On Twitter, Noah Smith asked:
ClicheGuevara But why do not we use our shares as a medium of exchange?
- Noah Smith (Noahpinion) 2015 年 6 月 13 日
He answered his own question in his blog for. I very much agree. Interestingly science fiction world where people think stocks are volatile instruments as a medium of exchange. Why are people in this world willing to use volatile media, and people in our world does not?
Liquidity uncertainty, the world's best insurance policy
First, we must understand why our world have favored stable media exchange. As Noah pointed out that people do not know when they will need to spend money, or how much. Any fact facing individual dizzying, an unlimited number of any event likely to reach them at any point in time. People have many ways to deal with this confusion, one of which is to establish a process that can be deployed to assist accident as they happen asset inventory. Current assets - those that can be sold quickly at a low cost, and along a variety of ways to spend that will do the job better than the non-current assets are those that take time to sell, generate transaction costs, and the lack of a variety of ways.
Liquidity buffer stock, providing people with the same set of services, the actual insurance, said the introduction of the policy by the GEICO. A home insurance immunizes against a range of possible disasters befall a person's residence. This flowability, because it can quickly purchase materials and labor. If the home insurance is in addition to holding the stock cheaper liquidity (including costs, Noah said, is an inferior expected return), then the people will mean mobility. Unfortunately, within only a limited range of future disasters on people can buy insurance. Good luck and let GEICO, to make sure you from the zombie outbreak, for example. If the situation is a zombie, you put a non-zero probability, then leave a little more liquid than you otherwise might ease some of your concerns things. Come outbreak can be quickly dispatched in all directions of liquid assets will come in handy.
Back issues fluctuations. If people are trying to build a moat uncertainty, insurance is what's the use, if it provides protection $ 20,000 Tuesday, $ 17,000 and $ 23,000 on Wednesday on Thursday? For the same reason, people need a fixed amount of insurance, rather than a floating amount to build your own moat, they will want to invest in a stable liquid assets, rather than volatile liquid assets. You can not solve more uncertainty uncertainty.
Liquidity is a virtuous circle
Liquidity is a virtuous circle; as an asset for more liquid becomes as an insurance policy, which brought more buyers, which makes it more liquid, thereby increasing its value as insurance more attractive . The most liquidity of assets once owned by everyone, they have joined the essence of the mutual insurance scheme throughout the economy. At this point there is no sense of merchants to accept less commonly held assets as payment. It will not only cause a nuisance build infrastructure, but businessman running into problems to coincide. Due to business employees are most liquid assets have been paid if the merchant accepts a volatile assets as payment he / she will have to bear their transition back to a standard unit costs. To avoid these inconveniences, only widely accepted assets held by the business. A payment standards development.
Businesses will also attempt by price tags in the perspective of its liquid assets to please the customer. This reduces the calculation burden imposed on customers. At this point, the asset has become a unit - of account, and a pricing standards have been developed. Adopted as a unit, taking into account a variety of additional benefits to owners of standard cells. Out of courtesy, grocery stores and other retailers to keep prices usually fixed a few days or weeks, which means that anyone who has a standard unit to know ahead of time about how much food they can buy. For the tendency prices, glued to the corporate accounts increased by only standard unit of utility is a general insurance policy.
In fact, the stock is not a unit - the account means that consumers who have missed their sticky retail price of all the benefits of ease of uncertainty. They do not know their purchasing power will in a minute, therefore, not to mention the next day.
World volatile money
If we live in a world where we do not have the necessary liquidity uncertainty asylum us, then we may be more likely to accept the use of Exchange volatile media.
For example, I sometimes think that if the dollar-denominated liquidity needs less than in the United States, Canada, because we Canadians have universal health care. With the potential to resolve how to pay for life-saving medical services nagging concern, we can save a steady flow of inventory, and seek higher returns. Americans, who do not have such a product, you may need to reduce their nausea about how they will have the ability to cope with future injury large dollar-denominated holdings of hoarding.
In this idea to the limit, if the insurance company wants to introduce a "everything" insurance products (yes, this is science fiction), it is more expensive than maintaining a standard liquid cell, then people will no longer need to insure themselves by depending on the standard units, generally central bank's monetary and banking derivative products on uncertainty. On the contrary, everyone will shift their savings to more volatile instruments such as stocks, exchange-traded funds, or Bitcoin, enjoy what Noah refers to drift higher, or long-term returns. Insofar as GEICO is to provide low-cost generic creams uncertainty over who would be willing to undertake a range of fluctuation of purchasing power, because it provides a little more drift inconvenience for them.
With low volatility units (dollar, yen, etc.) is far less pervasive than in the past, and the ownership of volatile assets (stocks, ETFs, bonds, etc.) are more common ownership, it might make sense , set-up costs for merchants to accept the assets to pay resulting volatility. In addition, the fact that their employees will receive wage these volatile assets, so as to solve the coincidence to the problem, will only accelerate the merchants willing to install the necessary infrastructure. After all, businesses can now pay their employees, they receive the same ETF fund units from their customers, thus saving commission expenses, and costs incurred differences and between the selling price of the bid. [1]
Information as to the uncertainty of the moat
In addition to mobility and the insurer may get more information by establishing its own moat. This is what I learned from David Lederer. (If you want to pass through the history of monetary thought a fascinating detour understand money, you can not go wrong with this three books.) Knowledge to enable individuals to better predict the future and plan accordingly, thereby reducing the liquidity of the two or insurance contracts as a hedge. If some cheap technologies have emerged to provide an unlimited amount of free information (ie the Internet), then maybe people will completely stop the accumulation of stable liquidity. In this world, the uncertainty of people's preferred solution would be no cost to tell myself to hold high-yield / high drift assets, like stocks, rather than staying ignorant and kept low, low-return liquid assets.
Of course, we can also consider the opposite; the Internet has solved a risk only to bring a new set of (identity theft, viruses, etc.), so that people have both the need for GEICO insurance and liquid assets.
In short, because our world is neither unlimited information and generic "everything" insurance policy remains steady flow of vaccination against one of the most inexpensive way to uncertainty. Insurance whole social strata of this money is widespread, encourage the development of these assets based on payment and pricing standards. These standards further hamper turmoil like bitcoin assets and equity exchange in the media widely.
[1] I added this section June 19.
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