4 ms·

Out of my depth here, but aren't the real estate and financial instruments being held merely as a generator of more money (except in the rare case that one actu

by gglitch 11y ago

Out of my depth here, but aren't the real estate and financial instruments being held merely as a generator of more money (except in the rare case that one actually lives on the real estate, I suppose)?

drabiega 11y ago
You might think so at first glance, but the telling question is whether you're holding those things to generate money to hold onto or whether you just want that money to buy other things?
msandford 11y ago
Generally yes, but the yields on real estate are small relative to the notional value. Further, by necessity most things are held at a notional value and the sum of all these notional values far far outweighs the total sum of all the money people are holding in bank accounts. Now obviously everyone in the world couldn't sell everything and achieve the notional values and put those in bank accounts, because in order for everyone to sell there would have to be buyers, but we can't have buyers because everyone is selling. But if somehow we could, the amount of money in banks would probably go up 100x or so, but definitely at least 10x. That means that real assets far outweigh money in the economy and so it's kind of strange to think about 'capital' as money rather than as assets. Assets are things which are generally useful in some particular way (a car, a house, a factory, etc) rather than as their potential which is more what money is.
dublinben 11y ago
Real estate, especially in major Western metropolises (London, Paris, New York, etc.) is also seen as a very stable store of value. If you are a newly-minted millionaire capitalist from an unstable developing country, parking your cash in foreign real estate is quite attractive.
AndrewKemendo 11y ago
It's a mix, but in general you can look at the risk profile of these assets as a range between "storage" and "return." The left end is more (historically) stable asset classes with lower returns like government bonds and the latter with volatile and high tech startups. Again though, it's not "money" per se, ie. cash, that they are trying to generate - though in the cases of dividend yielding assets as part of a retirement portfolio that is true - but rather to put their money into an asset that beats inflation with variable levels of security and maintenance, aka Risk. I guess you could say that you always want a higher cash value over time but I think that is a vulgar interpretation of how a market works.

by gglitch 11y ago

drabiega 11y ago

You might think so at first glance, but the telling question is whether you're holding those things to generate money to hold onto or whether you just want that money to buy other things?

msandford 11y ago

Generally yes, but the yields on real estate are small relative to the notional value. Further, by necessity most things are held at a notional value and the sum of all these notional values far far outweighs the total sum of all the money people are holding in bank accounts. Now obviously everyone in the world couldn't sell everything and achieve the notional values and put those in bank accounts, because in order for everyone to sell there would have to be buyers, but we can't have buyers because everyone is selling. But if somehow we could, the amount of money in banks would probably go up 100x or so, but definitely at least 10x. That means that real assets far outweigh money in the economy and so it's kind of strange to think about 'capital' as money rather than as assets. Assets are things which are generally useful in some particular way (a car, a house, a factory, etc) rather than as their potential which is more what money is.

dublinben 11y ago

Real estate, especially in major Western metropolises (London, Paris, New York, etc.) is also seen as a very stable store of value. If you are a newly-minted millionaire capitalist from an unstable developing country, parking your cash in foreign real estate is quite attractive.

AndrewKemendo 11y ago

It's a mix, but in general you can look at the risk profile of these assets as a range between "storage" and "return." The left end is more (historically) stable asset classes with lower returns like government bonds and the latter with volatile and high tech startups. Again though, it's not "money" per se, ie. cash, that they are trying to generate - though in the cases of dividend yielding assets as part of a retirement portfolio that is true - but rather to put their money into an asset that beats inflation with variable levels of security and maintenance, aka Risk. I guess you could say that you always want a higher cash value over time but I think that is a vulgar interpretation of how a market works.