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By Drlee
#15092953
I know what my econ classes say but I am curios as to what people here believe.

When the stock market tanks, where did the money go?
#15093017
It is not going to these people for sure:

#15093031
Money is not a physical thing. It is a concept. The coins in your pocket aren't money; they are tokens. The money system functions as a virtual control system that models the real economy of goods and services. It's a matter of decoding to determine how it's created and where it "goes" when it disappears.

Money is in a constant and continuous process of creation and destruction - these processes coexist in a kind of (very) delicate balance. Taxes, according to the chartalist view of money, extinguish the money they collect. The term of art is "drain," ie, collecting taxes drains (or grounds out) the potential energy money represents - this serves the purpose of removing money from circulation when that becomes necessary.

Economic crashes also extinguish money, but they do so unintentionally (unlike taxes).

There are numerous paths (called "channels") of money creation and destruction. Some are under the control of the government, but many are not. For example, vast private money markets function outside of direct government control; their size dwarfs official government money creation.
#15093042
Drlee wrote:I know what my econ classes say but I am curios as to what people here believe.

When the stock market tanks, where did the money go?


The stock market doesn't consist of actual money, but more like money that is expected to exist in the future. When the stock market crashes, it's not that money disappears, but more that it is no longer expected to exist.
#15093174
Drlee wrote:I know what my econ classes say but I am curios as to what people here believe.

When the stock market tanks, where did the money go?


That's an interesting question.

Wealth isn't created by printing money, it's created when people make something useful out of raw materials. If the market hits the crapper it means people aren't going to creating and selling and buying as much stuff, so the wealth disappears, and the value of stocks drop.

It's mostly just numbers in computers now these days anyways.
#15093177
quetzalcoatl wrote:Money is not a physical thing. It is a concept. The coins in your pocket aren't money; they are tokens. The money system functions as a virtual control system that models the real economy of goods and services. It's a matter of decoding to determine how it's created and where it "goes" when it disappears.

Money is in a constant and continuous process of creation and destruction - these processes coexist in a kind of (very) delicate balance. Taxes, according to the chartalist view of money, extinguish the money they collect. The term of art is "drain," ie, collecting taxes drains (or grounds out) the potential energy money represents - this serves the purpose of removing money from circulation when that becomes necessary.

Economic crashes also extinguish money, but they do so unintentionally (unlike taxes).

There are numerous paths (called "channels") of money creation and destruction. Some are under the control of the government, but many are not. For example, vast private money markets function outside of direct government control; their size dwarfs official government money creation.


You are damn brilliant in many posts. Sorry I never told you that before.

I wish you would come up with an eight year old boy version of this post. It is perfect for teaching my son what is money. He asked me that question the other day.

I said something similar. But your explanation is beautiful.

He then said, "If it is all made up stuff? Then why do people make it more important than working hard, and supporting each other and their relationships? Mommy isn't being a good person more important than how much money you got in one of those banks with the magic cards you put in and some pesos come out of?"

Out of the mouths of babes comes great wisdom.

Such a great explanation Quetzalcoatl.
#15093245
Tainari88 wrote:You are damn brilliant in many posts. Sorry I never told you that before.

I wish you would come up with an eight year old boy version of this post. It is perfect for teaching my son what is money. He asked me that question the other day.

I said something similar. But your explanation is beautiful.

He then said, "If it is all made up stuff? Then why do people make it more important than working hard, and supporting each other and their relationships? Mommy isn't being a good person more important than how much money you got in one of those banks with the magic cards you put in and some pesos come out of?"

Out of the mouths of babes comes great wisdom.

Such a great explanation Quetzalcoatl.


You're way too kind, Tainari. I think your eight year old is probably smarter than both of us.
User avatar
By Drlee
#15093295
@quetzalcoatl quetzalcoatl Superb answer. So let me ask. Suppose the feds decided to put a few trillion into the economy at this point in the form of serious lost wage support. Would that necessarily be a bad thing?

In my naiveté I wonder if it might, by just circulating around, replace that ethereal thing called "money in the stock market". Certainly much would go overseas to buy goods but by giving it to people to spend first might it not prop up the stock market through consumer spending?

Some industries are pretty much in trouble anyway because people will not congregate but others?
#15093299
Tainari88 wrote:He then said, "If it is all made up stuff? Then why do people make it more important than working hard, and supporting each other and their relationships? Mommy isn't being a good person more important than how much money you got in one of those banks with the magic cards you put in and some pesos come out of?"


<3
By late
#15093300
Drlee wrote:
@quetzalcoatl quetzalcoatl Superb answer. So let me ask. Suppose the feds decided to put a few trillion into the economy at this point in the form of serious lost wage support. Would that necessarily be a bad thing?



Stiglitz talks about that in my Stiglitz thread.

According to him, we need to do that, and a lot more. We also need to support states and localities, and institutions like hospitals that have gotten hammered by the disease.

https://www.politicsforum.org/forum/viewtopic.php?f=26&t=178536
#15093915
Drlee wrote:@quetzalcoatl quetzalcoatl Superb answer. So let me ask. Suppose the feds decided to put a few trillion into the economy at this point in the form of serious lost wage support. Would that necessarily be a bad thing?

In my naiveté I wonder if it might, by just circulating around, replace that ethereal thing called "money in the stock market". Certainly much would go overseas to buy goods but by giving it to people to spend first might it not prop up the stock market through consumer spending?

Some industries are pretty much in trouble anyway because people will not congregate but others?


I think that would be a very good thing, in fact.

One economist has estimated that simply nationalizing the US payroll for 3 months would have cost $2.9T. This would have kept unemployment low and wages in place. People would have been able to shelter in place without fear of losing their homes. And since it just replaced lost wages, there would have been no inflationary impact. The expected 25 - 35% small business bankruptcy would have been averted.

Had Trump done this he would have been branded a genius and would be leading overwhelmingly going into re-election. But our leaders are, not to put too fine a point on it, dimwits.
By Rugoz
#15093926
quetzalcoatl wrote:Taxes, according to the chartalist view of money, extinguish the money they collect.


Technically taxes don't destroy money in the current institutional setup because the government doesn't act as a bank. Central bank and private banks might do as a response to the reduced supply on the bond market. If the central bank wants to keep the interest rate on target, it will sell bonds (or buy less), hereby destroying money.

quetzalcoatl wrote:One economist has estimated that simply nationalizing the US payroll for 3 months would have cost $2.9T. This would have kept unemployment low and wages in place. People would have been able to shelter in place without fear of losing their homes. And since it just replaced lost wages, there would have been no inflationary impact. The expected 25 - 35% small business bankruptcy would have been averted.


Americans take hire-and-fire very seriously. In Europe, a large part of the workforce is on short-term work, with the government paying for the shortfall in wages. In America they just fire everyone, because they can :lol:. I've heard they made unemployment benefits more generous at least.
#15094017
Unemployment benefits in the US are largely a joke. They are far short of replacement wages. They also are not flexible enough. For example a person losing their job may not take part time work without losing a substantial amount or in some cases all of their unemployment benefits.

There is an additional problem with unemployment benefits in the US. The employer is incentivized to not discharge the employee but rather try to game the system. So they reduce hours until the employee can't afford to work there or they make the work environment hostile until the employee quits.

I totally agree with the nationalizing of wages for a time. It would have been inspired.

Other than to realize that Trump is a very damaged personality, it astounds me how many opportunities he has missed to be considered one of the great presidents of all time. If he had handled this crisis well he would have cruised to reelection. He just can't bring himself to even pretend to care about the people. He had better hope he does not need to rely on President Biden for a pardon. Or Governor Coumo.

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