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The link between an asset's intrinsic value and its market value is elastic, and the elasticity depends on how quickly the money supply grows and the available
by fredkbloggs 11y ago
The link between an asset's intrinsic value and its market value is elastic, and the elasticity depends on how quickly the money supply grows and the available rate of real returns elsewhere in the economy. In theory, a fiat-based monetary system can have unbounded monetary growth; in such a system, there is always a "greater fool" and the link to intrinsic value is broken entirely. Not saying this is actually happening, only that it can; it's simply the degenerate case of what we actually observe.
- valarauca1 11y agoYour assertion requires an unbounded number of consumers, which last time a check the population of the earth was still finite. You can fool all of the people most of the time, and you can fool some of the people all of the time, but you cannot fool all of the people all of the time - A. Lincoln
- fredkbloggs 11y agoIt does not. It requires only that they have an unbounded supply of money. The price of an asset can be bid up indefinitely as long as there are at least two traders with unlimited access to money.
- valarauca1 11y agoSo instead of an inifite number of consumers it requires 2x an inifite supply of money. How is this more likely? If you have inifite of something it by defination has no value to you.
- fredkbloggs 11y agoYou don't. The way that the monetary system works in all developed economies today is that you can borrow money into existence in order to purchase an asset. The supply is not infinite, but it is always possible to create more. That's reality, not a hypothetical. The hypothetical is that this could continue without limit, regardless of asset prices. Thus far, in reality, that growth has always been restricted at some point. There is no conceptual requirement that it be so.