the People we meet in our life can be categorized as Good and Bad maybe another category as “Dont Know What They Are Doing” type.

If you meet and befriend a person who have the “right heart” or in Malay or Islam,we called it “Niat Yang Baik Semua Kerana Allah” then he or she is a Good Person and you can have great confidence and trust in them.

If you meet or befriend a person who is in the “Bad” type,then this person actually knows what is the right or bad things in life BUT prefer to take the “wrongful” ways or the “black heart” ways and the only motive is to cheat others anyway they can or have the opportunity to cheat all for their own advantage or the people they work for or the country they live in.

So,the wisdom of humans like U and Ramli is to quickly identify this Good and Bad persons.Who are they,Where they come from and Why they do all these things?Lots of questions  but answers are not forthcoming sooner than we like.

Ramli also have “got in deep trouble” or “in a mess” with these kinds of BAD people in his lifetime.As usual we like to make friends with any people that smile,tell us good things,polite at first,share a joke,give us a treat,make lots of promises of becoming rich,provide us with goods that we have paid for and many things we experience that want us to friend someone what more if that person is our opposite sex!

Finally after some hours,some days,some weeks,some months or even some years we realized we are CHEATED and becoming SONOFABITCH.hahaha..serve you right,as we quietly tell our broken or angry hearts mainly we are not SMART ENOUGH either the STREET SMART OR BOOK SMART types.

Ramli’s advice to YOU young people in the Gen Z,Gen Y and GEN X category is always study,test,study again,test,review,consult,collaborate,conclude….whether that FRIEND is a Good or Bad Friend,really!UNless you dont mind getting cheated and lose lots of money invested in those “wonderful make me a Billionare or Millionaire” schemes.

So,in summary is all about RESULTS NOT REASONS!

If your friend or company you deal with is with GOOD intentions,then they will give you the results as indicated or promised if not when they are BAD people or hearts then the results will turn out to be REASONS and more REASONS only…till you wonder when you can get the results,at all!

Here’s some famous quotes or wisdom of Great Good People:

“There are two kinds of people in the world: those who make excuses and those who get results. An excuse person will find any excuse for why a job was not done, and a results person will find any reason why it can be done. Be a creator, not a reactor.”
Alan Cohen

“The great accomplishments of man have resulted from the transmission of ideas and enthusiasm.”
Thomas J. Watson, Sr

“Results! Why, man I have gotten a lot of results.
I know several thousand things that won’t work.”
Thomas A. Edison

“Perhaps the most valuable result of all education is the ability to make yourself do the thing you have to do when it ought to be done whether you like it or not.”
Thomas Huxley, one of our favorite graduation quotes

“There’s a difference between interest and commitment.
When you’re interested in doing something,
you do it only when circumstance permit.
When you’re committed to something,
you accept no excuses, only results.”
Art Turock

“Quality questions create a quality life.
Successful people ask better questions,
and as a result, they get better answers.”
Anthony Robbins

“Your perception affects the results of any situation. That means your perception controls reality from any point of view.”
Russ Stiffler,

“Everyone is bound to bear patiently the results of his own example.” Phaedrus

“The person who sends out positive thoughts activates the world around him positively and draws back to himself positive results.”
Norman Vincent Peale

The high cost or big budget put aside for the Military is better use for undertaking and solving human basic needs to live better than it is now!

The recent earth quake trajedy in Haiti where more than 100,000 people was reported to have died saw the importance of the good use of each country’s finances.Each dollar or ringgit well used will bring great benefits to her people and for future growth of the country’s concerned.

The Military(army,navy and airforce) sector always need many Billions of USD or RM to purchase weapons of mass destructions and weapons of minor destructions plus managing the military personnel not only domestically but  also overseas for most of the “super power” countries.These costs are huge and incurr a big portion of the Annual Budget of the Country concerned.

