4 ms·

They don't create new money, they hand over a part of the company. The shares don't grow by themselves. It has nothing to do with printing money like central ba

They don't create new money, they hand over a part of the company. The shares don't grow by themselves. It has nothing to do with printing money like central banks do.

zelos 6y ago
If the 'true' value of the company is (say) $0.5 per share issued, haven't they effectively printed money?
- TomMarius 6y ago
  No, they just sold a chunk of the company and made a $0.5/share profit on it, probably by promising future profits; there is not even a guarantee that the buyer will be able to sell it for the same price they bought it. They might commit fraud and sell valueless shares and effectively "print money" (especially if people take loans to buy them), but I have a feeling that it doesn't work for long.
- netcan 6y ago
  What I meant was that printing a share at any price is printing money. Uber prints a share. An investor exchanges currency for it. The share goes into his account. He can treat that share as money for most purposes. For many uses of money (eg securing a loan, providing working capital..) it's as good as having foreign currency, sovereign or private bonds. For other uses (eg paying rent), it's fungible with currency/money/coinage/etc.. Shares can be overpriced, but so can currency. It's besides the point, imo.
netcan 6y ago
I did say it gets abstract, and into some stuff that's highly debatable. Interestingly, economists (also sociologists, historians, etc.) disagree agree on what money is. For the purposes of this topic though... I think it's sufficient that marketable securities sit under "current assets" on a balance sheet, alongside "cash & equivalents." Say an investor buys a new share in uber for $35. Her balance sheet isn't meaningfully changed. Uber's bank account has grown by $35. I'm not saying that the accounting doesn't work out. The $35 isn't counted as revenue, and doesn't impact earnings. Still... $35 has now appeared in one account without disappearing from another. Again, I'm not saying the accounting is dodgy. Theoretically, when you buy a $2 ice cream then you have a $2 ice cream and 2 fewer dollars. Your "balance sheet" nets the same amount. Same thing when a woodshop buys timber. But for most practical purposes in the modern economy, a company's "total assets" don't matter much. "Current assets" do. Whether or not you want that money (or even currency) creation is interesting, but it works the same as money in practice. Gold, sovereign notes, bank bonds... Same result as shares.
- TomMarius 6y ago
  I don't follow. A literal part of the company has been handed over in exchange for the money, where is new money being printed?

They don't create new money, they hand over a part of the company. The shares don't grow by themselves. It has nothing to do with printing money like central banks do.

zelos 6y ago

If the 'true' value of the company is (say) $0.5 per share issued, haven't they effectively printed money?

TomMarius 6y ago
No, they just sold a chunk of the company and made a $0.5/share profit on it, probably by promising future profits; there is not even a guarantee that the buyer will be able to sell it for the same price they bought it. They might commit fraud and sell valueless shares and effectively "print money" (especially if people take loans to buy them), but I have a feeling that it doesn't work for long.
netcan 6y ago
What I meant was that printing a share at any price is printing money. Uber prints a share. An investor exchanges currency for it. The share goes into his account. He can treat that share as money for most purposes. For many uses of money (eg securing a loan, providing working capital..) it's as good as having foreign currency, sovereign or private bonds. For other uses (eg paying rent), it's fungible with currency/money/coinage/etc.. Shares can be overpriced, but so can currency. It's besides the point, imo.

netcan 6y ago

I did say it gets abstract, and into some stuff that's highly debatable. Interestingly, economists (also sociologists, historians, etc.) disagree agree on what money is. For the purposes of this topic though... I think it's sufficient that marketable securities sit under "current assets" on a balance sheet, alongside "cash & equivalents." Say an investor buys a new share in uber for $35. Her balance sheet isn't meaningfully changed. Uber's bank account has grown by $35. I'm not saying that the accounting doesn't work out. The $35 isn't counted as revenue, and doesn't impact earnings. Still... $35 has now appeared in one account without disappearing from another. Again, I'm not saying the accounting is dodgy. Theoretically, when you buy a $2 ice cream then you have a $2 ice cream and 2 fewer dollars. Your "balance sheet" nets the same amount. Same thing when a woodshop buys timber. But for most practical purposes in the modern economy, a company's "total assets" don't matter much. "Current assets" do. Whether or not you want that money (or even currency) creation is interesting, but it works the same as money in practice. Gold, sovereign notes, bank bonds... Same result as shares.

TomMarius 6y ago
I don't follow. A literal part of the company has been handed over in exchange for the money, where is new money being printed?