Nature of Competition: Trade of Asset

 

This is about the asset market of the title, as opposed to the rental right. We are herein interested in the secondary asset market. From the demanders’ perspective, at any rate, the supply being primary ("I" for gross domestic investment) or secondary (wealth of the nation, W) is trivial. Instead, it’s the rate of return that matters. 

             For simplicity, we zero in on the individual asset, with the issue of “portfolio management” on hold. This would be a mirror image that we when in the product market rule out indefinitely many kinds of “substitutes.” 

             Bluntly  saying, the asset market is in, of and for the asset  under consideration at the moment. Needless to say, over the long year, neither the national wealth (W) nor the units of asset on the block is “fixed.” The only "fixed" is variation. 

The reverse, true or not. On the demand side in the product market, the nominal price (U∙m) is the means to the end of real utility (M∙U). In the rental market, the end is the creative power (M∙U∙T^-1) of the human or physical asset. Both markets in the practice are communal due to transaction cost, at the low run or the high run. Accordingly, few in Manhattan would go shopping at Trader Joe’s; few would hire powers from old, New or new Old Mexico, either.

             In the asset market, on the contrary, the incomes of nominal rental rates are the real end; as the case may be, the revenue from the midway resale is to be included in such incomes. Of course the incomes are in the future periods rather than the present year. After all, the physical asset is to monetary incomes what the product is to a real utility. (Which is it, real or nominal?)

             As money is the real end, the physical site of asset market is no less nominal than the location of bank deposits are. As a corollary, the asset market is national. A New Yorker when investing wouldn’t mind the location of Trader Joe’s.

             The reverse is also true on the supply side.

The expected returns. On the basis of our discussions so far, we might conclude that each of us personally has a fair price of the asset in mind. The price is to be calculated with the expected cash flows on one hand and the “risk-adjusted” RRR (required rate of return) on the other hand. The RRR depends on the mind, or “spirits” as sometimes called, of the household in the situation at the moment of investment.

             Simply put it, the household when in the asset market has a certain benchmark price (as of the moment) as the divide: “To invest or not to invest, that is the Question.” 

             Open a textbook. Like the product market, the diagram of the national asset market depicts the price on the ordinate and the quantity traded per month, per quarter, per year or the like (M∙T^-1, a flow) on the abscissa. There is no place in the sun for “the interest rate”: in the first place, the price is known  to the  public while rates are personally expected. 

 

The demand curve. At a lower price, more households stand in the investment line for the asset. And, vice versa. The demand curve slopes downward. It’s clear to the rest of us

The supply curve. At a higher price, more households stand in the disinvestment line of the asset. And, vice versa. The supply curve slops upward. It’ more than clear to the rest of us, by now.

The market clearance. See, we told you so: Voila, the Golden Cross of equilibrium!

So nice and so beautiful: Of all sciences, Make Economics Greatest Again! 

              After a full circle, ideal and MEGA is (micro)-economics. On the sidewalk of MEGA, what is macroeconomics like? Where's its place in the sun? Sure, the place is the heavens right below the sun. 

 

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