A fighter jet like F5E or Stealth bomber may costs in the many millions of USD and most developed country are not satisfied with just a few but they want many fighter jets and aircraft carriers plus all other “accessories” like anti missiles,submarines etc…

Maybe to those entrepreneurs who are suppliers to the Military think this is Great Business by supplying all the needs of the military from bullets,uniforms,canned foods,cars,jeeps even fast food companies are now becoming suppliers to them so that the military will “feel at home” when they go for combat missions  or war games,can you just imagine the innovation and creativity the Military have done and accomplished!

Ramli thinks each country or infact the world must now change this Military over spending or “useless spending” to more thoughts on using whatever money we have in our pockets (which are getting smaller)to better use and bringing greater benefits to all citizens like:

1.better healthcare

2.decent affordable homes

3.better equipped schools for all

4.ample supply of basic food and drinks

5.jobs for all anytime

6.a good basic living from “cradle to grave”

7.care for senior citizens

8.more funds for entrepreneurs to build their businesses

9.good emergency funds and relief efforts for cases of natural catastrophies

10.and many more…..

Just imagine if you stop buying a F5E jet or a Patriot Missile that costs many millions,YOU can infact use that hard earned money to help your people in need or citizens of other countries that just had an earthquake or tsunami like the recent Haiti or the Aceh trajedies…

A few USD Millions mean a lot to people who are in need of basic needs like water,food,shelter,medical aids rather than bombing a country with non stop bombs that each may cost a few hundred thousands USD or sending in troops to invade a country that costs billions in logistics support plus food,shelter,all the “good feeling facilities at the camp” plus many other unnecessary costs that in the first place we dont need to spend at all!Thats the Great Problem?

The kids of today love peace not war and why do we still spend billions or even trillions of  USD on all these weapons of mass destructions when we NOW know the environment or global climate is in Great Danger.We should focus our spending of our hard earned money on areas of people development,meeting to people basic needs and security plus building a happy,safe and prosperous country based on mutual collaboration,prosper thy neighbour deals plus many other friendly engagements or cross border actions rather than firing expensive to make missiles,drone planes,suicide bombers and a hosts of other military actions that are so costly BUT no economic benefits or better human lives!

Ramli is just a normal citizen but have great passion to make the world a better place especially for his 5 children who later on in their lives will inherit this world and they too need to act wisely,quickly and humanely possible to make their children’s future better than what they had from all of us grown ups of today!

Does all the Military spendings help a better world of the future?

Does the nuclear weapons we possessed going to create a world where human basic needs are guaranteed like food,drinks,shelter,safety,clothings and medical aids of there are great natural disasters happening all the time like the 7.0 Earthquake that hit Haiti so bad recently?

2010 is the new decade for the 21st Century and if we plan wrongly then comes 2020 we will get a “lousy world” where more problems surfaced and the people have no great future to look forward and become “lousy people”!

We must be proactive,innovative and creative as always BUT most of all must treasure our peaceful living and care for each other no matter what color or religion we belief.As long all humans believe that Allah SWT (God Almighty) is the Creator of all Things and The Power of all Things then we are Blessed and Have Mercy from HIM,Inshallah.

Maybe its time now to spend less on Military Might but more on meeting human basic needs and to eradicate poverty to many billions of people in this world with many living on USD2.00 per day while many are living on USD 20~200 per day in other develop and rich nations!

Military spending is not CHEAP and the ROI is not that great anyway resulting in more destructions to properties and lives plus more hatred,bad feelings and revenge on all those effected or involved.

Human lives are sacred and it is our duty as adult person to help make this world a better place and a peaceful,prosperous and harmonious place for our future generations that we possess and that will carry on our human destiny till Allah SWT decided to end this World (Kiamat as what the Muslims believe strongly) or Doomsday like what the rest of God Abiding people belief too.

Wassallam.

Lets Help To Build a Greater World with Peace,Prosperity and Harmony!

Ramli Abu Hassan

Malaysia

email: ramlipromoter@yahoo.com