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@meowski @lnxw37b2 i mean it in the economic (same as marxist) sense, someone who owns resources, either financial or real. capital in that sense isn't just money, any factor of production except labor is capital.
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@lain @meowski @lnxw37b2
Why should labor be exempt from a definition of capital? It can be traded for capital like any other resource.
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@Big_Richard @meowski @lnxw37b2 i'm not a socialist, i'm not trying to argue that capitalists don't 'deserve' a return on their investment.
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@Big_Richard @meowski @lnxw37b2 that's just the definition... labor isn't capital and it isn't land
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@lain @meowski @lnxw37b2
That's fine, but why does labor not qualify as a form of capital? If anything, it's the absolute foundation on which to base the value of capital.
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@Big_Richard @meowski @lnxw37b2 i mean, feel free to use whatever definition you want, but that there's something different about labor and capital is generally accepted among all kinds of economic thinkers. for example, it's not easy to see why the interest rate on capital arises, i.e. why capital is 'productive'.
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@lain @meowski @lnxw37b2
Sounds like a faulty definition to me. Labor and value are so interchangeable that we've had nerds predicting a future where currency is based on watt-hours because of how simple it is to measure work by that sort of standard.
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@Big_Richard @meowski @lnxw37b2 i mostly agree, but i don't think the pure time preference theory of interest works completely
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@lain @meowski @lnxw37b2
The reason for that is because money now is worth more than money later. If that weren't the case, interest wouldn't have a reason to exist, but we would also be living in a timeless existence.
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@Big_Richard @meowski @lnxw37b2 alright, but the question is still why present money is preferred to future money, and why it should have impact on the price of capital
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@lain @meowski @lnxw37b2
Not by itself. The world is complex and there are a ton of factors that go into everything that happens, let alone any economic exchange. That complexity of variables makes it difficult even for the most asian of quants to predict. But that doesn't mean the basics don't exist, it just means there's a lot more to it than that.
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@lain @meowski @lnxw37b2
That's because money now can be used to do something that nets you more money later. Fifty bucks of investment into your own lemonade stand could result in you ending up with your money back plus profit by the end of the week, or month. A combination of time and labor, plus that seed capital, leads to that profit. Because of that, you'd rather have fifty dollars today than fifty dollars at the end of the month, because of what you could turn it into in the intervening time.
To put it another even simpler way, if I wanted to borrow fifty bucks from you, you wouldn't be able to do anything with that fifty bucks for as long as I was borrowing it. If I promised to give you back fifty bucks at the end of the month, there would be nothing in it for you, your financial options would be restricted to the tune of that fifty dollars that are no longer available to you for the month. Not to mention the risk that I might just be a loser who loses your money and can't pay you back at the end of things. So the value of lending me fifty bucks at no interest is negative to you.
That's why I can make it worth your while by offering to pay you back seventy dollars at the end of the month, and to have someone enforce that I pay back the full amount. Now in exchange for not having access to your money and taking on some risk that I'll default, you get to make twenty bucks off of me in a month. Now you have a reason to try it. There's something in it for you. And for me, whatever plan I had in mind that I needed fifty bucks to fully realize, I'm prepared to offer you seventy bucks because I think I'll make more than the difference there.
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@Big_Richard @meowski @lnxw37b2
> That's because money now can be used to do something that nets you more money later. Fifty bucks of investment into your own lemonade stand could result in you ending up with your money back plus profit by the end of the week, or month.
but that doesn't explain the price of capital. if you expect to make 100 bucks by buying lemons this week, you should be paying 100 bucks for them, not 100 - 1 week of interest.
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@Big_Richard @lnxw37b2 @meowski this is also something very different then what you said first. you said present money is worth more than future money, but the this post seems to say that present goods are worth more than future goods.
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@laurel @meowski @Big_Richard @lnxw37b2 that's one aspect, but that's not absolute. for example, i might prefer having trading my $100 now for $50 in a month if expect that in between that time someone will come to take all my money
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@lain @Big_Richard @lnxw37b2 @meowski
>why present money is preferred to future money, and why it should have impact on the price of capital
Risk (of never getting the future money)
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@Big_Richard @meowski @laurel @lnxw37b2 i'm an anarchist too, don't misunderstand me. but the example i posted is a case where this is not true. i might have $100 now and willingly trade it for $50 in the future. to make the example more vivid, let's say i'm someone escaping a war zone. i have $100 on me but i expect the criminals at the border to take away pretty much all of it. i also know someone who has internet access and can get me bitcoin. he buys me $50 worth of bitcoin that his associate will give me the key for once i'm in freedom country, but it'll cost me $100. in this case, i'm valuing future money higher than present money.
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@lain @meowski @laurel @lnxw37b2
You don't have the $100 now. You have the $50 now, and you (or the person you're investing in) figures that can be turned into $100 in a month. Otherwise, it wouldn't be worth trying. This is counterbalanced by the element of risk, and the passage of time between now and then.
If you decide to hoard your $50 now because you don't think you can turn it into $100 later, and you don't trust that anyone else can either, you might be right. If the market dips, then your money actually became worth more than everyone else's because you didn't risk it on a venture at a time when ventures failed. The deflationary environment thus preserved and even enhanced the value of your $50.
But what's much more common is that others invested and profited while you held on to your cash for fear of that deflationary event. In that case, everyone else turned their money into more money, while you remained still. So you fell behind relative to everyone else as a result.
Don't worry too much about it, because opportunity cost is a buzzkill, and whatever decision you make, bearish or bullish, you'll always be wrong and lose money. That's the magic of capitalism.
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@lain @Big_Richard @lnxw37b2 @meowski
Cash inside the warzone are not the same as cash outside the warzone. There are very high transportation costs that the one doing the exchange is taking upon himself.
Money is but a means of exchange. Better money (as in better as a means of exchange) will trade at a premium to worse money.
LS
Big Richard
laurel
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