Friday, December 9, 2011

A Boring Day Among Crazy Days

By being at the mercy of clientele, my work is inherently cyclical in nature, and depends almost completely on what time of the year it is. Most clients will hold quarterly Investment Committee meetings a month or so after a quarter ends. In the month leading up to these meetings, I can work some crazy long hours, though maybe not as much as others who may fall under the umbrella of the "Finance Industry", sometimes upwards of 70+ hours a week. At other times, I can be working the bare minimum of 40 hours a week, leaving work at the earliest allowable time of 6:00. This week has been one of those times. We've already been through the crazy meeting season, and nearly all of my clients are nearly finished winding things up for the holiday break.

Hence I texted Camille and she suggested I do the unthinkable. She suggested I *GASP* write a blog post. I thought "Why not?" So this is me trying to figure out what to write about. I suggested maybe I should write about why I want to get a puppy. I guess it's not really worth addressing the many positive aspects of having a puppy in the household, since Camille has made it clear that she'd rather raise children :(.

So that brings me to write about the topic that runs my life. Finance, economics and financial markets. Most people can stop reading now, as this may be boring to some, but hey, I've got some free time right now.

The Financial Industry seems to be in the Limelight right now. Some of the things that come to mind are Occupy X (replace X with just about any major city), the European financial crisis, numerous corporate scandals, and market volatility.

I've been thinking money lately (come on, that's all I ever do; it's my job). Why do we care so much about money? Some of the obvious reasons come to mind: We need money to purchase the things that we need to survive, to pay for the dwellings in which we live, purchase things to enrich our lives, prepare for retirement, etc. Money is the medium of exchange that everyone uses so that we don't have to try to barter goods and services (i.e. I'll trade my goat for ten gallons of milk...). Why does money work? Historically, the United States and other countries functioned under the Gold Standard, but this came to an end in 1933 when FDR outlawed the private ownership of gold. Our money is now what is called fiat money, or currency that is issued by a government.

Now that our currency has virtually no intrinsic value, other than that the U.S. Government decrees it so, why do we still exchange it for goods and services? You can't do anything with it other than hold it in your wallet. A chicken has value because it provides eggs which can be consumed for nourishment. A home has value because it satisfies the basic need of shelter. Why then do we assign a value to a piece of paper, which inherently does nothing to satisfy our basic needs or desires, other than to hoard it and have more than the guy next door?

Well, I would argue the question, why in the first place did we assign any monetary value to gold or silver or other precious metals (or cows? Johnny Lingo anyone?)? Gold gives you nothing. It doesn't pay you back. You don't earn interest. You can't do anything with it other than wear it as jewelry. The only quality that I can see that is desirable is the pretty yellow color.

Here's how I perceive it. Some goofy guy named Urg back in the stone age found a shiny yellow rock and said, "Hey, this rock is pretty! I bet I can make Furg give me his sweet stone axe for it". The deal was struck, and Urg now has an awesome stone ax to go chop wood. Furg now has a shiny yellow rock, but has no stone axe in which to chop wood for a fire. Furg approaches Turg, a renown professional wood chopping neanderthal, and asks him if he would chop him up one tree in exchange for 1/2 of his shiny yellow rock. Turg agrees and proceeds to chop down said tree for Furg.

And thus a currency is born. The value of a currency comes from the fact that each of us perceive it as something that the next man will accept in exchange for goods and services. Though our paper currency has no intrinsic value, (it's just paper) we have faith that the next man will accept it in exchange. This makes our economic system much more efficient. Furg, Urg, and Turg, now how an equally exchangeable object in which they can use to trade, rather than trying to barter services for goods or vice versa in which the previously undefined values could be quite arbitrarily idiosyncratic among parties. If not, Urg who owns a pet woolly mammoth but nothing else, would have to find something to trade with Furg for his axe. Maybe chop off a tusk or something. That begs the question, well, how much would Urg part of his woolly mammoth in exchange for said axe, and how much would Furg demand as payment to compensate him for the loss of his axe?

Money is such an incredible concept.

Ok, I've used up way too much time on this and I've realized that this isn't exactly what I had in mind when I started, but hey, I had some free time. Kudos to those still reading. Maybe I'll write another, as I have a few other topics I feel would be interesting to rant about. Cheers.


BradenJH said...

Excellent! I approve of the co-authorship. It makes it the Milly Memoir into a real Millar Memoir. I say, let the finance posts continue! Or the puppy posts. Or whatever tickles your fancy. In fact, you should make it a family thing; let Linkface contribute!

Natalie and Steve said...

It needs pictures. :D