Monetary value

Monetary value (also purchasing power ; English monetary value ) is the exchange relationship between money and goods or services in economics .

General

Money ( cash , book money ) has, among other things, a value measurement function that is expressed in the monetary value. It also serves as an object of exchange for the purchase of goods and services. The amount of goods or services that can be bought by an economic entity for one monetary unit (e.g. 1 euro ) is called monetary value. How many goods can be purchased in a market for a monetary unit depends on its market price . The higher the prices, the lower the amount of goods available for one monetary unit and vice versa. The monetary value is the reciprocal of the price level : ${\ displaystyle G_ {w}}$ ${\ displaystyle P}$

${\ displaystyle G_ {w} = {\ frac {1} {P}}}$.

A rising price level leads to a falling monetary value and vice versa. For example, if the price index increases from 100 to 110, the monetary value falls by 9.1% to 90.9% of its initial value. Since the denominator remains constant, the monetary value development corresponds to the growth rate of the price level, i.e. the rate of inflation . The development of the monetary value is measured in Germany with the consumer price index for Germany , in Europe with the harmonized consumer price index .

history

Martin Luther assumed in 1524 that price increases and thus the deterioration in the value of money could be traced back to the usurious traders , while in 1526 Nicolaus Copernicus assumed that precious metals captured during the war had contributed to the increase in money and thus to the deterioration in the value of money . The "most common reason a coin loses appreciation is because it is in too large a quantity". According to Copernicus, the monetary value did not depend on the printed face value , but on the metal value .

The first theory of monetary value should be understood as the criticism made by Jean Bodin in 1568 of studies on France's inflation . In this, he was apparently one of the first to analyze the previously unknown phenomenon of inflation caused by an excessive increase in the currency in circulation . It was mainly about the coins that were minted from the gold and silver of America. In his opinion, inflation far exceeded the extent of the deterioration in coins. For Bodin, the money supply and the value of money were inversely related. Other factors such as the use value, production costs or the need for money were initially not taken into account when determining the monetary value. In 1588, Bernardo Davanzati came to the relativizing result that it is not the amount of money itself, but the development of its relationship to the amount of goods that is decisive for the development of money value. But as early as 1662 William Petty tried to explain the monetary value from the production costs of precious metals . John Locke saw in 1691 was the first to velocity of money ( English quickness of its circulation on) as another factor the value of money.

In 1809 David Ricardo in particular emphasized the importance of production costs for monetary value. He pointed out that the discovery of new gold mines leads to a larger amount of money and thus a decrease in the value of money. In addition to the amount of money, he also recognized the speed of circulation and the substitution of cash payments among merchants with bills of exchange . Ricardo concluded that a change in the value of money did not produce a change in the rate of profit. Karl Marx countered this in a letter dated April 22, 1868 to his friend Friedrich Engels , because the rate of profit (= return on capital ) rose as the value of money fell. In fact, however, result in inflationary periods for companies nominal fictitious profits , which do not exist in real terms.

In 1909 Otto von Zwiedineck-Südhorst was the first to show the dependence of purchasing power on income structure and income movements in an economy . The Austrian economists Friedrich von Wieser (1909) and Ludwig von Mises (1911) assumed that the monetary value of a monetary unit decreases with increasing income. According to John Maynard Keynes , a distinction is made between supply-side and demand-side monetary value determinants. In 1930 he defined the value of money as "the ability of money to buy those goods and services for which a certain community of people spends their money income on obtaining them for consumption".

Influencing variables

Since the price level affects the value of money, inflation and deflation affect the value of money. If the value of money (or purchasing power) decreases, then there is inflation, conversely, deflation. Inflation is also referred to as “currency devaluation” because fewer goods / services can be purchased for one monetary unit. If economic agents are subject to a monetary illusion , they ignore or underestimate inflationary effects. Rather, they expect future prices to match current prices. The value of money increases (deflation) when more goods / services can be purchased for a monetary unit.

Another influencing factor is the amount of money . The value of money decreases when the amount of money and thus the overall economic demand increases with a constant supply of goods and vice versa.

species

There is an inner and an outer monetary value. The internal monetary value (" internal value of money") is the value of money, which is mathematically expressed in the domestic price index. The external monetary value results from the exchange rate of a country. In addition to the exchange rate, it also takes into account the price level abroad . If the internal and external monetary value do not match, an appreciation or depreciation between two foreign currencies is necessary. An improvement is to be made, if the internal value of money relative to the outer monetary value is too high, and therefore the external value increased by one-sided exchange rate (the domestic currency upgraded) and vice versa. If the different currencies show the same monetary value after appreciation or depreciation due to their exchange rates, one speaks of purchasing power parity . Within the euro area and the EU , the purchasing power standard  (PPS) is used in the form of a fictitious currency, via which the euro can be converted into the national price level with a percentage value of the European mean.

Others

The word monetary value can also be used as an attributive adjective , for example in the form of monetary benefit .

Web links

Wiktionary: geldwert  - explanations of meanings, word origins, synonyms, translations
Wiktionary: Purchasing power  - explanations of meanings, word origins, synonyms, translations

Individual evidence

1. Werner Mahr: Introduction to General Economics. 1971, p. 192
2. Compact Lexicon Economy. Springer Fachmedien Wiesbaden, 2014, p. 222
3. Martin Luther: From Kauffshandlungen and usury. 1524, p. 222
4. Nicolaus Copernicus: Monetae cudendae ratio . 1526, p. 38
5. ^ Jean Bodin: La Réponse aux paradoxes de Monsieur de Malestroit. 1568, p. 9
6. Bernardo Davanzati: Lezioe della monete. 1588, p. 37 f.
7. ^ William Petty: A treatise of taxes and contributions. 1662, p. 104
8. John Locke: Some Cosiderations of the Cosequences of the Lowering and Raising the Value of Money. 1691, p. 290
9. ^ David Ricardo: On the high price of Bullion - a proof of the depreciation of bank notes. 1809, p. 121
10. ^ David Ricardo: On the high price of Bullion - a proof of the depreciation of bank notes. 1809, p. 122
11. August Bebel / Eduard Bernstein (ed.): The correspondence between Friedrich Engels and Karl Marx. Volume 4, 2012, p. 36 f.
12. ^ Alfred Kruse / Hans E Lechner: Money and Credit. 1970, p. 236
13. ^ John Maynard Keynes: A Treatise on Money. 1930 / From the money. 1932, p. 43
14. Dietmar Dorn / Rainer Fischbach / Volker Letzner: Economics 2: Economics Theory and Policy. 2010, p. 84
15. ^ Claus Köhler : Money economy. Volume 1, 1970, p. 334
16. Werner Ehrlicher (Ed.): Compendium of Economics. Volume 1, 1975, p. 392
17. ^
18. Volker Häfner: Gabler Economics Lexicon. 1983, p. 219
19. Reinhold Henzler: Business Administration of Foreign Trade. 1970, p. 66