Another lesson in economics

Okay students, gather around, today we are going to learn about exchange rates and the "value" of the dollar (or loonie for us Canadians eh?) . I am pleased to have with us today, Jared Fleminhimer to tells us the story.

The History

Back in the "old days" we had a thing called "bartering". I owned a farm, my friend Josh was a fisterman, and Jed and Ned..well they built houses and barns for folks. So I'd give some of my milk and vegtiables to Josh and he'd give me some fish. I sold off a few of my cows to Ned for my new barn..and we all lived happily ever after.

'Course it was a lot of work back in those days moving my vegtables around and sometimes my crop did turn out so well, and people would get them from da neighbours hourse. I had to go weeks sometimes without any good fish, and it wasn't pretty. Some of the others did without fresh fruit and vegitables and they got the scurvy.

Then in came the Gold Rush, now anyone and everyone wanted those pretty yellow nuggets. I could ne'er figure out why. They weren't good for much, but I admit they looked pretty, and it if you had some you could trade it for something good like fish or blankets when you needed 'em so I guess they was handy thatta way.

But da gold was heavy and could not be easily carried around, a few of the smarter folks got together and made the nuggets into little round things they called coins. They were much easier to carry around, by now you could even go to da salloon and get urself a nice drink for a few of the shinny "coin" things

There was another problem too, shinny yellow nuggets starting getting harder and harder to find, there only seemed to be so many of them, and a few people had most of them and didn't seem to want to trade very often. Course there were other pretty gems and stuff that people traded now and again, but I couldn't remember the last time someone bartered anymore. I was staring to miss dem good ol' days.

[Okay class, as you may have guessed Mr Fleminhimer is getting 'up there' in years and has to go take a nap. Let's review what we have learned so far.]

In general "value" of an item (from the 'olden days) was determined by 2 factors:

1) The "need" for an item. The more a person needs (or thinks they need) an item, the more valualbe that item is. Blankets in the middle of winter are much more valuable then swimwear.

2) The "rarity" of an item. Items that can only be possessed by the few are often 'coveted' by others lacking the item.

Stay Tuned for Part 2, meanwhile you may be interested in this other economics lesson.