Tag Archives: hybrid units of wealth

Hybrid units of wealth (and a surprising guarantee)

Suppose you have some New Zealand dollars (\mathrm{NZD}) and some other valuable, fungible, relatively divisble items called, say, \mathrm{XYZ}. If the value of \mathrm{XYZ} increases, then the value of your portfolio (measured in \mathrm{NZD}) increases.

But the value of \mathrm{XYZ} increasing is indistinguishable from the value of \mathrm{NZD} decreasing, so if you measure the value of your portfolio in \mathrm{XYZ}, then an increase in the value of \mathrm{XYZ} appears as a decrease in the value of your portfolio.

So which is correct? Has your portfolio increased in value, or decreased in value? Well, it depends on whether \mathrm{XYZ} or \mathrm{NZD} is more useful to you. But what if they’re equally useful to you? What if \mathrm{XYZ} is another currency that you use as often as \mathrm{NZD}? Continue reading Hybrid units of wealth (and a surprising guarantee)

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