tag:blogger.com,1999:blog-6704573462403312459.post839751484570853068..comments2024-03-28T06:53:23.473-04:00Comments on Moneyness: Stock as a medium of exchangeJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-6704573462403312459.post-33182351441744785962014-10-05T21:18:57.740-04:002014-10-05T21:18:57.740-04:00"Barter is when you swap one thing of narrow ..."Barter is when you swap one thing of narrow transaction utility (useful only for a few transactions) for another thing of narrow transaction utility."<br /><br />So what is it called if you and me were to swap one thing of narrow transaction utility -- Botswanan Pula -- for something with equally low transaction utility -- Angolan kwanzas? Barter? <br /><br />What do you call it when someone swaps one thing with high transaction utility -- US Treasury bills -- for another thing with high transaction utility -- US treasury bonds?<br /><br />What do you call it when <a href="http://jpkoning.blogspot.ca/2013/05/long-chains-of-monetary-barter.html" rel="nofollow">I swapped Ripple for bitcoin?</a><br /><br />Barter vs non-barter transactions, I don't see this as being a meaningful distinction. About all we can do is shift towards goods with poorer liquidity, equal liquidity, or superior liquidity.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-86879828642465207242014-10-05T21:00:06.788-04:002014-10-05T21:00:06.788-04:00To me a monetary economy emerges the moment we beg...To me a monetary economy emerges the moment we begin to move from autarky to trade. Disparate 'tribes' start to accumulate buffer stocks of goods for anticipated trade, and these goods start to gain liquidity premia. <br /><br />So an economy has become a monetary economy long before it arrives at a state at which all other goods are traded for one good, and only one good.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-56801979700282628222014-10-05T18:18:34.053-04:002014-10-05T18:18:34.053-04:00Barter is when you swap one thing of narrow transa...Barter is when you swap one thing of narrow transaction utility (useful only for a few transactions) for another thing of narrow transaction utility. The point of a medium of exchange is that it has <i>broad</i> transaction utility (i.e. is useful for lots of transactions). Now, there is a "how broad is broad" issue, but a medium of exchange has to be something that people actually hold to use in other transactions--i.e. it has to be a transaction good. Merely being used in transactions does not make something a transaction good; merely being used in exchange does not make something a medium of exchange. Lorenzohttps://www.blogger.com/profile/00305933404442191098noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-5127818127725003082014-10-05T09:48:00.822-04:002014-10-05T09:48:00.822-04:00In the real world, almost nothing is pure. Pure mo...In the real world, almost nothing is pure. Pure monetary exchange economies do not exist in reality. There are always exceptions. But those exceptions, especially if they can be explained, do not invalidate the distinction. A bald man is different from a hairy man, even if he does have a couple of hairs on his head.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-90216028870401609502014-10-05T09:43:34.765-04:002014-10-05T09:43:34.765-04:00It means that all other goods are traded for one g...It means that all other goods are traded for one good, and only one good. We call that one good "the medium of exchange".<br /><br />Being a monetary exchange economy is an endogenous attribute of an economy. In some cases, like the imposition of price controls, a monetary exchange economy will stop being a monetary exchange economy. We will observe some trading between two of the other goods.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-14829935703949095102014-10-05T07:12:19.292-04:002014-10-05T07:12:19.292-04:00"Suppose there is a monetary exchange economy..."Suppose there is a monetary exchange economy."<br /><br />I'm not sure what that means.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-42966258572548260992014-10-04T23:20:19.391-04:002014-10-04T23:20:19.391-04:00Suppose there is a monetary exchange economy, but ...Suppose there is a monetary exchange economy, but the dollar price of apples, and the dollar price of bananas, are both fixed too high, so there is an excess supply of apples in the apple/dollar market, and an excess supply of bananas in the banana/dollar market.<br /><br />That creates an incentive for people to barter apples for bananas, even though barter is less convenient than monetary exchange.<br /><br />The unemployed hairdresser cuts the hair of the unemployed masseuse, in exchange for a massage. Because there is an excess demand for money.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.com