These are great questions. Strangely, it is your "Philosophical"
question, that is the easiest to answer (the answer to the two other
questions are closely related). The basic idea is that the value of the
dollars is determined by the number of dollars in circulation (as well
as by the velocity of money, that is the amount of time that a dollar on
average spends in your pocket). If the government were to double the
number of dollars in circulation (by using printing press etc) the price
of a cup of coffee will double etc... Similarly, if the interest rate
goes up but the number of dollars in circulation remains the same you
will keep less money in your pockets and the price of coffee will
increase etc. This is a bit of an oversimplification but the basic idea
is that scarcity gives value to a dollar. 

Michael

-----Original Message-----
From: ykouskoulas Æ comcast.net [mailto:ykouskoulas Æ comcast.net] 
Sent: Monday, November 20, 2006 3:09 PM
To: Daniel Reeves; michael schwarz
Cc: yootopia-discuss Æ yahoo-inc.com; ykouskoulas Æ gmail.com;
bethany
soule; improvetheworld Æ umich.edu
Subject: Re: Yootles

I've had the flu for the last couple weeks, (yuk!) so I only saw and was
able to respond to your e-mail recently. I enjoy thought experiments and
exploring ideas like this, so I hope you don't mind the questions...
Michael's comment about gaming the system by deliberately going bankrupt
is an interesting one.

> let me start by claiming that yootles do not in
> fact need to be tied to anything of value.

Yes, let me work on understanding this one better before we talk about
the level playing field. So I can ask some questions:

1. Practical usage question: If yootles are not tied to anything of
value, how do I know how much each is worth? I don't know how to come up
with a number in negotiations without having an idea about its value.
I.e. is a backrub worth 20 or 2000 yootles?

2. Stabilization of value over time question: If I just start by
throwing out a number, is there an expectation that the value of a
yootle will stabilize as the currency is used over time? Or does the
worth of a yootle fluctuate from month to month?

3. Philosophical, 'how does currency get its value' question: I was
given to understand, based on economics classes that I took that
currencies got their values by being tied to something else of value (a
good or service). If yootles are not tied to anything of value, how do
they get their value? Mabye some economists (Michael?) could chime in
here to elaborate or correct my understanding of this. How do currencies
get their value? Do I just have the wrong idea here? If so, what is the
right idea?

Phrasing the question in another way, "why is a dollar bill in my pocket
today valued such that I can buy a cup of coffee* with it, and not a new
computer?" What determines its value?

-Yanni

* Ok, a cheap cup of coffee, not at starbucks.