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If equities, bonds, and commodities all drop, where is the money going? Certainly not as unsecured deposits at banks. The money has to cycle somewhere and I don
by voisin 7y ago
If equities, bonds, and commodities all drop, where is the money going? Certainly not as unsecured deposits at banks. The money has to cycle somewhere and I don’t see any asset classes jumping by enough to account for all the sales of the remaining asset classes.
- mgsouth 7y agoDoesn't work that way. "Market value" isn't a count of funny-looking pieces of paper, or the total weight of various commodities. It's a popular consensus of the power to command future use of resources. It's a general I.O.U. If the market says I'm worth $100, then everyone is agreeing that sometime in the future I'll probably be able to request a certain amount of resources in exchange for passing on control of the I.O.U. So the market may say I can get ten hamburgers, or get four suits dry-cleaned. Changes in total market value happen when that consensus changes. If everyone realizes I'm only going to be able to get five hamburgers, or two suits, then I've lost 50% of my worth. If the market decides everyone is in the same boat, then the market has lost 50%.