/biz/ - Business & Finance » Thread #939118

[15 / 2 / ?]

Anonymous ID:iGsKThMh Tue 27 Oct 2015 19:38:26 No.939118 View Reply Report Delete

When the stock market crashes, where does the money that was lost go to? Is it reallocated to somewhere else? Does it just vanish like a fart in the wind?

Anonymous

Anonymous ID:J0/U635I Tue 27 Oct 2015 19:42:33 No.939121 Report Delete

Quoted By: >>939209

>>939118
imagine a peanut stall selling peanuts is getting low and the price is high for a peanut, suddenly a bunch of people start selling their stored peanuts since they're worth so much, there are now so many peanuts that the price is ridiculous and peanuts are worth less
same amount of peanuts, same amount of money, different amound of demand

Anonymous

Anonymous ID:Asmosjnz Tue 27 Oct 2015 19:46:57 No.939124 Report Delete

Quoted By:

>>939118
it didn't "go" anywhere. it's just not worth as much to everyone

Anonymous

Anonymous ID:iGsKThMh Tue 27 Oct 2015 19:52:06 No.939131 Report Delete

Quoted By: >>939141 >>939160 >>939209 >>939213

So the total amount of real wealth in the world is not decreased by this?

Anonymous

Anonymous ID:lK1KvE/C Tue 27 Oct 2015 20:14:29 No.939141 Report Delete

Quoted By:

>>939131
nope. this is essentially what's called a zero-sum game, i.e., your loss is someone else's profit and vice-versa, the money doesn't just "disappear".

Anonymous

Anonymous ID:D13rIAju Tue 27 Oct 2015 20:46:17 No.939160 Report Delete

Quoted By: >>939209 >>939317

>>939131
That is a really great question.
The short answer is yes. But the long answer comes down to what our real wealth is right now.

A majority of investments are run with heavy margin and leverage and even then, the brokers that let you invest on leverage can swap their debt out as asset classes of their own to invest in.
Going beyond that, companies can then take out loans to bolster their own growth with the banks that have no money to lend out and lend out the debt to other banks to invest in with no money.

So, looking back at what our wealth is, it is all propped up on fake numbers. 2008 crash was so bad because the banks had so much leveraged on these values.

If there was another market crash, we have no way of taking on more debt to back it up. So loans will be cashed in, propped up assets will fall and some businesses that are floating on investments will fail globally.

It is a pretty interesting time to live in. Odds are the market crash will only deflate the system by 10-15%. That is big enough to make a serious crash.

A real crash like the great depression would cause an even larger one because of how high on the bubble we are.

Anonymous

Anonymous ID:nETkrjtz Tue 27 Oct 2015 21:36:57 No.939200 Report Delete

Quoted By: >>939209

Please answer this. As the market is crashing who is it that is buying on the way down and furthermore who is it that is buying when the stocks have hit the (perceived) bottom?

Anonymous

Anonymous ID:TAu0TQer Tue 27 Oct 2015 21:47:12 No.939209 Report Delete

Quoted By: >>939302 >>939317 >>942204

>>939200
>>939160
>>939131
>>939121
Zero Sum Fallacy

If I buy a rock for $5 and out of it make a beautiful sculpture worth $100, I simply created $95. The person that sold me the rock didn't lose money, and neither does the person I sell it to (he has equity in the sculpture). Now, if he destroys the sculpture he now has a pile of gravel worth $1. The value didn't go anywhere, he destroyed it.

Anonymous

Anonymous ID:bd3tvrnr Tue 27 Oct 2015 21:49:02 No.939213 Report Delete

Quoted By:

>>939131

Yes, because of consumption. Stocks increase productivity because it is a investment in a business that produces goods.

If businesses lose the money they need to keep producing good than the rate of production to consumption goes down, so things become more expensive.

This is why you have deflation is recessions.

Anonymous

Anonymous ID:nETkrjtz Tue 27 Oct 2015 22:51:26 No.939302 Report Delete

Quoted By: >>939315

>>939209
Fair enough but you haven't explained who or what entities are buying when everybody else is selling. If it is a simple silly question please just give the simple answer.

Anonymous

Anonymous ID:TAu0TQer Tue 27 Oct 2015 22:58:48 No.939315 Report Delete

Quoted By:

>>939302
You are actually selling your stock to another person. It seems kind of ridiculous that someone is always there to buy when someone else is trying to sell, even in the event of a collapse, but here's the deal:
In capitalism, prices are designed to make the amount of buyers and the amount of sellers equal. That's supply and demand. The value of a stock is the exact price point at which the amount of people willing to buy is equal to the amount of people willing to sell. So if the stock is tanking, it is dropping because there is an increase of people trying to sell it, and it drops until enough people back out.

Anonymous

Anonymous ID:0liM/nX+ Tue 27 Oct 2015 23:00:57 No.939317 Report Delete

Quoted By:

This >>939209
Not this >>939160

OP, the answer to your Q is extremely complex. But I would say in a nutshell two things.
1. Much wealth is destroyed. This happens for several reasons, including that assets formerly being productive are no longer producing: a factory running at capacity in good times is worth much more than the factory a year later when running on skeleton crew.
And a lot of the money in our world is not "base" money, as in actual dollar bills, but rather money created by the financial sector. Here's why: Assume you make something and sell it for a dollar. You put that dollar in the bank. The bank does not keep that dollar around, it lends out $0.50 to $1.00 of that (depending on regulations) and keep a fraction in reserve. The person they lend it to can put it in THEIR bank (or their purchaser's bank) which does the same thing. Thus your $1 of money can lubricate $5 of transactions in the real world. When the markets crash, the fractional reserve system contracts and the total amount of money shrinks. That's bad.
2. Some people will inevitably profit from the crash. The big banks, for example, placed large financial bets on the collapse of subprime mortgages while telling their customers to buy. Those assholes profit. But the profit is not equivalent to the net economic loss for the reasons spelled out in 1.

Anonymous

Anonymous ID:C0hARAdg Thu 29 Oct 2015 07:06:46 No.940960 Report Delete

Quoted By:

Appen.com -> Join Us

Anonymous

Anonymous ID:S53oQ/Ee Thu 29 Oct 2015 20:37:59 No.941788 Report Delete

Quoted By:

Gold and silver have been very high lately, when are they going to cash it out? I'd say somewhere in mid november

Anonymous

View Same Google ImgOps iqdb SauceNAO strong.jpg, 4KiB, 275x183

Anonymous ID:MKV6dY+j Fri 30 Oct 2015 04:17:34 No.942204 Report Delete

Quoted By:

>>939209

that strong analogy

Subject

Name

E-mail

Password

Capcode	All Only User Posts Only Verified Posts Only Moderator Posts Only Manager Posts Only Admin Posts Only Developer Posts Only Founder Posts
Show Posts	All Only With Images Only Without Images Only Spoiler Images Only Non-Spoiler Images
Deleted Posts	All Only Deleted Posts Only Non-Deleted Posts
Ghost Posts	All Only Ghost Posts Only Non-Ghost Posts
Post Type	All Only Sticky Threads Only Opening Posts Only Reply Posts
Results	All Grouped By Threads
Order	Latest Posts First Oldest Posts First

On these boards

Your latest searches