<So, we have volatility, we have risk, we have spectacular defaults. It's amazing it works at all. But it seems to. >
CB, All too often, it seems not to.
Money needs to carry a risk premium to shares when it's not backed by gold or land or something other than "In God We Trust" or, "In God and Uncle Al We Trust". It used to read "In Gold We Trust", but somebody figured they could save on ink and digging up gold, which is hard work, by leaving off the l.
They didn't think the illiterate masses would notice and if the masses did notice, being superstitious, they probably thought that trusting God was a good idea - they get told that they should trust God so much from infancy when some priest mutters mumbo jumbo and baptizes them, to old age, when some priest sees them off, that they are prone to be gullible and credulous about such claims.
Buying the index or a bunch of shares would form a better basis for money supply. One day, I expect an Argentina-style run on the USA currency and those multitrillions you mentioned will surge around looking for a hiding place. Well, it's hard to hide an elephant under a fig leaf and they won't want to bid gold to $10,000 an ounce in a giant greater fool scheme.
So, people will reverse the risk premium on shares and accuse God to be untrustworthy in running a currency [especially when they realize it isn't God running the printing presses but really the old guy, my mate Uncle Al, who is an atheist, and a bunch of politicians who are as trustworthy as Bill Clinton with a flock of interns and a marriage vow to keep him honest].
I'm hopeful that it will be a gradual trend to shares as currency. My guess is that it will be. Bit by bit as cyberspace develops, shares will be used as store of value and increasingly as means of exchange as well. Lenders won't want to be caught in a hyperinflation black hole as their wealth disappears below the event horizon. Mortgages will be denominated in Q instead of $.
Mq |
