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RE: What Is Financial Value?

in #economics7 years ago

I think financial value stems from actual worth, or at least an approximation of it. Although not entirely accurate, most of our goods have a value based on how plentiful they are in connection with how necessary they are. Cryptocurrency is like oil, in that it has a low supply, and a high necessity in the future. Water, although high in necessity, is low because of its quantity. Gold, has a high value because of its low quantity.

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But isn’t the supply / demand dynamic you're describing just another way of describing how much individuals want something? Your belly lint might be completely unique, but that doesn’t make it financially valuable. :)

But yes, I agree, the amount something is necessary for comfortable living connected with its availability does strongly correlate with how much people believe something is valuable which determines their in-the-moment financial transaction leading to price discovery. Even this, however, is still open to manipulation. Some poor families, for existence, may eat terribly cheap, unhealthy food but still own a massive TV purchased on credit for which they pay interest. That’s not rational but, for them, it’s what they believe is valuable that drives their purchasing decisions.

I agree with the part about the TV, but what can you do? And I think it is sort of a way of describing how much they want something, but the limited supply increases that value. Our wants are endless, but our resources finite.