Skjellifetti

The Intrinsic Value of Nothing, Part 1

On Oct 27 12:50 PM jeffgroove wrote:

> The problem with other schools of economic thought is that they assume good intentions on behalf of the people in charge ...

Bzzzt. No school of economics assumes anything of the sort.

The Intrinsic Value of Nothing, Part 1

The Labor Theory of Value was actually first espoused by none other than Adam Smith and is associated with a whole host of early classical economists (Smith, Malthus, and Ricardo) as well as Marx.

"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people."

-- Wealth of Nations Book 1, chapter V

"The value of any commodity, ... to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities."

-- Wealth of Nations Book 1, chapter V

Most economists today start with utility theory which basically says that individuals have a set of preferences where a larger quantity of a good is preferred to lesser quantities of the same good and preferences are transitive so that if a bundle of goods (A) is preferred to another bundle (B) and B is preferred to still another bundle (C), then A will be preferred to C.

Because people have preferences, goods have value to them even in the absence of exchange because a person can always state whether they prefer one bundle of goods over another (i.e. they value one set of goods over another). In fact, it is downright inane to argue that something has value to you only because someone else finds it valuable as well. This is one of the traps that caused the labor theory of value to be abandoned because they could never quite reconcile the concepts of value in use and value in exchange. Today we do that via supply and demand curves derived from costs of production on the one side and utility theory on the other.

"The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called 'value in use ;' the other, 'value in exchange.' The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it."

-- Wealth of Nations Book 1, chapter IV

Rising Interest in Currency Funds

What are the correlations between DBV and the S&P, MSCI, bond indexes, etc?


On May 28 04:09 PM RiskReturnOptimizer wrote:

> I'm long DBV as a core holding in my long term portfolio. Studying
> the long term performance (going back to before the DBV ETF was available)
> of the underlying index, you can see that the G10 Carry Trade has
> averaged 10% annual return, with much less volatility than US market
> (seekingalpha.com/symbo...). For a long term diversification
> perspective, DBV is a great, low cost vehicle.
>
> From fundamental perspective, DBV plays on the growing China and
> emerging markets, as the key long position is Aussie $ and New Zealand
> Kiwi, both commodity producers; and the key short position is Japan
> Yen. If there is any global growth, DBV will have good upside.
> If there is NO global growth, DBV will suffer, but much less than
> US equities.

Today's Lesson: Why the Fed Raised Its Rates in 1931

China is sterilizing the dollars by issuing enough bonds to soak up the yuan they are printing to buy the dollars that are flooding into their economy through their trade imbalance with the U.S.

While Herbert Stein has reminded us that things that cannot go on forever, don't, it is not clear to me why China is importing inflation given the sterilization policy and the fact that they have been (too!) slowly re-valuing the yuan in recent years.