Looking at the replies to my recent posts I am starting to wonder if people could really be so stuck in value judgements or their views of the world to ignore simple mathematics. Opening the newspaper, I know they are.
Amazingly, the programmers knew right away where I was coming from and where I was headed. It appears that our way of thinking always looks at x+y=z being equal to z=y+x, boring as it might be. On the other hand it appears that normal people only think about it in terms x and y and the value of z. In real world terms we had JP who expanded on my claim that once monetary instruments that are denominated in (e-)gold are being used as a means of exchange whenever e-gold was hard to come by, inconvenient, expensive, etc. that then we would get 'perceived inflationary tendencies'. JP went as far as applying the above and saying that any property that could be onwed and traded represented money. Note, he never said that it was currency. John then argued against that, essentially bringing in the concept of the difference betwen money and assets. Patrick wondered why not more trade was done in the real world with shares and Frank argued that we were actually talking about bartering. Jim D. equated inflationary tendencies, igonoring the word perceived, with a rise in the money supply while the number of goods and services are stagnant, the text-book definition of inflation, and then went on to take my examples apart, showing that they all had an inherent deflation as the direct result and wandered off arguing the flaws of the world view he implied I must be having. The world view he implies me having is far removed from the one I have, by the way. Maybe it is best summed up by: 'Live well and prosper, where possible not at the expense of others. And don't kick the face of the people on whose shoulders you are being carried' But back to the subject matter, which appears to be by far more complicated than I thought it would be. My points are: An increase in derivative instruments of a perceived value, such as shares of stock, increase the perceived available wealth, if the tangible wealth (gold) used to trade that perceived value is not increased in tandem, or alternatively the generated revenue from an exchange of wealth (sale of shares) is not being used to affirm the perceived value. In other words, if shares are being sold for e-gold and the revenue e-gold from the sale is being outexchanged then we are looking at the same amount of e-gold to trade with, but something additionnal of value to trade for. This would indeed lead to deflation if people did not use those same shares as a means of trade. The argument that shares have to be traded for dollars in the real world is incorrect in so far that shares are in fact often being used to buy other shares, as JP pointed out. Given that these shares represent a partial ownership of the assets of a company, which often include real property, there is in fact the instance where shares are being used to purchase property, albeit not outright. However, as it is obviously possible to do so and as just shown in fact being done, there is no reason why people can not make a deal in which they sell a house and expect shares as payment (very interesting taxation wise, by the way). Based on my own experience and it appears others have at least heard of similar instances, shares of TGC are being used as a means of exchange. If this catches on and people frequently accept shares as payment, then we are looking at the development of a system, parallel to exchangers. Note, there is no in-or out exchange involved if someone pays me with 2 TGC shares for a dedicated server. (Yes Jim, someone had to buy the e-gold to buy the shares first, but he did that only once). If I then choose to pay a programmer for his work in shares and he accepts that, there is a second transaction in parallel system. Essentially, about $4,000 worth of goods and services have exchanged hands, without a single e-gold transaction. Once this catches on more and more people will do the same thing, depriving e-gold of its fees and the exchangers of theirs. Yet, each time new shares are being issued, people need to get e-gold (once) to buy them. In essence, the same 100gr of gold could be used over and over in one IPO after the other, continuing to increase the numbers of shares used for bartering apart from normal trades. In other words, the amount of available means of exchange continues to increase while goods and services are stagnant and because the shares are gold denominated and can be exchanged for goods and services people will continue to believe that hey have a value in their own right, independent from what someone is willing to pay in e-gold for them. The system can work ad infinitum, of course. But there is no garantee that it will. You see, if people stopped trusting the shares of any particular company then the amount of e-gold they are willing to pay for the shares will drop. At the same time merchants won't accept them as payment anymore. The chance of a snowball effect in such an instance is likely. Suddenly bartering with shares is not the in-thing anymore and while prices continue to drop, people want to get out of the shares but there is not enough e-gold around for anyone to buy them all even if he wanted to. So new 'real world money' has to be pumped in increase the circulation of e-gold to allow for more shares being bought. All the while shares continue to drop because people are panicking (and don't say it can't happen, it's what ALWAYS happens). Well and as the shares don't entitle share holders to a claim on the assets of the ventures in this free spirit economy of ours anyone who would buy at such a time would either have a lot of surplus funds or would be unusually optimistic that things might change for the better again, while pinko minded service providers like yours truly pulls plugs by the dozens for non-payment - or accepts shares as part payments at highly deflated prices. When the dust settles and we look at the ruins of our once booming little economy we are starting to wonder what hit us. At least now you can't say, you didn't know. The madman told you so. Signing off to the asylum for the night, Cheers, Robert. 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