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How is something worth anything? How is something worth $800b? Is it because someone else would pay $800b for it? Why would they pay $800b for that somethin? Is
by CBarkleyU 3y ago
How is something worth anything? How is something worth $800b? Is it because someone else would pay $800b for it? Why would they pay $800b for that somethin? Is it because they need to in order to make more money?
If that all is true, then by destroying the need to pay $800b, we freed up $800b, right?
- zeroonetwothree 3y agoThis is not exactly correct. For example consider a single office building and say it’s worth $2 billion. But now demand has fallen and the most anyway will pay is $1 billion. The other $1 billion is not “lost”, but it’s not freed up either. It just means that the buyer no longer transfers it to the seller. So the buyer has an extra $1 billion to spend on other things and the seller has $1 billion less. The net effect on the economy should be approximately neutral (of course sometimes if asset prices fall too much then companies can go out of business which can hurt the economy etc)
- CBarkleyU 3y ago>The net effect on the economy should be approximately neutral It wouldnt, and that's exactly my point. Company A is producing something of value (presumably) while Landlord B isnt (as evidenced by COVID-19 forcing us to WFH). So the $1 billion has now and always has had a wasted opportunity cost attached to it (who's making better use of it). In other words, if Apple wired me personally half of their yearly profit, do you think that the net effect on the economy would be neutral?