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But that is assuming the owners, i.e., stockholders, expect their Return on Investment to be in the form of cash.  Currently the expectation is ROI will be received in the form of a rising stock price.  


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Thu Oct 11th, 2007 at 07:09:28 AM EST
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A rising stock price is useless if you can't cash it in and spend it on something. So there's an implication that it's still - effectively - equivalent to real cash. (Otherwise, what would be the point?)

Of course what's happened is that the capital and physical economies have decoupled more and more, so it's possible for ROI to circulate indefinitely between different schemes, becoming bigger and bigger and never actually being spent on anything tangible.

The mythology calls this growth and seems to consider it a good thing.

I think it's inflationary because at best its leeching value out of the physical economy, and at worst it's just a big Ponzi-shaped pile of IOUs.

You can of course still cash ou, but only if you do it before the pile collapses - which is useful for anyone who gets there ahead of the rush, but not so useful for the Bigger Fools who are a little slow.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Oct 11th, 2007 at 07:53:03 AM EST
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A rising stock price is better than cash because it isn't a taxable event and yet can be monetarized, e.g., when used as collateral for for a loan.  If you're a bank a rising stock price is a capital asset contributing to your reserves.  And there's lots of other financial shenanigans that can be pulled - derivatives immediately spring to mind.

None of this has anything to do with actually producing something.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Thu Oct 11th, 2007 at 08:35:31 AM EST
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This partly explains the asset bubble.

We have met the enemy, and it is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Oct 11th, 2007 at 08:45:00 AM EST
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