What's the value of Money?

These days, with the US printing money like Wal-Mart flyers, it makes you wonder what the global monetary system is based on. With the words “speculative bubble” popping up everywhere it makes you wonder if money itself is simply a giant speculative bubble!

For those not familiar with the term, speculative bubbles refer to any market (such as telecoms, real-estate, food, oil) where values are driven up beyond their actual worth by investments. It’s a supply and demand of a supply and demand! During the dot com boom, telecom companies were thriving (high demand) and this attracted a lot of investors trying to get a piece of the pie (high demand). This additive effect drove up stock prices beyond the actual value of the companies. Once the honeymoon period is over (bubble bursts), there is a rapid decrease in the market’s value and it becomes undervalued due to a loss of confidence.

This also happened in the summer of 2007 with record high food prices and in 2008 with the 140$ barrel of oil. This is most likely going to happen with gold now that the economy is in shambles. To go back to my original point: the US can ultimately print as much money as it wants even though its gold reserves stay the same. This begs the question… what decides money’s true value. Why is the US dollar worth specifically 1.21857 Canadian dollars or 0.76525 Euros today? This is all very speculative isn’t it? Financial experts have pretty much shown in the last 30 years that they honestly have no real sense of a market’s true value. How true are those monetary exchange values quoted? What happens when that bubble bursts?