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Crashes are actually great for the middle class. The value of the dollar increases as prices come down. Homes, land, property, etc all become cheaper during cra

Crashes are actually great for the middle class. The value of the dollar increases as prices come down. Homes, land, property, etc all become cheaper during crashes. This "bull market" is the actual "crash." All its doing is depleting the value of your money

forapurpose 9y ago
> Crashes are actually great for the middle class In perhaps one narrow sense. The middle class people who lose their jobs and savings, or whose welfare depends on economic activity (i.e., almost everyone) such as others buying, selling and investing in things don't do so well. Perhaps there is some data on how well the middle class did in 1929, 1988, 2008, etc.
- jonwachob91 9y ago
  It's also ignoring the amount of middle-class savings that are destroyed during the crash... The ONLY middle class individuals that benefit from a crash are those with the cash to buy in at the depreciated prices.
  - PatientTrader 9y ago
    > It's also ignoring the amount of middle-class savings that are destroyed during the crash Cash savings actually increase in value during crashes. Crashes provide the middle class with opportunities to purchase assets that they otherwise would not be able to afford.
    - jonwachob91 9y ago
      > Cash savings actually increase in value during crashes. I get that, but you have to have cash savings before you can purchase assets. MOST middle class individuals can't afford to keep their savings in cash. MAYBE they keep 6 months of salary in cash in the event of a lose of work, but every other saved dollar is put to work. You'd have to destroy their life savings to give them a decent opportunity to buy assets on the cheap.
Meegul 9y ago
This is only partially true. It ignores the job losses that result from the fall in capital available to firms. Additionally, anyone owning equities, which should be most of the middle class although I'm aware this isn't the case, will see their wealth decrease. I'd argue that the only people who benefit from crashes are those with large amounts of cash assets, which is generally not how you should be holding your wealth. Holding cash, after all, is just withholding wealth from being productive.
- rwmj 9y ago
  > Holding cash, after all, is just withholding wealth from being productive. Unless you're literally storing notes under your bed, your bank is lending out your money to someone.
  - cstejerean 9y ago
    Sure, the bank benefits, but with near zero interest rates on saving accounts (in the US at least) the wealth isn’t productive for you. You are actually losing money to inflationso it’s not a good idea to keep all of your wealth in cash.
  - Meegul 9y ago
    True in the larger economic sense. But on an individual level, even the best savings accounts which typically get a bit above 1% interest will not keep up with the 2-3% inflation that we see (and the fed targets).
  - nradov 9y ago
    That might have been true long ago but with fractional reserve lending this linkage is effectively severed. The bank usually isn't lending out your money. The total amount a bank can lend out is constrained more by regulatory requirements and its invested capital than by the balance of customer savings/checking/CD accounts.
    - misja111 9y ago
      It's true that the lending amount of a bank is heavily constrained by regulatory requirements. But that doesn't mean that banks are not lending your deposited money to someone else. Consider two banks in the same country, so having to comply with the same reserve requirements. The reserve requirements are defined as a percentage of the amount on the banks's deposit account at the central bank. So the bank which can transfer an extra deposit to this acount is the one which is able to lend more money.
akgerber 9y ago
The middle class just needs to draw on its sizable reserves of capital to purchase homes at a fire-sale prices.
swendoog 9y ago
I don't see how they're great for the "middle class". A crash is generally bad for anyone who's invested. I could only see it being good for people who have cash on hand after the crash.
- PatientTrader 9y ago
  > A crash is generally bad for anyone who's invested You are forgetting that cash in hand or in a bank is an asset/investment. Cash should be 20-30% of any investment portfolio.
  - swendoog 9y ago
    Fair enough... I'm not much of an experienced investor. I had always heard you should invest, invest, invest, and forget about what the market is doing or will do.

forapurpose 9y ago

> Crashes are actually great for the middle class In perhaps one narrow sense. The middle class people who lose their jobs and savings, or whose welfare depends on economic activity (i.e., almost everyone) such as others buying, selling and investing in things don't do so well. Perhaps there is some data on how well the middle class did in 1929, 1988, 2008, etc.

jonwachob91 9y ago
It's also ignoring the amount of middle-class savings that are destroyed during the crash... The ONLY middle class individuals that benefit from a crash are those with the cash to buy in at the depreciated prices.
- PatientTrader 9y ago
  > It's also ignoring the amount of middle-class savings that are destroyed during the crash Cash savings actually increase in value during crashes. Crashes provide the middle class with opportunities to purchase assets that they otherwise would not be able to afford.
  - jonwachob91 9y ago
    > Cash savings actually increase in value during crashes. I get that, but you have to have cash savings before you can purchase assets. MOST middle class individuals can't afford to keep their savings in cash. MAYBE they keep 6 months of salary in cash in the event of a lose of work, but every other saved dollar is put to work. You'd have to destroy their life savings to give them a decent opportunity to buy assets on the cheap.

Meegul 9y ago

This is only partially true. It ignores the job losses that result from the fall in capital available to firms. Additionally, anyone owning equities, which should be most of the middle class although I'm aware this isn't the case, will see their wealth decrease. I'd argue that the only people who benefit from crashes are those with large amounts of cash assets, which is generally not how you should be holding your wealth. Holding cash, after all, is just withholding wealth from being productive.

rwmj 9y ago
> Holding cash, after all, is just withholding wealth from being productive. Unless you're literally storing notes under your bed, your bank is lending out your money to someone.
- cstejerean 9y ago
  Sure, the bank benefits, but with near zero interest rates on saving accounts (in the US at least) the wealth isn’t productive for you. You are actually losing money to inflationso it’s not a good idea to keep all of your wealth in cash.
- Meegul 9y ago
  True in the larger economic sense. But on an individual level, even the best savings accounts which typically get a bit above 1% interest will not keep up with the 2-3% inflation that we see (and the fed targets).
- nradov 9y ago
  That might have been true long ago but with fractional reserve lending this linkage is effectively severed. The bank usually isn't lending out your money. The total amount a bank can lend out is constrained more by regulatory requirements and its invested capital than by the balance of customer savings/checking/CD accounts.
  - misja111 9y ago
    It's true that the lending amount of a bank is heavily constrained by regulatory requirements. But that doesn't mean that banks are not lending your deposited money to someone else. Consider two banks in the same country, so having to comply with the same reserve requirements. The reserve requirements are defined as a percentage of the amount on the banks's deposit account at the central bank. So the bank which can transfer an extra deposit to this acount is the one which is able to lend more money.

akgerber 9y ago

The middle class just needs to draw on its sizable reserves of capital to purchase homes at a fire-sale prices.

swendoog 9y ago

I don't see how they're great for the "middle class". A crash is generally bad for anyone who's invested. I could only see it being good for people who have cash on hand after the crash.

PatientTrader 9y ago
> A crash is generally bad for anyone who's invested You are forgetting that cash in hand or in a bank is an asset/investment. Cash should be 20-30% of any investment portfolio.
- swendoog 9y ago
  Fair enough... I'm not much of an experienced investor. I had always heard you should invest, invest, invest, and forget about what the market is doing or will do.