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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Maurice Winn who wrote (18139)4/20/2002 12:07:52 PM
From: Maurice Winn  Read Replies (2) of 74559
 
Mq you were quite right that money [unbacked] should carry risk premium, not shares. People in Argentina are now facing closed banks and a reprise of currency failures which go off around the world periodically, like an old star collapsing into a black hole, sucking all in the vicinity with it.

When a currency is unbacked, such as the US$, it carries a risk of falling below the event horizon anytime people go into a psychological funk. Shares in companies producing real things can individually collapse, forming micro black holes for those involved, but the whole firmament of companies has never collapsed - even in the greatest depression ever. So, owning a wide range of companies protects against total loss such as those in Argentina face. Perhaps they'll get 1:1000 in a new currency as a sop. People in Argentina who own a wide range of Argentine companies will have loss in value, but still have their productive assets [such as a Globalstar gateway, a CDMA network, CDMA phone - the essentials of life].

Therefore, the old-fashioned idea that shares should earn a risk premium over currencies is false. That includes the US$, which will one day be replaced by cybermoney backed by shares [that process is already well underway].

Mqurice
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