On 6/2/2013 9:10 PM, S. Dale Morrey wrote:
Cash serves (in my mind) a specific purpose. It's sole purpose is to
facilitate exchange between parties, for instance I can pay taxes with it
and buy gas for my car, groceries to feed my family etc. It doesn't matter
if that cash is dollars, euros or clamshells if I can spend it directly
then it's cash. However it's the spending that gives it value. Holding
onto it forever does nothing but cost money.
If it pays interest it doesn't meet the definition, it falls more into
longer term storage of purchasing power even if the length of storage is 1
month or 1 year. Savings accounts and Certificates of Deposit, which bear
interest above inflation fall into this category. Checking accounts are
essentially cash.
The only points I'm going to make in this entire conversation relate to
your definitions or whatever this is here.
- The value of a thing is never static and never attributed to a given
entity. The value of something in a specific context /might/ be, but
it's not likely. This applies to anything you might call currency,
money, assets, or whatever.
- Wealth is not some mystical number you derive about your holdings.
Wealth is the ability to create value for other parties. If you have a
mountain of gold but can do nothing with it, it is not wealth. If you
can make some shiny clothes with it somehow, this still isn't wealth.
It only becomes wealth when it drives a transaction.
- Cash is just an abstraction, because we got to a point in civilization
where it was cumbersome to deal in chickens or rice or whatever the
other guy was dealing in. It saves transactions required to convert my
assets into something I can trade for your assets. The fact that we
argue about it is actually kind of an example of how we do not
understand it.
- Finally, remember that you can not buy a stick of butter for the same
prices at 10 different places, even if its from the same dairy. This
has nothing to do with the value of butter or investments or anything.
My philosophy surrounding these facts is fairly simple. In the end,
every transaction we make, even elongated over an investment period,
needs to create value (intrinsic or on an account balance or otherwise)
for both parties involved, or it is devaluing something. That's really
the only end-all be-all to economics. If someone feels they're getting
screwed, eventually we all are. If everyone feels they came out ahead,
eventually we all will.
-Tod Hansmann
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