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0 pointslazulicurio6y ago0 comments

Bonds are not just an accounting mechanism; bonds are an alternative to stocks for investment. Even government bonds create value---if not funding something tangible (such as infrastructure), just the existence of a stable and functioning legal system is hugely valuable.

Cash is more than an accounting system too, especially since the end of the gold standard. There isn't a fixed supply of dollars that businesses just move around.

Also, with regards to both cash and precious metals: their value is as media for economic transactions; their value increases each time they change hands. Would you want to barter to buy shares of a company? Trade sheep to invest in Microsoft?

0 pointslazulicurio6y ago0 comments

Cash is more than an accounting system too, especially since the end of the gold standard. There isn't a fixed supply of dollars that businesses just move around.

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4 comments · 1 top-level

naveen996y ago· 3 in thread

I didn’t say bonds and cash can’t be investments, just that they don’t generate new goods and services. Cash and cash equivalents only generate value through passage of time. There isn’t any creativity involved. Creativity is long term more valuable than just the time value of money.

lazulicurioOP6y ago

That same reductionist argument can also be applied to stocks. Share ownership doesn't generate value in and of itself either.

You're saying that businesses generate value. No disagreement from me there.

But then you're saying that stocks are the only way to share the value that businesses create. That's where you lose me. Selling shares is not the only way for a company to raise funds to operate. Companies can also sell bonds or take out loans (i.e. cash). Your argument that stocks are inherently more valuable would only make sense if stocks were the only way to invest in a company.

naveen996y ago

Without share ownership, there is no business... you can have a business without loans. business generates value. Shares assign ownership. Loans just price risk of capital. Pricing the risk is also a business.

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dragontamer6y ago

> just that they don’t generate new goods and services.

The highway down the street from me was funded using Bonds. I even own a few Hospital bonds, which were used to construct hospitals.

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