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>Well, not really. >Financial instruments like stocks and bonds are real legal claims on the real assets of an entity. They are not creating value out of nothi

>Well, not really. >Financial instruments like stocks and bonds are real legal claims on the real assets of an entity. They are not creating value out of nothing, they are transferring ownership rights. While an instrument making a claim to a real asset can't create value from nothing, it can create value from almost nothing. For example if the going price for a particular beanie baby is $100,000 a huge amount of speculative value has been created from a very small (basically nothing) real world value. In general it's poor speculation that causes problems, not necessarily the nature of the asset itself

JackFr 9y ago
A beanie baby is a beanie baby. It's an asset and offers no other claims or rights. If I pay $1 for a beanie baby the manufacturer presumably captures the value of the difference between where they value labor and materials (< $1) and $1. I capture the value of the utility a beanie baby gives me (>=$1) less $1. If I then mark the beanie baby on my books as worth $1 million, because that's where I have seen other similar beanie babies trade, on my balance sheet I have captured $9,999,999 because I was able to get real property the market values at $1 million for $1. That is ludicrous, but it is real (though unrealized). Now I could sell it for the $1 million, and my gain would realized, and it would equal the difference between my cost and the (possibly irrational) utility the buyer placed on that beanie baby. That the buyer irrationally believes that a beanie baby has value beyond that of a toy, as a store of value, or a possible rising speculative asset is not prudent or wise, but it is real.
- tehsauce 9y ago
  Ok so what if in that entire scenario above you replace "beanie baby" with "printed slip for a wallet containing 1 BTC". The value stored in cryptocurrencies do actually have a physical manifestation (whether it's the neurons in your brain, or a printed physical wallet that stores your password). It's just that it's physical existence is puny by comparison and very easy to copy/transfer.
  - pbecotte 9y ago
    That is kind of the point, however, the value isn't created by making the toy or the btc. The value is created when the perceived utility of the underlying goes up. Imagine you own a well. Later they discover a way yo get oil from that type of well. The change in perception is where the increased value comes from.

JackFr 9y ago

A beanie baby is a beanie baby. It's an asset and offers no other claims or rights. If I pay $1 for a beanie baby the manufacturer presumably captures the value of the difference between where they value labor and materials (< $1) and $1. I capture the value of the utility a beanie baby gives me (>=$1) less $1. If I then mark the beanie baby on my books as worth $1 million, because that's where I have seen other similar beanie babies trade, on my balance sheet I have captured $9,999,999 because I was able to get real property the market values at $1 million for $1. That is ludicrous, but it is real (though unrealized). Now I could sell it for the $1 million, and my gain would realized, and it would equal the difference between my cost and the (possibly irrational) utility the buyer placed on that beanie baby. That the buyer irrationally believes that a beanie baby has value beyond that of a toy, as a store of value, or a possible rising speculative asset is not prudent or wise, but it is real.

tehsauce 9y ago
Ok so what if in that entire scenario above you replace "beanie baby" with "printed slip for a wallet containing 1 BTC". The value stored in cryptocurrencies do actually have a physical manifestation (whether it's the neurons in your brain, or a printed physical wallet that stores your password). It's just that it's physical existence is puny by comparison and very easy to copy/transfer.
- pbecotte 9y ago
  That is kind of the point, however, the value isn't created by making the toy or the btc. The value is created when the perceived utility of the underlying goes up. Imagine you own a well. Later they discover a way yo get oil from that type of well. The change in perception is where the increased value comes from.