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Politics : Just the Facts, Ma'am: A Compendium of Liberal Fiction -- Ignore unavailable to you. Want to Upgrade?

To: Solon who wrote (50895)	9/7/2006 5:52:32 PM
From: TimF	Read Replies (1) \| Respond to of 90947

Btw...much flow of money IS a zero sum game...trading in futures, for instance Futures can help spread risks, and even to an extent measure risks and help capital to be more efficently allocated. Its not all a zero sum game. Futures aren't just used by speculators. And even speculation isn't entirely a zero sum game, they help the process of transfering risk and if they are going to make a profit they have to buy (pushing the price up) low and sell high (pushing the price down). "Professor Friedman: Well, in a day-to-day term, the speculators, whom you are describing, can have some influence. But let me ask a very simple question: You are a speculator. How can you make money and how can you lose money? You can only make money if you buy a product, whatever it is - maybe a currency, maybe wheat and maybe something else - at a relatively low price and sell it at a higher price than you buy it at. There's no other way to make money. If you buy at a relatively low price, you're making that price higher than it otherwise would be. If you're selling at a relatively high price, you're making that price lower than it otherwise will be. If speculators make money, on the whole - there are some rare theoretical exceptions - but, on the whole, they make the market more stable, not less stable. " abc.net.au