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You can always 'create' more oil by pumping it out of the ground once the prices hit a certain amount. So it's not really 'zero-sum'. If the supply isn't locked
by neximo64 6y ago
You can always 'create' more oil by pumping it out of the ground once the prices hit a certain amount. So it's not really 'zero-sum'. If the supply isn't locked or restricted it's hard to say that.
Same thing with Tesla shares, or whatever it is. If you can create more Tesla shares its not zero sum (which is done often).
Currencies too are printed when needed. About the only thing really zero sum are some cryptocurrencies.
You could argue in some way that it is zero-sum, but if the price goes down and oil companies don't pump oil out, they don't really lose anything - especially with derivatives as it is on a future outcome.
- FabHK 6y agoThere is positive supply of oil, or Tesla shares. However, the net supply of derivatives (such as options, forwards, futures) is zero.
- vmception 6y ago> the net supply of derivatives (such as options, forwards, futures) is zero. so we believe, but yes. also CDOs have entered the chat
- baconandeggs 6y agoIt is zero sum in the sense that all the money has to be equal to all the stocks. Not in the sense of perceived value.
- neximo64 6y agoYou can make more money though & you can make more stocks. That's where the notion you're addressing breaks down, even in the perceived sense: The Hong Kong dollar is pegged at the moment, this also means it's not zero sum for a buyer or seller either, especially at the peg boundary like now. They simply make more Hong Kong dollars or withdraw them.
- baconandeggs 6y agoIt is zero sum because it adjusts, no matter what you do. If you pump more oil from the ground, the prices will fluctuate until they reach the new zero-sum level that takes into account the new production level. A pegged dollar is the same, it only takes a little longer. When they print they dilute the value of the current dollars in circulation but not immediately, because of the peg. But eventually, because it is zero-sum, so much pressure is pent-up trying to maintain that non-zero-sum peg that the system begins to crack and they have to re-peg it. Which happens often with pegged currencies. This does not mean there are no winners and losers, personal finance is of course not a zero-sum game. And because the adjustments are not instantaneous there is a lot of room to profit if you know what is happening, which gives the impression of it not being zero-sum.
- neximo64 6y agoActually with the lag it changes everything, because you can earn interest/dividends on the amounts. You can die in the meantime so its someone elses. The variations are endless. When someone discusses it as being zero-sum there is always just a scenario you can describe where it isn't, and if even just $1 can't be accounted for the whole argument breaks apart. It is never really instantaneous and can take more than months, years. You would have thought printing 6 trillion would have changed something but not really.