Walkin' After Midnight

Is everyone who talks about "fiat money" crazy, tout court? Or is there some sensible person out there who talks about it? Not that the concept is incomprehensible, but do non-crazy people call it something else?

Additionally, I can't decide whether I feel happy about the Sing dollar's rise (it was pegged tightly to a basket of currencies including the US dollar but is now floating more freely.) On the one hand, John got a raise! On the other hand, the money we have invested in America is worth less! But then, we'll probably want to use that money to buy things in the US for the most part, so it doesn't matter. But money is fungible so that's a stupid way of looking at it?

Comments

[LizardBreath]

I don't think there's a different name for 'fiat money' among non-crazy people, because mostly they just call it 'money' -- it's not possible for a modern economy to run on bartering precious metals at their values as commodities, so there's no functional alternative to 'fiat money'. The fact that someone thinks it's important to talk about the distinction between 'fiat money' and some alternative type of money is what stamps them as crazy.

This is not investment advice, because I know nothing, but if you think the Sing. dollar is going to go up against the US dollar in future, you could move your US investments to Singapore.

[dave heasman]

All else being within 20% of equal it's usually wise to keep your assets in the same currency/jurisdiction as your liabilities.

[Doug]

Yes on the crazy.

All money is fiat money, in the sense that it is an agreed-upon medium for exchange. Gold is only valuable insofar as people value it (take me down to tautology city, where the bucks are green and the gold is pretty), there's nothing intrinsic in shiny metal that lets it be traded for food or plane tickets.

Dave's also right about matching liabilities and currencies. Unless you want to spend a lot of time monitoring/anticipating (correctly!) value swings, the 20% he recommends can be set much much higher.

[Myles SG]

"All else being within 20% of equal it's usually wise to keep your assets in the same currency/jurisdiction as your liabilities."

That's not necessarily the case. The family of a British friend of mine kept their money in German-speaking Europe after the Second World War (they had some connection to the location area), and in comparison to the piteous state of British investments for most of the post-war period, they did really well. They were basically one of the very rare British upper-class families that managed to not lose money in the post-war imperial crash.

[Myles SG]

Also, don't take investment advice from me, but a good way to balance the USD currency risk would be to look at the Eurozone. The Japanese markets have been dead, of course, and will remain so for a long time to come, and Asian markets in general are pretty shady.

[moron]

but do non-crazy people call it something else?

Yes -- they call it "money".

[Gary Farber]

"Is everyone who talks about 'fiat money' crazy, tout court?"

Technically not, and there are people worth discoursing with on other topics who use the term, but it's not a bad rule of thumb if you are into time-saving.