Credit, Currency and Other Animals | 78 comments (78 topical, editorial, 0 hidden)

Re: Credit, Currency and Other Animals (4.00 / 2)

You pay money (or money's worth) now, and take delivery of goods or services later, receiving a certificate of entitlement (on your mobile phone) in the meantime. The certificate does not entitle you to demand delivery (as a futures contract would) but if you do take delivery from the issuer (or from another affiliated within a clearing union), he undertakes to accept the certificate in payment.

If denominated in a delivarable (such as energy), what prevents more certificates from being prepaid thanit is physically possible to take delivery of?

And no, "transparency" doesn't cut it because the producer will always enjoy an asymmetric information advantage. And not everyone is a hedge fund. Buyers also have differring levels of informacion.

Finance is the brain [tumour] of the economy

by Carrie (migeru at eurotrib dot com) on Sat Sep 7th, 2013 at 04:56:28 PM EST
[ Parent ]

Re: Credit, Currency and Other Animals (4.00 / 2)

My capacity to utilise the underlying value has no relationship to how many units of currency I may acquire as an investment. I can always dispose of the surplus to another user if mine is the best offer below the physical market price.

Moreover, no matter how many I buy, I can't corner the market with an undated instrument.

Fiat currency is and always has been a tax prepayment - whoever issues it (whether public or private) - and it is irrelevant how many units of it I hold, although historically I would have expected some sort of return to be convinced to do so.

Transparency is necessary, but not sufficient. There is also a requirement for a manager to conduct due diligence and a monetary authority to supervise the manager in accordance with agreed standards.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 05:53:29 PM EST
[ Parent ]

Re: Credit, Currency and Other Animals (none / 0)

Transparency is necessary, but not sufficient. There is also a requirement for a manager to conduct due diligence and a monetary authority to supervise the manager in accordance with agreed standards.

I am confused, I thought The Market™ would provide.

Finance is the brain [tumour] of the economy

by Carrie (migeru at eurotrib dot com) on Sun Sep 8th, 2013 at 05:55:16 PM EST
[ Parent ]

Re: Credit, Currency and Other Animals (none / 1)

Fiat currency is and always has been a tax prepayment - whoever issues it (whether public or private) - and it is irrelevant how many units of it I hold, although historically I would have expected some sort of return to be convinced to do so.

The return is the opportunity cost of not having any on hand, which is substantial, either because of fines incurred for tax nonpayment, or the need to pay interest on borrowed money if everyday counterparties demand cash payments.

Finance is the brain [tumour] of the economy

by Carrie (migeru at eurotrib dot com) on Sun Sep 8th, 2013 at 05:57:54 PM EST
[ Parent ]

Re: Credit, Currency and Other Animals (none / 0)

Opportunity cost denominated in what?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Sep 12th, 2013 at 01:39:10 PM EST
[ Parent ]

Re: Credit, Currency and Other Animals (none / 0)

Disproportionate forfeiture of assets and liberties.

Specifically, goons with guns will take your stuff and put you in the slammer.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 12th, 2013 at 07:13:43 PM EST
[ Parent ]

Credit, Currency and Other Animals | 78 comments (78 topical, 0 editorial, 0 hidden)

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