Many people
don’t fully grasp how the stock market works and what its economic function
actually is. Behind all the complicated
maths and (deliberate and unhelpful) mystique is a very simple economic
function. Entrepreneurs need capital to
operate their businesses and individuals need outlets for savings. Individuals can give entrepreneurs money in
return for a SHARE of the company’s future profits or a STOCK of the company’s
capital. An individual can, at any time,
sell this right to a share in the company’s future profits to another
individual – this market, which can be organised or informal, is known as the
share market or stock market. Below is a
great cartoon from the 1950s, unearthed by Graeme Acheson, which provides a
helpful (if dated) explanation of how the stock market works.
According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money. George Selgin , a free banker, takes an opposing view - click here . Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.