As we were getting older, Liger wanted us to be more responsible so Liger are going to have a currency system which made by some of the Liger students. In this Expertise I learned a lot, and here is my note taking in class.
We are now planning the Liger Currency (pedro).
What we gonna talk about now is money in general, How to manage our own budgets?
A lot of people having problem with borrowing money, loan, manage their money or even save their money.
What is it
Money is any valuable object that is widely used in the purchase and sale of goods and services.
Function in the economy
How to manage our own budgets?
Opportunities we have in Liger
If money doesn’t exist, we can trade goods.
Using goods to trade for other goods without using money.
1. Some goods are heavy and hard to transport
2. Some goods don’t last
3. With barter, we need to want what the other person has
4. We need to figure out, how much our good is worth vs all other goods
5. Information is incomplete
6. Some good cannot be divide
Money must be
1. Medium of Exchange
It solves problem #3. I can sell my product for money and use that money to buy what I want. Both people are willing trade for money
2. Unit of account
Now I don’t to measure the quantity of the product. It’s a standard way of measuring value. Now I have a much better idea how much my goods worth. Example: I don’t need to measure 1kg of Dorian equal how much kg for the rice. I just need to said 1kg of dorian 12000 riel.
This answer problem #4.
3. Store of value
Solve problem #2. Money didn’t get lost or rotten like fish. Something put away for a time and still keep its value.
4. Standard of Deferred Payment
A standard way of paying of future debt. Money is denominations (size, measure, different value, be able to divide)
The Value of Money
Money that made out of something valuable (made from gold). In 1915, the commodity worth $5.
Money that gets its value from being exchangeable into a precious metal like gold and silver.
Physical currency authorized by a central bank or governmental body and that does not have to be exchanged for gold or some other commodity money. Backed by nothing but the promise of the Federal Government.
The government said that it is worth this much, and we believe the promise.
– Does not exist in physical. It’s exist virtually form. Extremely Important for every economy.
Right now, there are more Electronic money than Physical money (much much more);
How is money created?
We don’t have money, so we’ll do barter. I am the president of the Liger economy. The first thing I do is to create a central bank. Take care of printing, and distribute money. Vuthy will be a central bank management.
1. I create a central Bank, which will be Vuthy
2. Vuthy (Central Bank) will prints papers certificates and decrees the value of each certificate to be 1 pedro (pd) which becomes the national currency in Liger republic. I and Vuthy will say it worth 1 pedro, we guaranty, and we said that.
3. The government will punish someone other than the Liger central bank from printing these certificates. One way for them to get the money is for them to pay government workers. Then they buy assets (buy clothes, fruit, cars), so the money can go to the people.
4. Legal Tender – On every money, there is a legal tender: means here something must be accepted in an exchange of goods and services. I can’t exchange car with Royal D. Government accepted it as payment for taxes. Utah next to Navada, Navada next to California – Utah is a country that have silver as a legal tender
After Khmer Rouge, Cambodia make new currency because at that time it hard to sell assets.
When the government want to introduce the money, they will buy things. When they want to take money back, they sell things example land, clothes, etc.
Role of the central bank
1. Printing and take care of all the currency in the country
2. Creating a money (monetary) policy for the entire country
4.. Monetary Policy – a money plan for the country, he need to decide whether the government need to print more money, or less money. Does it need to take out money for the economy?
5. Setting Interest rates
Right now the interest rates in Cambodia is 1.42%. In U.S, the interest rates only .5%. If I putted money in U.S. bank, I got only extra .5% of the money I put. Why I got so low in U.S than in Cambodia? It has to do a lot with GDP growth. If the interest rates go high, it hard to borrow money. So they will buy less things. It helps to lower the speed of the economy not to grow quickly.
Each person found about 52,000 dollars a year in America-. 27% of people save 0 money, 22% of people can’t pay 100 dollars, and 46% of people can’t pay 800 dollars.
First bank created electronic bank, and the people borrow money but not all money.