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You are using a very non-standard definition of capital. > As a result creating and destroying money doesn't create or destroy wealth. I'll give you a MacBook
by halpmeh 4y ago
You are using a very non-standard definition of capital.
> As a result creating and destroying money doesn't create or destroy wealth.
I'll give you a MacBook, which is a durable good you can use to produce goods and services, if you go to the bank, withdraw all of your money, and then set it on fire. This is a good deal for you. Your wealth will not change from setting the money on fire, as destroying money does not destroy wealth, and you will have a capital good that will increase the amount of wealth you have.
- lottin 4y agoIf you set your own money on fire, the amount of wealth in the economy won't change. However you'll be worse off, because your share of the total wealth is now smaller (and everybody else's share is bigger).
- halpmeh 4y ago> However you'll be worse off, because your share of the total wealth is now smaller So you're worse off because your share of the wealth is smaller... if only we had a way to describe that. Perhaps you could say that you're less wealthy and by burning your money, you've destroyed your capital? Look, I get what you're trying to say. The value of each currency unit is roughly the total amount of economic value divided by the number of units of currency. So the sum of the value of all the currency units doesn't change as you add to or subtract from the money supply. The piece you're missing, though, is that the VCs didn't create the money they invested in BlockFi. The money came from investors and partners. So in a very real sense the capital of those investors and partners was destroyed.
- lottin 4y agoDestroying money doesn't destroy capital. It doesn't matter who created it. Money is not capital. You're mistaking a claim on a good for the good itself. These are completely different things.
- halpmeh 4y agoAgain, you're using a totally non-standard definition of capital. Google "capital definition" > wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing. So yes, if you redefine the word capital to fit whatever you like, then sure, I agree with you.
- lottin 4y agoI'm not redefining anything. I'm an economist, and I know the terminology of economics well. Capital can refer to two things, either 'capital' (or 'real capital') or 'financial capital'. The definition that you've posted matches (more less) the definition of financial capital. But, either way, this is not complicated. The fact remains that destroying money doesn't destroy wealth. Mistaking money for real wealth is a common mistake.
- halpmeh 4y agoOk, so I think we’re in the same page: there is a definition of capital that includes money but is for some reason not applicable to this conversation because you’re an economist and know better. And if you burn your money in your bank account, then you’re less wealthy but that cannot be referred to as destroying [your] wealth or capital.
- somewhereoutth 4y agoTo help out a little - money is only a signalling protocol for resource allocation. Nothing more. Burning the money in your bank account does not destroy any resources anywhere. It does, however, rather screw with being able to get some of those resources allocated to you.
- halpmeh 4y agoSo now we're redefining "resource?" Resource. Noun. a stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively. Even if the commonly accepted definition of "resource" didn't explicitly state that money is a resource, the ability to acquire resources is itself a resource.