What is the Strict Definition of Value in Finance Terms

Learn about “value” or suffer the consequences financially

So i said in a previous video that we would talk more about the word value and its meaning so there’s a couple of different ways you could look at the word value so let’s talk about how the individual would value something of course all of our value systems are differently now i’m talking in terms of things that we want to own not you know your moral value system

That’s a separate discussion but things that are important to you like i play guitar so owning a guitar is important to me i value a guitar a person who can’t play a guitar would maybe value a guitar as an ornament on the wall or something on that line or just to have the pride of ownership to say i have a guitar i have friends that play guitar when they come over

They can play my guitar so i value having that around now that’s all true and all good and all well but value as a general rule in finance needs to be viewed a different way so some of those those factors the personal factors would still be issu factors inside of aggregate finance when it comes to the individual but more so what happens is we would look at the

Values of individuals as a group so we would take a group of people and their buying habits or their their banking habits or their credit card purchases and we’d be able to see from what they purchased individually which is an individual thing that we just talked about and see what they buy on average and come up with some sort of an aggregate index of what people

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For example are willing to pay for something what is someone willing to pay for you know a single family home a a small car a honda civic for example a specific car what how do people value that in terms of purchasing and what numerical value do we put on that that’s another distinction i always like to make is that the typically when i ask people about the value

Of something they they give me a dollar amount well that is one way to measure value in dollars but as i’ve said previously dollars are sort of ethereal and not a fixed standard and it’s a very challenging way to measure things over time it’s great in the instant currency currently right talked about that before it’s great in the moment and it’s a useful tool for

Benchmarking in the moment but over time it becomes very confusing because the dollars are illusory they uh they don’t buy as much they lose purchasing power so you may see a set amount of dollars and present in an account but over time that’s going to lose purchasing power we’ll talk about that in greater detail again so getting back to value so value over time

And value in the context of finance really comes down to the word means equal to now you can take an etymological dictionary which is a dictionary that tracks the usage and meaning of words over time and if you go back a number of years seven eight hundred years you’ll find out that in the context of finance value meant equal to so again all values are relative

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I’ve said that before it’s equal to whatever you think is fair in that transaction so try to remember try to keep that i’m going to keep repeating that value statement over and over again because as you’ll see going forward you’ll see why i harp on and hammer on this particular word and this subject matter so much because it’s so integral and so important to what

We’re about to experience in this heavily inflationary environment that we’re about to launch into here in the world okay so that’s all i have to say on value for right now we’ll talk about it at length more and more probably just about every time i get on screen here so be prepared thanks for listening

Transcribed from video
What is the Strict Definition of "Value" in Finance Terms By DURHAM PRECIOUS METALS