# Where Does The Money Go?



## rgrossicone (Jan 27, 2008)

OK- I am not economist, by any means, and in a recent classroom discussion while teaching the Great Depression, and what we are experiencing today as well, a student asked me, "Well, where does the money go?" and "Why can't the gov't just make more money for everyone?". I told him why the gov't doesn't print more money, saying it would devalue whats already out there, and I used limited edition Nike Dunks on eBay to show that. If Nike makes 1,000,000 pair of one design, it won't be worth nearly as much as a design they only make 100 of. But I wasn't quite sure how to answer the first question, 1-because I didn't know, and 2-even if I did,I have a feeling the answer would be beyond a 14 year olds mind. I have a feeling in times like these the top .0001% reap the benefits, but I may very well be wrong.

So can someone tell me, where does the money go in times like these? Simply.


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## Concordia (Sep 30, 2004)

You could look up various definitions of money supply, including M1, M2, M3, etc.

More simply, not all the money out there is in the form of dollar bills. Most of it is created (sort of) by the way banking and credit works. You have $100 in cash, you give it to a bank for safekeeping. They lend out most of it (or more than all of it if they're incompetent), and that $90 goes to some of their clients. Some of that either gets saved in the bank again (where it can be lent on), or spent and given to someone else who will put it in HIS bank account. At the end of the day, there is going to be a lot more than $100 of bank deposits, and that is what everyone believes they can spend.

More recently, you had a bunch of banks realizing that they couldn't continue lending and stay healthy because some of their past loans had gone bad and chewed up their balance sheets. So if you gave the bank $100, it didn't circulate around the economy. People might have tried to call up the bank to borrow sonme of it, but suddenly the terms got stricter and the interest rate higher. As a result, it just sat there. When other consumers who might have borrowed saw that there wouldn't be much business going on, they were more reluctant to borrow. That doesn't mean, strictly speaking, that the money supply is drying up, but it is probably what your students are noticing.

At some point, this becomes a death spiral. Less lending, lower economic activity and falling prices, even less lending... Keynes called this a "liquidity trap" and saw that the only way to reverse it was to have the government spend lots of money to restore confidence and make it more feasible for bankers to lend again (and for consumers to want to borrow).


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## Beau (Oct 4, 2007)

rgrossicone said:


> "Well, where does the money go?" I have a feeling in times like these the top .0001% reap the benefits, but I may very well be wrong.
> 
> So can someone tell me, where does the money go in times like these? Simply.


The money goes into programs that benefit those people in society who put almost nothing back in, even their labor. If you look at the chart on the link below, and add up all the expeditures (w/out including dept. defense) then you will see how much goes to benefit the 50% of citizens (and non-citizens) who don't pay any taxes.

or try this graph:

The top .001% only seems to benefit, in that they don't seem to suffer, since they have EARNED enough money to weather the storm.

Confiscatory tax policy hurts most immeidately those who pay income taxes in addition to their withholdings.

Here is an example of where it is going to get worse. Let's say that the president gets his healthcare reform. Well, if you have employer provided health insurance you will be taxed on the full amount of that benefit via more withholdings. That means that if you are insuring a family of four, your employers contribution could be at least $10K - $12K per year. You would then pay an income tax on that amount, where as not now you do not. Based on what you earn, that imputed income could bump you up to another tax bracket. Then you will pay even more income taxes.

The federal government does not earn money. It takes money from those who earn income subsequent to the perview of teh I.R.S. and have a registered SSN. It then takes these collections and apportions them to its different agencies to promote the general welfare and protection of the populus within its borders (except to fight wars on foreign soil and to provide for the elimination of the unborn in select foreign countries). Our federal government has gotten so far outside of its original intention that today it seems like we are on the cusp of ruin.

An oligarchy is not the answer. We must return to the strength of free markets and promoting the potential of the individual to succeed on his own strengths and skills.

I am interested to know what your teaching text says about the cause of the Great Depression.


