When markets don’t work, it can be hard to know the value of anything.

At the center of the current S economic crisis is a problem the market is supposed to solve: knowing what things are worth.
Adam Smith said that value is set “not by any accurate measure, but by the higgling and bargaining of the market.” But as country after country contends with struggling banks, whiplashing stock markets and calcifying credit, the value of mortgages, securities, currencies and property has become difficult to determine no matter how much higgling you do.
Take the case of Icelanders and their ailing kronur. Battered by the massive failure of the national banking system, the country’s currency has lost almost half of its value against the dollar over the past year. As a result, Icelanders are looking for safe investments - like Rolex watches. Franch Michelsen, a watch dealer in downtown Reykjavik, told Eric Pfanner of The Times that he had seen increased demand for the brand.
“People want something they can take anywhere in the world and sell it,” Mr. Michelsen said.
A Rolex is more likely to hold its worth than, say, a house in Florida. The state saw one of the most rapid inflations in real estate values during the recent bubble, and is now experiencing one of the most rapid declines. Jack McCabe, a real estate consultant, told Vikas Bajaj of The Times that two homes on his street in Fort Lauderdale sold for about $730,000 each in 2005. They were recently resold for $400,000 apiece - a 44 percent drop.
“The rocket has run out of fuel, and now it’s plunged back down to earth,” Mr. McCabe said.
It’s not always a bubble bursting that deflates a market. New technology can do the trick, as the recording industry has learned in the digital age. With songs online selling for anywhere from a few cents to a dollar or more, the monetary value of music has become murkier than ever.
This month, a panel of federal judges finally set a United States royalty rate for digital downloads. The music industry wanted it higher than the rate for physical recordings, Ben Sisario reported in The Times, while online retailers wanted to scrap the system and just pay a percentage of revenues.
But the judges, like a lot of people in recent days confronted with confusing and competing indicators, took a cautious middle path. They established a rate of 9.1 cents per track - the same as on a compact disc. Sometimes it’s easiest to stick with a value you know.
That may be true of international investors, too. Despite the turmoil in the American banking system and stock markets, the United States dollar has been gaining strength, trading recently at close to $1.30 to the euro, down from nearly $1.60 in July.
The psychological value of the dollar - long a symbol of financial stability - is trumping the wobbliness of the economy that underpins it.
“It’s ironic, given that we just messed up big time, the response of foreigners is to pour more money into us,” Kenneth S. Rogoff, an economics professor at Harvard University, told Mark Landler of The Times. “They’re not sure where else to go.”
After all, you can only buy so many Rolexes.