Posted on 12/03/2009 1:33:19 PM PST by arthurus
Let's spin this globe and take a look at things from a slightly different angle. If we could inventory the entire planet, every real, solid, tradable item we came across would belong to someone. Someone somewhere, or a group of someones would have bragging rights to each and every thing on this planet.
Each one of these items that is the least bit tradable would have some sort of value attached to it. Of course some things are not tradable. For example, a mountain in the United States that has been designated by the collective as public land is not a tradable property. Neither is Antarctica.
But those things to which property ownership rights can be transferred must have a value of some sort. And this value is a numerical representation of their relative usefulness or desirability to humanity when compared to everything else. Of course, less tradable items, like the Kremlin or the White House, need not have a calculable value in any real sense.
(Excerpt) Read more at seekingalpha.com ...
And, some points he makes are just wrong.
If a company doubles its issue of stock certificates to raise cash, then the price of each outstanding share will be cut in half. If a sovereign money-printer doubles his currency base to pay his cronies, then the value of each currency unit will be cut in half.The point about a country issuing money without any backing (fiat currency) is correct. The value of the currency will fall according to the amount issued.
But he or she is wrong about the company issuing new stock. If a company sells stock to double the outstanding amount of stock, the price of the stock does not fall. The stock is now backed by the original assets of the company + the newly received cash from the sale of stock.
Other examples also play fast and loose with numbers. For example, a house falls from $400K to $200K, and the choices are a sale at $125K or a partnership in a $200K house. If the best sale price is at $125K, that's the value of the house, not $200K.
I was having difficulty following the numbers on this thing and wanted to hear from others.
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