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## ajo (Oct 22, 2007)

On the subject of the Great Depression I just finished reading the 

Lords of Finance The Bankers Who Broke The World by Liaquat Ahemed

Highly recommended.


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## PedanticTurkey (Jan 26, 2008)

The short answer to your question is that the money doesn't go anywhere. There's a lot more stuff in the world than there is money in circulation, but things are only valued at what you can sell them for. So when there's a "credit crisis," people won't pay as much for everything, so everything becomes worth less.


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## ksinc (May 30, 2005)

rgrossicone said:


> OK- I am not economist, by any means, and in a recent classroom discussion while teaching the Great Depression, and what we are experiencing today as well, a student asked me, "Well, where does the money go?" and "Why can't the gov't just make more money for everyone?". I told him why the gov't doesn't print more money, saying it would devalue whats already out there, and I used limited edition Nike Dunks on eBay to show that. If Nike makes 1,000,000 pair of one design, it won't be worth nearly as much as a design they only make 100 of. But I wasn't quite sure how to answer the first question, 1-because I didn't know, and 2-even if I did,I have a feeling the answer would be beyond a 14 year olds mind. I have a feeling in times like these the top .0001% reap the benefits, but I may very well be wrong.
> 
> So can someone tell me, where does the money go in times like these? Simply.


Simply put: the money lost by the losers; is money gained by the winners. In reality there is a lot of unrealized gains disappearing. People have a tendency to think that if they bought a house for $100,000 and it appreciated to to $500,000 then depreciated to $200,000 they LOST $300,000. This is usually because they run out and borrow against the $500k valuation. Therefore the money "lost" today was "gained" in previous years so it is hard to see the connection. So that, the offsetting gain for the current loss was sold a long time ago. People see what they want to see at a given point in time; sometimes many see only the gains, sometimes many see only the losses.

I don't know how the knowledge fits with how old your students are, but if they are interested in such things and you think they can do it this is a site they should learn to navigate: https://research.stlouisfed.org/fred2/

They are printing money, but they are also using quantitative easing (creating electronic money through open market operations.)

https://research.stlouisfed.org/fred2/series/M1?cid=25

At the very least you could teach them the Components of M1 and how to find them (click MoneyAggregates.M1andComponents from the main Fred menu)


> Ml includes funds that are readily accessible for spending. M1 consists of: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits; and (4) other checkable deposits (OCDs), which consist primarily of negotiable order of withdrawal (NOW) accounts at depository institutions and credit union share draft accounts. Seasonally adjusted M1 is calculated by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately.


You could give them research; like see if they can find the latest reported AAA Corporate Bond Rate on the website?

I think the best thing you could probably impart to your students is that these are good questions and the answers/numbers exist and are out there; and an individuals power to succeed in the economy is only limited by their knowledge gained by learning and understanding the factors and how they relate to their lives as citizens/taxpayers, consumers, producers, employees, and employers. Those that can be pro-active in their use of money and credit will prosper; and those that cannot will not. It's a matter of how hard they work in school and in life to acquire and apply that knowlege. If you can teach them how to research and find answers to their own questions (or those of others) you will be doing a good thing. Good Luck!


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## Nerev (Apr 25, 2009)

"It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or gained its simple transferred from one perception to another." A quote from Wall Street from the well dressed Mr. Gordon Gekko. 

Where does the money go? It counts on where the money goes specificly. For example, a stimulas package for individuals goes to back to tax payers. A stimulas for a state means that they are getting additional income that they can use for budget purposes because all state governments cannot run a deficet. If a state runs out of money, they need to adjust their budget to get at least 0. TARP money went to the banks, and that money is normally horded so that they are not declared insolvent and have the FDIC take them into receivership.

TARP money is actually kind of funny, and I'm sure your students would get a kick out of this. Normally, people think of printing money as a means of getting "money" into the system. All banks have an account witht he Federal Reserve just like anyone has a checking account with a bank. Let us say that Bank of America has $10 billion in their account witht he Fed, and needed more money. The Fed simply changes that "1" to a "5" and now they have $50 billion, with $40 billion out as a loan. Again, money isn't made or lost, it's transfered from one perception to another; the illusion of money.

