TheBookkeeper

Global Sovereign Bond Watch: Overstuffed Supply

"Global sovereign bonds are just another asset competing for capital."

Could today be a wise time to refresh our understanding of the word "capital," in the context of commercial trade? It's binary complement for centuries has been "cash." An artifact of value is brought to the marketplace and sold by a debtor to a creditor. The debtor in the trade receives "cash" as the "value" of the artifact in trade. The creditor who paid out the cash, receives in exchange "capital-potential." Capital's potential is an expression of rights to ownership of the artifact. Capital's expressed value will gain or lose real value in future trades. When money is the artifact in trade, the creditor is betting on the paper, or the gold, or the oil having real value in return for potential value spent in a future trades. Capital that has expressed potential value of one sort is seeking real value in trade by purchasing capital of different sort. "Money in the bank," has a whole new meaning in today's world as potential gets removed further and further from physical assets with real value. Sometimes, in changing times, it is helpful to go back to basics and to rethink what one thinks they already know.