Chamberlain

Why Money?Why not Barter?

Exchange goods and services for other goods and services

Economists call it a double chance of coincidence

I give a girl drum lessons in exchange for a large pizza

http://www.npr.org/templates/story/story.php?storyId=5763262

Bartering on the WebWhat is your reaction – from a paperclip to a

house?Do you think it is possible to make a living

today bartering?What problems could arise?How does the internet make bartering more

feasible?

Why Money?CurrencyWe use money as a medium of exchange or

something you will accept in exchange for goods or services.

Historically civilizations have usedFurs, Salt, precious metals and even dried cod

Today currency can be characterized as mainly bills and coins

CurrencyThe US = DollarWhat do other countries use as currency?

What amount of their currency would you get if you gave them one dollar?

http://www.x-rates.com/d/USD/table.html

Purchasing Power• Exchange rates only show us how much

money we can get for a US Dollar and vice versa

• But it is not always a good indicator of how strong a country is economically– For example: Look at the Japanese Yen• $1 = 105 Yen• Japan is a strong country economically

• It is better to look at the purchasing power of a dollar

Big Mac TheorySo you get 105 yen for $1…What can you get with 105 yen is the

questions we should be askinghttp://www.oanda.com/products/bigmac/

bigmac.shtmlIf you had limited amounts of cash, where

would you go to visit? Where is the last place you would go?

Purchasing PowerAll Inclusive4 NightsIncludes all meals,

flight and resort stay accommodations

Dominican Republic$750

Purchasing PowerItaly 3 nights: Flight and Hotel only =

$1700Hawaii 4 Nights: Flight and Hotel only =

$1000Go to: Orbitz.com

Click vacation packages and see where would be a great place to go for the price

Why Use Money?• Everyone accepts it

• Standard of Value– Gives objects and services a value

• Store of Value– Put $10 away today and 10 years from now it

will still be $10 – But it may not have as much buying power

Fiat SystemOur money has worth because:

It is generally scarceThe government says so

Allows unlimited credit

Past system = Gold StandardThe government backed every cent of money in

goldWe cannot print money unless you have it backed

by goldLimited government spending

Why use our specific money designBook Explanations Me being skepticalConvenientEasy to CountEasy to makeCheap to makeSupply is controlledDifficult to counterfeitDurable

Same SizeSame ColorThe copper in pennies

are worth more than the penny2006 Spent $100 Million

DirtyHigh tech computers and

copiers make it easier to counterfeit

Constant upkeep and cleaning

The rise of ATM/MAC Will people stop using money because of the

ease and convenience of check cards?

Why do stores have a minimum that must be spent if a check card is being used?

RF Tags may actually become even more popular.

CounterfeitingUS Spends 100’s millions of dollars making money

difficult to duplicate, tracking counterfeiters and prosecuting counterfeiters. Why?Money would be worthless if people were able to copy it

Measures taken by the governmentFeel (Cotton fabric)Blue and Red fibers in the billsWatermarkPortraits are lifelike and ink has a raised lookTreasury SealNumbers and Borders – very distinct

New Currency DesignsGo to:

http://www.moneyfactory.gov/newmoney/

Compare the copy of the $100 to the new designs on the computer and see if you can count how many ways the $100 Bill has been “changed” in order to stop counterfeiting

So how do you get all of this money?Income – Get a Job and do some work!

Types of IncomeSalaryWageCommissionBonusPiecework

Types of IncomeType Description Advantage Disadvantage

Hourly wage Paid by the hour

Possible overtime

Business slows so could your hours

Salary Fixed Payment – Usually on a yearly basis

Guaranteed income

Business increases but your pay stays the same

Commission Receive a fixed percentage on top of wage or salary

Hard work and ambitious attitude could mean more

Pay could vary from check to check

Bonus Additional pay for good work

Good work is noticed

Not getting one

Piece work Pay for each unit or product produced

Fast work = more $Quality work = more work = $

Income variesWork could slow

Fringe BenefitsBenefits and services you receive on top of

payMedicalDentalSick payVacation payCompany vehicleGym membership Use of company condo?Stock options

Income and Budgeting Fixed Costs

Car paymentRent or mortgageInsurance

Disposable Income = Money you have left over after expenses

Varied CostsElectricGasPhone

Investing your moneySavings Account

Checking Account

Mutual funds

Real Estate

CD’s

Bonds

Stocks

Insurance

Common forms of InvestmentsType Where? Descriptio

nAdvantage Disadvanta

ge

Savings BankCredit Union

Store money Collect InterestFDIC

SafeInterest

Very low interest rateMinimum balance

Checking Bank Credit Union

Store money Collect InterestFDIC

Check CardsWrite ChecksInterest

Low interest rateMinimum Balance

Savings Bond

GovernmentBroker/Financial Planner

Lend money to an organization – guaranteed value

SafeGood return

Time period you have to wait for the bond to matureTaxes

Time Deposit or CDAcquire at a bank, credit union or through an

investment firmDeposit a set amount of cash for a set amount

of time periodGuaranteed higher interest ratePenalties for early withdrawalClaim all earnings on your taxes

Time Deposit – CD’shttp://www.schwab.com/public/schwab/

investment_products/cds_money_markets/certificates_deposit?cmsid=P-983753&lvl1=investment_products&lvl2=cds_money_markets&refid=P-2211207&refpid=P-999522

http://partners.leadfusion.com/tools/pncbank/savings16/tool.fcs

StocksBuy a share of a company

Collect Dividends = Yearly profits

Sell for profit

Constant fear you may lose your shirt

Bear Stearns: Last summer $185/March $2.00

Mutual FundsGive money to a financial planner or

investment groupTHEY buy stocks for you

1985 - $10,000.00 invested Low Risk = $100,000.00 High Risk = $130,000.00

Always at risk of how the market is performingYou might think low/high risk depending on when

you are planning on taking the money outPay a commission to the group or planner

Real EstatePositives

Sell for ProfitRent

NegativesResponsibility

Costs and TaxesTough times vs. Good

times

InsuranceCar

Life

Home Owners

Renters

Personal

Flood

Health

Dental

Eye

Business liability

InsurancePay small amount

monthly or yearly

More you pay the more you will be covered

Vote Barack Obama ‘08

InvestmentsType Where Descriptio

nAdvantage Disadvanta

ge

InsuranceInsurance company

Pay Small of $ for coverage

Lots of coverage for little money

Selective coverageDon’t use?

Real Estate

Where it is available

Buy property – Exploit, Rent or Sell

ChoiceCould be a good sell

Bad economy

responsibility

CD’s

BrokerBank

Put $ into an account for set time period

Higher interest rates

Need money now take a penalty

Stocks

Broker/Financial Planner

Buy a share of a company – Hold, or sell

Big gainsStock market on the up

Possible loss

Mutual Fund

Broker $ given to a planner who invests it

Less stressfulStock market has been good

Possible loss