tag:blogger.com,1999:blog-6704573462403312459.post429110437564313232..comments2024-03-19T04:32:14.899-04:00Comments on Moneyness: Yap stones and moneynessJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6704573462403312459.post-24973509444926975532013-01-10T16:52:05.554-05:002013-01-10T16:52:05.554-05:00I have really enjoyed your three posts on yap and ...I have really enjoyed your three posts on yap and have learned a lot. Thank you!Michaelhttps://www.blogger.com/profile/05326714665961549764noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-48702983893400858472013-01-10T16:51:34.562-05:002013-01-10T16:51:34.562-05:00This comment has been removed by the author.Michaelhttps://www.blogger.com/profile/05326714665961549764noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-61282536390388591222013-01-08T20:32:42.800-05:002013-01-08T20:32:42.800-05:00I agree with your equating of a liquidity premium ...I agree with your equating of a liquidity premium with a convenience yield. A convenience yield seems to me to be a more open-ended concept than a liquidity premium... in my thinking a liquidity yield relates solely to an asset's saleability, whereas the full convenience yield includes the ability to consume some asset. <br /><br />Convenient compared to what? Good question. What about comparing the media of exchange to itself under different hypothetical circumstances? A Yapese house is a media of exchange since its owner can buy it knowing that they can sell it next month if they care. If they were to purchase the same house knowing that some law prevented them from selling it for 5 years, how much less would they be willing to pay for the house? The difference is the convenience yield/liquidity premium.<br /><br />I agree with you though that rival media of exchange will affect the premia on Yap houses. If there are plenty of other highly liquid media of exchange, then the necessity of holding houses in order to own "liquidity" is less important and the premium on them will shrink. But it won't disappear. I'm still thinking about this stuff though, so don't stop pushing me on it.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-3272788718507967562013-01-08T18:34:29.186-05:002013-01-08T18:34:29.186-05:00J. Schumpeter once remarked that "You can'...J. Schumpeter once remarked that "You can't ride a claim to a horse, but you can trade with a claim to money." He might have also mentioned that you can trade with a claim to a horse. <br /><br />So, we can buy things with gold, or with a horse. We can also buy things with claims to horses and gold, and even with claims to claims. Monetary theory thus boils down to asking what determines the value of gold, horses, and claims. Specifically, what kind of liquidity premium will we see on gold, horses, and claims? <br /><br />My answer is "little or nothing", since any premium would attract rival moneys. But the theory of finance does allow for "convenience yield" to play a part in the pricing of financial securities, and money is nothing if not convenient. The thing is that we have to ask "convenient compared to what?" If there is some rival money that is only marginally less convenient than the money actually used, the convenience yield of money will be negligible.Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.com