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LegendKiller
 
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Originally Posted by cromicus View Post
Totally meaningless, the capital market simply brokers value, it doesn't create it.


That explains why USD debt is created, not USD.


And how does a US citizen create demand for USD?

The capital markets certainly do create value, without the securities then wealth would have no way to transfer between one place and another. Without it investments of wealth would have no easy way of creating other wealth. Sure, the most base use of the capital markets is movement of wealth, but that in itself creates demand for USD.

A citizen creates demand for the USD by transacting in goods and creating wealth denominated in USD. In both cases, the demand for USD increases.
Old 02-09-2008, 02:18 PM LegendKiller is offline  
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LegendKiller
 
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Well shit. Lets start having some babies. The dollar will SKYROCKET.

Yeah, that's exactly what I meant...
Old 02-09-2008, 02:19 PM LegendKiller is offline  
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cromicus
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Originally Posted by LegendKiller View Post
The capital markets certainly do create value, without the securities then wealth would have no way to transfer between one place and another. Without it investments of wealth would have no easy way of creating other wealth. Sure, the most base use of the capital markets is movement of wealth, but that in itself creates demand for USD.
This is brokering value, not creating value. Value is created when individuals learn of a new way to use an item or create items of known value from items of lesser value. The closest the capital market comes to this process is pressuring investment in areas which are undervalued and away from the areas that are overvalued. The process of what is actually valuable and why is entirely separate from the capital market.

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A citizen creates demand for the USD by transacting in goods and creating wealth denominated in USD. In both cases, the demand for USD increases.
Why would he choose to use USD instead of, for example, Euros or CAD?
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Old 02-09-2008, 02:28 PM cromicus is offline  
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LegendKiller
 
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This is brokering value, not creating value. Value is created when individuals learn of a new way to use an item or create items of known value from items of lesser value. The closest the capital market comes to this process is pressuring investment in areas which are undervalued and away from the areas that are overvalued. The process of what is actually valuable and why is entirely separate from the capital market.


Why would he choose to use USD instead of, for example, Euros or CAD?

Value is created by the mere existence of the capital markets. Without them then the ease of wealth transferrence and investment would be greatly reduced. Frictions would occur, velocity would slow down, returns would be diminished, ease of investment would be reduced, transparency would be diminished, and the economy would slow. The existence of a strong capital market creates value by allowing the brokering of wealth transfer. It doesn't "create" actual wealth, in the sense of goods created, but without it good's values would be diminished.

They can use any other currency, provided it's accepted anywhere else. I can use any currency I wish in many places in NYC. Why would I though? Most everybody uses USD.
Old 02-09-2008, 02:48 PM LegendKiller is offline  
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cromicus
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Originally Posted by LegendKiller View Post
It doesn't "create" actual wealth
Right. So what does?

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Most everybody uses USD.
And why is that?
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Old 02-09-2008, 03:01 PM cromicus is offline  
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LegendKiller
 
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Right. So what does?


And why is that?

The people who make "stuff" and those who are involved in the process. However, the process would be a lot less efficient without strong capital markets. Thus, while the CM doesn't produce stuff directly, by their very nature they produce stuff by proxy.

Why is that? More market control domestically. Money aligned with the domestic economy. Money not constrained by foreign powers and markets. Transactions in local currencies are easier...etc The list can go on and on.

Your libertopian theories may seem cool and all, but until you come up with a workable solution, they are just theories. The current system is flawed, but it works well enough. It's better than the systems tried before.

And, as I asked before, what are your ideas?
Old 02-09-2008, 04:16 PM LegendKiller is offline  
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cromicus
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The people who make "stuff" and those who are involved in the process. However, the process would be a lot less efficient without strong capital markets. Thus, while the CM doesn't produce stuff directly, by their very nature they produce stuff by proxy.
I agree with all this, in fact if anything you're understating the importance of the capital market, but it doesn't have much to do with the reason why the USD has value. The capital market is priced and traded in USD for the same reason as almost everything else in America is; the reason for that is the central issue.

But maybe your fixation on the capital market as opposed to, say, the commodities market or the labor market or the consumer goods market might reveal the problem. Why do you highlight the capital market for this discussion?

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Why is that? More market control domestically. Money aligned with the domestic economy. Money not constrained by foreign powers and markets. Transactions in local currencies are easier...etc The list can go on and on.
And why is that? I'm going to keep asking why until you get to the root cause of the demand for USD. If people were to be pricing and trading everything in pebbles, wouldn't you want to know why? And wouldn't you be rather dissatisfied with the answer of "well, everybody else is trading in pebbles"?

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And, as I asked before, what are your ideas?
I don't really know, but that isn't the point. The point is that it should be bankers, brokers, accountants and lawyers who create and develop the instruments and infrastructure of commerce and trade. If they think that it is a good idea to group the exchange of goods in a market together using a kind of money, then they'll make it available and people will use it appropriately. It's the same thing as teachers deciding how best to educate children, and doctors deciding what medical care a person needs, and car makers deciding the best type of car parts to use. I think they should be free to make those decisions for themselves and not have their professional judgment substituted by an ignorant, unreasonable government. This is as true for business as it is for anything else.
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Last edited by cromicus; 02-09-2008 at 05:10 PM..
Old 02-09-2008, 05:09 PM cromicus is offline  
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