

The Stock Market Story - Laurentvw
http://9lessons.blogspot.com/2008/11/stock-market-story.html

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drewcrawford
The fallacy here is that money (dollars) is (at least in theory) backed by
something of value. In the economy presented in the article, the only thing of
value is the land, which is of infinite worth, because there's nothing else to
buy. By definition, it's worth however many dollars there are, so as the
economy goes through the normal inflation process, the land increases in value
without bound.

Break the spell by thinking of it this way: if there were two pieces of land,
they would increase in resale value at the same rate. If there was a piece of
land and a truck, they would increase in value at the same rate. We're looking
at inflation here, not a bubble.

In the real world, currency is backed by assets (even if those assets are only
a promise to pay). It doesn't make any sense to talk about dollars independent
of their backing.