As to why the government can't just print out money for everyone, you should simply tell them this. If everyone had $10 and a loaf of bread was $1, you could buy 10 loaves of bread. If the government printed money and that $10 became a $100, a loaf of bread would now be $10, and you still would only buy 10 loaves of bread.


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## bigchris1313 (Apr 16, 2009)

Nerev said:


> "It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or gained its simple transferred from one perception to another." A quote from Wall Street from the well dressed Mr. Gordon Gekko.


Patently false. Wealth can be both created and destroyed. This is mathematically demonstrable.


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## Nerev (Apr 25, 2009)

bigchris1313 said:


> Patently false. Wealth can be both created and destroyed. This is mathematically demonstrable.


Obviously false? What do you think happens when you get wealthy or you lose that money? And I'd love to see you mathematically demonstrate this. Even burning bags of money simply means less money for everyone therefore increasing everyones else wealth.


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## ksinc (May 30, 2005)

bigchris1313 said:


> Patently false. Wealth can be both created and destroyed. This is mathematically demonstrable.





Nerev said:


> Obviously false? What do you think happens when you get wealthy or you lose that money? And I'd love to see you mathematically demonstrate this. Even burning bags of money simply means less money for everyone therefore increasing everyones else wealth.


Money and Wealth are not the same thing; although you could fool most people. :devil:


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## bigchris1313 (Apr 16, 2009)

Nerev said:


> And I'd love to see you mathematically demonstrate this.


Wealth Destruction:










Small triangle labeled "gone" is the dead weight loss. Mathematical proof of wealth creation is in the works and will be provided sooner than later.


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## PedanticTurkey (Jan 26, 2008)

You guys are really not addressing the question, which was "where does all the money go in a recession?" asked by a child.


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## Nerev (Apr 25, 2009)

bigchris1313 said:


> Wealth Destruction:
> 
> 
> 
> ...


_"Causes of deadweight loss can include monopoly pricing (see artificial scarcity), externalities, taxes or subsidies (Case and Fair, 1999: 442), and binding price ceilings or floors. The term deadweight loss may also be referred to as the "excess burden of monopoly" or the "excess burden of taxation"."_

Good read but not close at all to what the quote meant; might as quote Charles Dickenson.



> You guys are really not addressing the question, which was "where does all the money go in a recession?" asked by a child.





> Where does the money go? It counts on where the money goes specificly. For example, a stimulas package for individuals goes to back to tax payers. A stimulas for a state means that they are getting additional income that they can use for budget purposes because all state governments cannot run a deficet. If a state runs out of money, they need to adjust their budget to get at least 0. TARP money went to the banks, and that money is normally horded so that they are not declared insolvent and have the FDIC take them into receivership.


There is no "recession money pit" where if you need money, you simply go there and get it. The money during a recession has to be allocated into specific programs and legislation. The stimulas package, packages for the state, TARP money, and a ton of other programs, initiatives, and legislation that is passed so that the money can be directed.


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## bigchris1313 (Apr 16, 2009)

Nerev said:


> _"Causes of deadweight loss can include monopoly pricing (see artificial scarcity), externalities, taxes or subsidies (Case and Fair, 1999: 442), and binding price ceilings or floors. The term deadweight loss may also be referred to as the "excess burden of monopoly" or the "excess burden of taxation"."_
> 
> Good read but not close at all to what the quote meant; might as quote Charles Dickenson.


I do not understand what you're talking about. Are you denying that a deadweight loss, caused by a market distortion--in this example a tax--and resulting in a loss of economic value that would have been created in the absence of the distortion,* is a form of wealth destruction?

*or was previously created before the existence of the distortion


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## Nerev (Apr 25, 2009)

The quote is referring to the age old accounting principle of Assets = Liabilities + Equity. Your loss is someone else's gain, always. Money is never created or destroyed, it's simply transferred from one form, any of the three, to something else, or to someone's else's balance sheet. Deadweight loss from tax and the resulting economic loss that would have been created in its absense still follows the above idea. If someone would rather get welfare instead of work minimum wage, there is a loss in economic value since they didn't work, but money isn't made or loss. It is simply transferred from us in the form of taxes to them in the form of welfare. Could have, would have, but didn't.


