Quotable (#21)

From a conceptually-rich John Law (2006) post on the game-theoretic fragility of the world monetary order:

The first rule of investing is that it’s never a good idea to buy anything just because everyone else is buying it. When the price of an asset is the result of herd behavior, not fundamental value, it’s called a “bubble,” and bubbles always pop.

This rule is absolutely right — except in one case.

In English, a bubble that doesn’t pop is called “money.” Money is always fundamentally overvalued. Its purchasing power is independent of its direct physical usefulness to anyone.

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