Where Will Money Go?

[Martin Hash]

A person only recognizes a loss (or gain) when an asset is sold. Until then, all that delicious "money" is just a ledger entry of the asset's predicted current market value. The money that was spent on that asset still exists, just in other peoples' pockets. When one sells an asset, a buyer has to come up with actual cash in existence to buy it. Bubbles don't create money, or destroy it. Bubbles do induce people to spend more on assets than they are actually worth. Bye, bye, money!

Governmental inflation of the money supply destroys (dilutes) the value of the fiat money. It also creates bubbles in asset prices.

??? If the "ledger" says you had $million yesterday, and only $1 today, nobody else got that money - it's simply gone. And if the reverse happens, money materialized out of thin air.

[DBTrek]

Same trillions are still in existence though. They didn’t disappear. Banks buying stuff after the crash still creates the same inflation.

You and me (a bank) buy a stock for $100. Total value in play $200.
I sell mine at $100 ... so do all the other banks, unbeknownst to you.
Stock crashes to $30.
You sell.

Now I have $100 from my stock sale, and you have $30. Total value in play $130.

See that? I just took a 35% chunk out of the money supply.
Sure, your other dollars my still "exist" on record somewhere, but they don't belong to you.
They belong to the evaporated value of the stock I crashed.

My original $100 is already in the hands of whoever I bought that stock from. I have the same silly stock certificate, whether it’s worth $30 or $3,000.

If I sell that stock, someone else hands me their money for it. No money has disappeared from the supply, only how much I expected to get eventually.

Yeah, I get that the serialized dollars aren't physically or digitally "destroyed" when stocks crash. But the act of artificially pumping the stock bubble because you're a bank, and the Fed prints money to give to you - induces consumers to buy over-inflated assets. Then, when the rug is pulled, consumers hold significantly less money and the banks (who have to repay the Fed for lending them money) are holding more.

Is the cycle not clear? Maybe I'm just doing a bad job of explaining the idea.

Fed loans banks money -> banks pump asset prices -> citizens buy inflated assets -> banks mass sell -> assets crash -> citizens panic sell during crash for a loss-> banks repay Fed for loans.

How is inflation tamed? Ultimately by the Fed raising interest rates on its loans to the banks, right? So at the last step of the cycle.

But before the Fed raises rates they're going to want to make sure the banks can pay. If the banks sucker everyone into buying assets that are rising precisely because of the Fed's printing, then ultimately small investors are providing that interest money. Aka, small investors are going to be paying that inflation down.

As I said, I was buzzed when I came up with the theory. I have to admit, I didn't do a ton of math trying to prove or disprove it. Just throwing the idea out there for consideration. (I reserve the right to have ideas that are wrong, because it beats having no ideas )

[Martin Hash]

Dude: if you bought GameStop for $1 and it went up to $300, that $299 gain materialized from nowhere. Nobody put $299 into the market for your share, they bought someone else’s share.

[DBTrek]

Dude: if you bought GameStop for $1 and it went up to $300, that $299 gain materialized from nowhere. Nobody put $299 into the market for your share, they bought someone else’s share.

True.
But to get the $299 I have to sell my share, and take someone elses $299.
Of course, if you're a bank, and the Fed is just printing money for you - $299 ain't hard to come by.


I dunno, the more I think it over the more I see the point that a collapse destroys tons of value, but it doesn't destroy the physical dollars. Like .. if the Fed prints $20T dollars, each with a serial number ... those dollars exist *somewhere* before and after the crash. So ... I dunno. I may have to get buzzed again and give it another think.
Or play guitar.
Or walk the dog.

Lots of options I guess, hahah.

[Martin Hash]

Guy, it’s not just your share that went from $1 to $300, it was thousands of shares, all because 1 share sold for $300. There’s nothing like Conservation Of Energy with money.

[Martin Hash]

The Fed doesn’t actually “print” money; there are no serial numbers; they just take the toxic asset off the Bank’s Balance Sheet and put it on their own, and credit the bank that amount. The Fed is sitting on $10 trillion that we know about with no matching Treasuries.

[DBTrek]

Guy, it’s not just your share that went from $1 to $300, it was thousands of shares, all because 1 share sold for $300. There’s nothing like Conservation Of Energy with money.

Yeah, that is pretty weird. Never really thought of it like that, but market cap is kinda crazy that way. Every share is worth the current ask price. Except it's not really because if everyone tried to sell their shares for the current ask, they'd never get it. In fact, putting 100% of the shares on the market for the current ask would be a disaster for the price of shares.

On the other hand, the last sale of a stock also represents the lowest amount someone will accept for selling their share - so it could be argued that all shares are actually worth *more* than the most recent ask. The last sale was simply the cheapest share available.

Fuck.

This is why people lose money in the markets, and nerds with AI-driven mainframes sitting 16' away from the exchange always win.

[Martin Hash]

Capitalism is the idealization of people who produce nothing; they simply manipulate the artificialness of money. It only works because everyone wishes it was them, but if you think about it: damn, what a corruption of values.

[Martin Hash]

There is so much artificial money that if it was spread evenly among the population, like UBI for example, inflation would be a monster because everyone would want to use it to consume. Worse, nobody would want to produce. That’s the cliff’s edge we’re walking on, but fuck it, time for another Great Flood and start over. Humanity, because of democracy, is lost.

[Hastur]

There truly is a lot of money.