What Is Value, And How Is HFT Affecting Market Value?
January 23, 2011 | about: GLD
My apologies to readers who’ve been requesting that I write more about options-selling strategies. I promise to get a series on that subject started with my next post.
After the hail of fire I drew with my prior post, which dared to inform readers of research that suggested the price of gold might be in a bubble pattern, I decided to stay away from writing anything that implies “value” is nothing but a social construct. But then I heard two recent public-radio programs that featured refreshing takes on economics, trading, markets, and the meaning of money. Seasoned investors and veteran economists might find these programs trivial—but I humbly submit that it's important to look outside the bubble (no pun intended) to get some perspective.
Cutting right to the chase, there's last week's This American Lifeprogram entitled, “The Invention of Money”. Prompted by reports that more than a trillion dollars “disappeared” when the housing bubble burst, contributors started to investigate what money really means. Planet Money correspondent Jacob Goldstein asked his aunt, a savvy, successful business-woman, “Where did all that money go?” and her reply was, “Money is fiction.”
Cutting right to the chase, there's last week's This American Lifeprogram entitled, “The Invention of Money”. Prompted by reports that more than a trillion dollars “disappeared” when the housing bubble burst, contributors started to investigate what money really means. Planet Money correspondent Jacob Goldstein asked his aunt, a savvy, successful business-woman, “Where did all that money go?” and her reply was, “Money is fiction.”
Indeed, whether it's represented by salt, stones, silver or, yes, gold, the value of everything is determined by social contract. As TAL host Ira Glass put it,
READ FULL POST HEREThe answer to the question, “Where did all the money go when the housing market collapsed?” turns out to be that the money never existed in the first place.
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