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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (90967)	9/30/2007 7:46:41 PM
From: neolib	Read Replies (1) \| Respond to of 306849

My problem is that I can easily understand the following: 1) A competent individual, evaluating another individual who they know, and deciding to extend long term credit in exchange for selling them a current asset, based on the added compensation that the IOU has an interest rate baked in. 2) The realization of risk in the above transaction. (They buyer might afterall die tomorrow, or become incapacitated) 3) The realization that the IOU can be "sold" to others. 4) The realization that you don't know everyone in the society well enough to attach a valid risk to their IOU's, but that statistical methods might exist to overcome this issue. 5) The realization that risk is controlled by some sort of collectively agreed on (but fairly applied) society wide controls on the creation of IOUs. In the above system, the mechanisms can be relatively cheap, and most of the effort of society goes into growing food, building housing, raising kids, etc. This is in great contrast to a system that instead can only achieve non-bartered commerce by having some significant fraction of the populace sit down and painstaking carve shells into certain agreed upon intricate shapes, where the "value" of the resulting bit of shell is essentially proportional to the immense effort put into carving it, but the final product has no other use than to "store" the effort put into producing it. The "stored" wealth can then function as money. The latter system strikes me as nonsense, but you will find economists (despite the claim that "we are all monetarists now") who support it. How am I to make heads or tales of this?