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by rvba
1155 days ago
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Markets dont follow logic because central banks pump incredible amounts of dollars via money creation. Quantitative easing, 0% interest, massive inflation - are all just facets of the same problem - that central banks dont work for the common people. Market looks irrational, but it is rational - money is "free" - so zombie companies can exist. Inflation just ruins the low and middle class, but who cares - it is convenient for governments. Market was artificially pumped by quantitive easing. Also money is not free for normal people, banks earn interest and that interest comes back as inflafion. Licence to create money out of thin air is like license to steal. |
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If I just want to trade my bushel of corn for your chicken, money makes it easier - I exchange my corn for some money, and then I exchange that money for your chicken. I don’t care whether the money is ‘one fricasee’ or ‘ten million gorzebos’ as long as we both agree that’s the number attached to it. You can use something that is a real asset for this, but it actually doesn’t have to have any intrinsic value to be usable for this, as long as everyone agrees to use it.
However, there’s a time element - I can sell my corn, and then keep the money for a while, retaining the power to buy the chicken later. That turns it into a potential asset. During that time, the numbers attached to different items could go up or down - the time element makes arbitrage possible. Even for ‘useless’ assets.
Too much money held as assets can reduce its effectiveness as a medium of exchange - but improving the effectiveness as a medium of exchange can reduce its stability/value as an asset.
Also probably why there is a lot of contention over gold standards etc. - the gold standard improves its value as an asset, while potentially limiting its value as a medium of exchange - so it’s going to depend on which one you prioritize whether you will favor it or not.