Time Value of Money

[Kidlicious]

Originally posted by Drachasor
Money measures the value of a good to those willing to pay that amount for it. However, money is not like a yard stick, nor is a good constant. Both can fluctuate in their "worth."

If you have more and more of a good created, beyond what you had before with the same demand for it, then the cost of it goes down. This is supply and demand. It is important to note that this value doesn't necessarily coincide with how much work it takes to procure/make the item, as there are some things people simply don't want, and other things that people really do want. As such some things simply aren't worth making, even if they do require a lot of time and energy.

Money isn't immune to this either. Right now most countries are not on a gold standard, instead they are on the "full faith and credit" standard, basically meaning a unit of money has value because the nation that issued it backs it up, controls the supply of it, etc. So the value of money relative to goods and services can fluctuate too.

All this is right.

Now, both of these things together give you the time value of money.

None of that above does anything to justify this claim. All it shows is that you recieve rent, interest or whatever for your money if you put it in the financial system. Putting money in the financial system does not create a good or service and does not create value.

Let me put it this way. Say I buy a widget from the producer. Is the price = to the value of that widget? Then I rent that widget out. Is the price + rent = value? Of course not. You can't have two different values just because time went by.

[Kidlicious]

Originally posted by Flip McWho
Ok final point then I must do my essay. Money creates the speculative value. But labour does not hold any inherent value within itself. Which you are tending to ignore.

Why not? Explain.

[Moral Hazard]

Ok so you define value as total quality and quantity of goods and services. No problem. I'll define capital as accumulated labor and land. If this capital is properly allocated it would bring about the greatest total quantity and quality of goods and services. In order for someone to give up their own capital, they would have to be compensated. If the party who needs the capital doesn't have anything to exchange at present; the best way to do this is to give them their capital with interest at a later date, or too make the capital provider a partner (stocks). Because if the capital provider used that capital themselves, then they could either create value with it, or use in exchange for a good or service. They must be compensated with greater interest than they could produce themselves by using their own capital. This would require the capital user to have to use the capital in more value creating work then the person he borrowed it from. Both parties win and are better off.

That is how TVM works in a purely qualitative sense, with no external demand.

[pchang]

Time Value of Money

Has nothing to do with money. It is all about time. What it really means is that it is more valuable to have something now than it is to have the same thing at some later time instead.

[Kidlicious]

Originally posted by Moral Hazard
Ok so you define value as total quality and quantity of goods and services. No problem. I'll define capital as accumulated labor and land.

Yes there is a problem, because capital isn't just an accumulation of labor. It's also an accumulation of rent. Hence, the concept: time value of money.

If this capital is properly allocated it would bring about the greatest total quantity and quality of goods and services. In order for someone to give up their own capital, they would have to be compensated. If the party who needs the capital doesn't have anything to exchange at present; the best way to do this is to give them their capital with interest at a later date, or too make the capital provider a partner (stocks).

So people should be able to accumulate rent, because they have accumulated rent in the past. Smoke and mirrors.

Because if the capital provider used that capital themselves, then they could either create value with it, or use in exchange for a good or service.

And I have no problem with them doing that.

They must be compensated with greater interest than they could produce themselves by using their own capital. This would require the capital user to have to use the capital in more value creating work then the person he borrowed it from. Both parties win and are better off.

So, because they don't want to do the work themselves, they deserve to collect rent.

That is how TVM works in a purely qualitative sense, with no external demand.

Doesn't it though.

[Kidlicious]

Re: Time Value of Money

Originally posted by pchang
Has nothing to do with money. It is all about time. What it really means is that it is more valuable to have something now than it is to have the same thing at some later time instead.

And?

[pchang]

There is no and. You say "Time Value of Money" is a crap concept, but in reality, you have a misunderstanding of the concept. I have just explain the true meaning of the phrase.

[Kidlicious]

Originally posted by pchang
There is no and. You say "Time Value of Money" is a crap concept, but in reality, you have a misunderstanding of the concept. I have just explain the true meaning of the phrase.

You haven't explained anything about money, only things. You say things are more valuable today then they are tomorrow. So what does that have to do with money? If money is a thing than you have just made a contradicting argument.

[Moral Hazard]

Yes there is a problem, because capital isn't just an accumulation of labor. It's also an accumulation of rent. Hence, the concept: time value of money.

Assume nobody has ever traded before - still works.

They could use the capital themselves and this would produce less value.

[Kidlicious]

Originally posted by Moral Hazard

Yes there is a problem, because capital isn't just an accumulation of labor. It's also an accumulation of rent. Hence, the concept: time value of money.

Asume nobody has ever traded before - still works.

They could use the capital themselves and this would produce less value.

Now why would I want to make a false assumption. For your magic trick?

[Moral Hazard]

Once again you can't disprove the theory, so you call it a magic trick. Pathetic.
With out interest there would rarely be transfer across time of capital and there would be less value. Anyways your hopeless.

[Kidlicious]

Originally posted by Moral Hazard
Once again you can't disprove the theory, so you call it a magic trick. Pathetic.

I call a theory that knowingly uses false assumptions magic.

With out interest there would rarely be transfer across time of capital and there would be less value. Anyways your hopeless.

In a capitalist system perhaps. I never claimed that labor could be fully compensated in the capitalist system. Rent must be compensated. That doesn't mean that rent is the result of an increase of quantity or quality of goods and services. All it is is an increase in money. You're continually confusing an increase in money with an increase in goods and services.

[Imran Siddiqui]

Is the price = to the value of that widget?

Um... yes.

Then I rent that widget out. Is the price + rent = value?

The amount of rent is only the rental value of the widgit. The 'value' of it is what the market is willing to pay for it.

And the Time Value of Money is what pchang said. It's the idea that money today is worth more than money tomorrow. That speculation that you deride is integral to determining value.

Nothing has economic value without determination of its price. And seeing how you are all alone on this (even ODIN disagrees with you), basically, you've been PWNED.

[Kidlicious]

Originally posted by Imran Siddiqui

Is the price = to the value of that widget?

Um... yes.

Then I rent that widget out. Is the price + rent = value?

The amount of rent is only the rental value of the widgit. The 'value' of it is what the market is willing to pay for it.

And the Time Value of Money is what pchang said. It's the idea that money today is worth more than money tomorrow. That speculation that you deride is integral to determining value.

Nothing has economic value without determination of its price. And seeing how you are all alone on this (even ODIN disagrees with you), basically, you've been PWNED.

I guess so since ideas have economic value, NOT!

[Kidlicious]

Let me break it down again for some of you. Rent increases money only. It does NOT produce anything of value in the economy. It is a transfer of income. One person used to get value from the money, but now another person gets value from the money.

NO VALUE HAS BEEN CREATED BY THE MONEY, VALUE HAS ONLY BEEN TRANSFERED!