Re: Am I Having a Saturday Morning Stupid Moment?




Joerg wrote:

Guy Macon wrote:

Joerg wrote:

John Larkin wrote:

Jim Thompson wrote:

...No. It would violate conservation of energy.

Considering COE solves a lot of problems.

There are many people who don't believe in that kind of logic. Such as
hedge fund managers, mortgage bankers, politicians (especially when it
comes to budgets), etc.

Those are all open systems, while conservation of energy applies to
closed systems only. Also, the analogy between money and energy is
just that -- an anology -- and thus it may or may not be appropriate
to apply the laws governing one to the other.

This is not to say that the examples above don't think that they can
ignore the basic laws of economics, which *do* apply...

It's closed systems.

You mentioned hedge fund managers. In what way is a hedge fund manager
a closed system with no inputs or outputs, as opposed to an open system
with inputs and outputs in the stock market?

You can only spend as much as there is tax revenue.
Yet that gets ignored time and again.

True, but that does not make it a closed system. Trivial example:
The government spends some of your tax money on building a wall
in a national park. You lose money, the park gains a wall. Maybe
they are even equally valuable. Then the government spends some
of your tax money on digging a big hole in the ground and some more
of your tax money filling it in. Are you still out the money? Yes.
Was something of value like a wall created? No. So wealth was lost.
Now try losing energy in a closed physical system. It's not possible.

In the mortgage industry you can only dole out what the
underlying real estate values are.

So if I take out a mortgage and buy a swamp, drain it, put in a
roads and some utilities, and build some houses on it, the real
estate value is conserved and thus does not change? And if you
burn down that houses and dump a bunch of toxic waste there the
value of that real estate still remains unchaanged?

As we all know the bankers screwed that up as well. Big time.
Then they started leveraging the leverage that was already
leveraged, as an editor in Flying Magazine put it. We all
know what that resulted in.

Yes, I fully agree that there are parts of the examples you
cited where someone tried to convince others he was making
something from nothing, and that something analogous to
conservation of energy tells us that this was not possible.
You don't need to keep giving more examples of that. I will
agree with every one. To prove a closed system, you need to
establish that *every* financial transaction is like that.
I just gave you some that are not.

This is basic economics that goes back to _The Wealth of
Nations_ by Adam Smith (published in 1776.)

--
Guy Macon
<http://www.GuyMacon.com/>

.

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