432 - Greater Fools and the Capitalist Zero Sum Game (Power and Powerlessness 9)

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Episode #432 - Greater Fools and the Capitalist Zero Sum Game (Power and Powerlessness #9)

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⌚ Sun 12 October 2008  ☻Lyn Gerry, Brad Sherman, Max Keiser, William Engdahl (reading)

Download Hour1 Download Hour2This week we look at the zero-sum nature of financial markets and the greater fool theory.

A web site called market crash describes the capitalist market as follows:

In financial markets, the "majority is always wrong." When the investing majority or the crowd is overly bearish, this is the best time to be buying stocks. When the crowd is overly exuberant, this is the time to be selling stocks. The financial markets work in this ironic way because not everyone can win in the market. If it were possible for everyone to win in the markets, this would mean that money is being created from nothing. The creation of money, in this manner, is impossible. Therefore the markets are a zero-sum game. Zero-sum means that for every winner, there is a loser. The winner takes the losers' money. Zero-sum games are games one person's loss is another's gain.

The greater fool theory; A theory that states it is possible to make money by buying securities, whether overvalued or not, and later selling them at a profit because there will always be someone (a bigger or greater fool) who is willing to pay the higher price. When acting in accordance with the greater fool theory, an investor buys questionable securities without any regard to their quality, but with the hope of quickly selling them off to another investor (the greater fool), who might also be hoping to flip it quickly. Unfortunately, speculative bubbles always burst eventually, leading to a rapid depreciation in share price due to the selloff.
Thanks to C-span and http://engdahl.oilgeopolitics.net
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