@1GigiSims This mirrors what was probably happening in the stock market prior to this. Value and price are two different things. Value cannot be quantified. We know something has value because of its nature. Its price is determined by demand and supply. Here is where 'hot air" can...
@1GigiSims ...be injected into a market. Take toilet paper. It has value because of its use, so there is a demand for it. Depending on the availability of the commodity, it will have a high, or low price. Price can also be affected by the amount of currency issued by the government, but
@1GigiSims we will assume a stable currency for now. If someone with sufficient cash can buy up a large portion of the available toilet paper, the available supply drops. With demand naturally high, the price goes up. This is not a NATURAL shortage caused by something like the...
@1GigiSims ...loss of raw material supply, or manufacturing facilities. A human being created the shortage in order to drive up the price. The value of the toilet paper does not change, only the price, which is always fluctuating.
@1GigiSims In the stock market, prices of stocks can be manipulated in similar ways as the toilet paper price. The stocks have a value, but it cannot be really quantified. The examination of a corporate balance sheet, to determine the stock's contribution to total equity, could be close..
@1GigiSims ...to a quantified value, but what you see in the stock market is only the PRICE of the stock, not necessarily its value. That is why the slogan, "I'm in IT (stock market) for the long haul" should not mean "Buy and Hold" stocks forever. You buy, and sell, all the time.
@1GigiSims Take your profit when you can, because a lot of it might not reflect REAL VALUE of the corporate entity issuing the stock, but only demand and supply for those shares.
@1GigiSims I'm that rare thing called an "Austrian Economist." I studied the economic theory of the Austrian School (Ludwig von Mises). All I disagree with them about now is Marginal Utility Theory of value. The Austrians contradict themselves on their monetary theory by defining...
@1GigiSims the assignment of value to an object as being subjective to the person appraising an object's value. What you value is not necessarily what I value, etc. That type of mental exercise, determining what you will purchase, and what you won't, is more of a demand and supply...
@1GigiSims ...or price determinant. In this case, DEMAND is subjective to the individual. VALUE is inherent in the object itself. Value is determined by the nature of the object itself. For example, one would not choose a new fly rod over the Mona Lisa as the Mona Lisa could sell...
@1GigiSims at a high enough PRICE to purchase a warehouse of high-end fly rods. If value was truly subjective to the individual, such a decision to choose the fly rod over the Mona Lisa would not be considered very wise.
This is where the value of MONEY comes in.
This is where the value of MONEY comes in.
@1GigiSims Austrian economists do not like paper currency, or debt created money which is in higher supply today than paper currency, because it's "value" is not stable as it is easy to create more of it. The more money in the economy, the more goods can be demanded, forcing up prices.
@1GigiSims To ensure a money of stable VALUE, Austrians prefer gold and/or silver money. Here is where the contradiction inherent in subjective value theory (Marginal Utility) can be seen. Paper currency, and money created in the lending process in modern banking, gets it's "value"...
@1GigiSims ...from the SUBJECTIVE DECISION of the individual that the money being used in the economy has VALUE. The value of government/banking system money, not backed by anything of INTRINSIC VALUE, is determined by the subjective notion of the people that it has "value."
@1GigiSims As long as the people keep accepting it in exchange for their labor and anything they are selling, the money has "value," but the Austrians do not accept that kind of monetary system. It's a contradiction. So, I'm not sure I am STILL an Austrian economist.
@1GigiSims Price can be quantified in the relation to the sales price of an object. Value can only be quantified by God, the maker of all things. We know naturally if something possesses value, but cannot put a number on that value.
@1GigiSims @threadreaderapp Unroll if you please.
