DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - What would the effect on the economy be if gold became abundant?

**HunterM** · 06-17-2008, 04:04 AM

Originally posted by Straybow
A substantial part of the stock market (including the mechanisms that drive stock values) are futures and similar derivatives, but the greater part of stock transactions are purchases rather than derivatives. Not so for the gold market. It's an irrelevant distinction to what you were arguing.

"One person loses money that another person gains in any given transaction." - Stray

When you buy a stock, you give money to someone else, who is selling the stock. If the stock price crashes, the person you bought the stock from "makes" the money you "lost". Selling an appreciating asset is a loss, selling a depreciating asset is a gain. This becomes very apparent when you look at short sales of stock.

Also, you don't "make" money on stocks until someone buys them from you. Just sitting on an appreciating asset affects your wealth, but to lock that in, you have to close out your position.

There is no actual money created or destroyed in the process, only transferred. But the underlying value changes all the time.

This is no different in that regard than commodity markets. The underlying value changes all the time, affecting wealth distribution. If you take that underlying value away, it's a real loss in wealth, regardless of what types of contracts are used to describe or facilitate ownership of the underlying.

06-17-2008, 04:04 AM	#20
HunterM Join Date Oct 2005 Posts 366 Senior Member	Originally posted by Straybow A substantial part of the stock market (including the mechanisms that drive stock values) are futures and similar derivatives, but the greater part of stock transactions are purchases rather than derivatives. Not so for the gold market. It's an irrelevant distinction to what you were arguing. "One person loses money that another person gains in any given transaction." - Stray When you buy a stock, you give money to someone else, who is selling the stock. If the stock price crashes, the person you bought the stock from "makes" the money you "lost". Selling an appreciating asset is a loss, selling a depreciating asset is a gain. This becomes very apparent when you look at short sales of stock. Also, you don't "make" money on stocks until someone buys them from you. Just sitting on an appreciating asset affects your wealth, but to lock that in, you have to close out your position. There is no actual money created or destroyed in the process, only transferred. But the underlying value changes all the time. This is no different in that regard than commodity markets. The underlying value changes all the time, affecting wealth distribution. If you take that underlying value away, it's a real loss in wealth, regardless of what types of contracts are used to describe or facilitate ownership of the underlying.
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