[EdwardDiego]

Pretending that there aren't fundamentals behind the USD is ridiculous.

How do those people collectively agree on the value of the USD? By looking at the fundamentals - the economy of the US, the stability of its government, the likelihood that it will make good on its bonds.

[everfree]

None of those factors establish a fundamental market price for the dollar - you're simply listing the price of admission for any state-backed currency.

The dollar has declined in value by over 90% since 1933. By your metrics that must mean that the US is in catastrophic meltdown, but of course it isn't.

[EdwardDiego]

> None of those factors establish a fundamental market price for the dollar

Neither does the P/E ratio of a company, yet it's still a fundamental used to value stocks.

> The dollar has declined in value by over 90% since 1933.

Relative to which other currencies?

[everfree]

> Neither does the P/E ratio of a company, yet it's still a fundamental used to value stocks.

Earnings is used to create a valuation of a stock. Price-to-earnings is the result.

As a company's earnings increase, the stock's value increases. As a country's earnings increase, there is no similar correlation with its currency.

> Relative to which other currencies?

Relative to a standard basket of goods.

[dheera]

> Earnings is used to create a valuation of a stock

Is it? Many times stocks perform well at earnings and shareholders still put on a fit and downvote its price.

Conversely, they often upvote its price based on some PR hype instead of actual earnings.

[everfree]

Theoretically, a stock's fair value is the sum of their current and (discounted) future earnings.

> Many times stocks perform well at earnings and shareholders still put on a fit and downvote its price.

Price fluctuations at earnings calls are due to relative earnings expectations, not the absolute value of the earnings itself. Such stock revaluation is due to investors suddenly having more accurate earnings figures to price into their valuation.

> Conversely, they often upvote its price based on some PR hype instead of actual earnings.

"PR hype" pumps represent increased market expectations of actual future earnings, however tenuous those expectations may be.

[peyton]

Nit: fair value is more an accounting thing related to observed market price. It’s not really a theoretical concept.

You can make up some valuation using a variety of methods.

Today stock price is gonna be heavily sector specific but for tech it’s mostly comparables + signals, not really future earnings.

[EdwardDiego]

> As a country's earnings increase, there is no similar correlation with its currency.

Oh right, so balance of trade doesn't impact a currency's value. Interesting.

[weberer]

>Relative to which other currencies?

Relative to the USA's consumer price index.