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It’s zero sum for the individual buyer and seller, but in aggregate it’s how the economy decides what work to do.
by psyc 9y ago
It’s zero sum for the individual buyer and seller, but in aggregate it’s how the economy decides what work to do.
- BenoitEssiambre 9y agoI think I understand what you are saying but in macroeconomics it's usually stated the other way. On the aggregate debt and financial instruments net to zero. One person's debt is another person's saving and if you add all financials up, you get zero (or depending on what you are counting, you get the value of the physical assets behind the financial assets such as stuff, factories etc. On the other hand, for sub parts of the economy or for individuals there can be positive or negative financial equity or debt meaning some individuals or parts of the economy owe are are owed more than others.
- FabHK 9y agoCorrect me if I'm wrong though: equity is issued in net positive supply. And while the company has equity on the book as a liability, that liability does not go up when the stock price goes up, right. Thus, when stock price doubles, it is wealth creation for the shareholders (and if they'd sell to someone else, it would be realised). Edit to add: unlike derivatives (like call options), which are in net zero supply, thus their payouts are always zero-sum.