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Monday, December 9, 2019

Influence

Yesterday I sent a note to Forbes:
Stop using the term 'market capitalization' when you should be using 'market valuation'. Capital is what you invest in a company. The stock market valuation has nothing to do with the amount of money invested.
Yes, I know, everybody does it. That doesn't make it right.
The last instance I came across was in your story about George Pedersen.
This morning I open a story (also from Forbes):
Digital Bank Chime Now Has A Valuation Of $5.8 Billion
Even if they listened to me, I doubt they could react that quickly. Still, a nice little bubble of happiness in my morning.

The story about Chime didn't tell me much, other than some people think digital banks might be a good place to invest their money. The only reason I can surmise for that is that they are dispensing with the brick & mortar store front operations. For people who grew up in the 20th century, when cash was king, a big brick bank with a big steel vault could be a reassuring presence in your economic life. These days, for many people, as long as that little plastic card works, cash is just a nuisance. If you never go to the bank, why would you care if they have an office that you can visit?

Near as I can tell, owning a bank is the nearest thing to having a printing press that prints money. They take in deposits from zillions of people working for wages, and then they lend out five or ten times that amount to people who want to borrow money. Of course, lending money is a risky business, which is why banks make you jump through hoops before they will fork over the dough.

1 comment:

Ole Phat Stu said...

I refer you to Black misquoting Brecht :
William K. Black (2014). “The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry”, p.270, University of Texas Press