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## bigchris1313 (Apr 16, 2009)

Nerev said:


> The quote is referring to the age old accounting principle of Assets = Liabilities + Equity. Your loss is someone else's gain, always. Money is never created or destroyed, it's simply transferred from one form, any of the three, to something else, or to someone's else's balance sheet.


Do you actually believe what you're saying? If wealth can neither be created nor destroyed--perhaps a corollary to the First Law of Thermodynamics is in order?--please explain how this graph can exist:










At various points on the graph, the size of the entire world economy, the aggregate of all nations' GDPs, increases. If wealth is zero sum, as you claim, surely an increase would be impossible. The line would have to remain flat. A decrease would also be impossible, because, according to your logic, one actor's loss is another actor's gain.

If the economic production of every country is accounted for, where is the change in value coming from? We certainly aren't trading with aliens.


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## Beresford (Mar 30, 2006)

Nerev said:


> The quote is referring to the age old accounting principle of Assets = Liabilities + Equity. Your loss is someone else's gain, always. Money is never created or destroyed, it's simply transferred from one form, any of the three, to something else, or to someone's else's balance sheet. Deadweight loss from tax and the resulting economic loss that would have been created in its absense still follows the above idea. If someone would rather get welfare instead of work minimum wage, there is a loss in economic value since they didn't work, but money isn't made or loss. It is simply transferred from us in the form of taxes to them in the form of welfare. Could have, would have, but didn't.


You are assuming "money" has intrinsic worth. In fact, it has no value apart from the emotional and psychological value people ascribe to it. In reality, it is just little pieces of green paper. Or more likely, today, just an electronic pulse sitting in a computer system.

Once people lose faith in the ability of the little green pieces of paper to fairly store and transmit the value of their labor and services, the "wealth" represented by the little pieces of green paper disappears.

In ancient days, people dealt with this problem by either engaging in barter, or in a currency that had a hard asset value because it could be used for something and couldn't be destroyed, e.g., salt, gold.

One of the problems with the present situation is the government is still pretending that our little pieces of paper have the same intrinsic worth and are simply printing them up and spending them as if they do. But sooner or later people will catch on that there is nothing backing the little green pieces of paper, and that they are not assets but just unpaid IOUs.


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## Nerev (Apr 25, 2009)

First law of thermodynamics and the world GDP growth in a lump, your hard work (not aliens) is the energy that changes from one form, work, to another, money and therefore GDP growth; the change in perception.

_"It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or gained its simple transferred from one perception to another."_

Beresford, of course since we went off the gold standard, money is based on faith. Now that I think about it too, gold is also based on faith that there will be demand of this shiny yellow metal that we can't eat, drink, or survive on. But I'm not trying to touch upon that, though I evidently did.


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## Beau (Oct 4, 2007)

Nerev said:


> Obviously false? What do you think happens when you get wealthy or you lose that money? And I'd love to see you mathematically demonstrate this. Even burning bags of money simply means less money for everyone therefore increasing everyones else wealth.


Except for the poor SOB whose bag of money was burned.


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## Nerev (Apr 25, 2009)

Beau said:


> Except for the poor SOB whose bag of money was burned.


Yeah, that too :icon_headagainstwal


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## agnash (Jul 24, 2006)

PedanticTurkey said:


> You guys are really not addressing the question, which was "where does all the money go in a recession?" asked by a child.


Good point. The day after the market declined there was approximately the same amount of actual cash in existence. The decline was that the value of stocks, bonds, mortgages, etc. valued by that cash had substantially declined. People (banks, investors, etc) are now sitting on money, they are afraid to lend or invest becuase of uncertainty over which company will fail next. Consumers are afraid that they will be jobless, so they are saving/reducing debt, which puts more cash into the hands of banks/investors. Perhaps under alternative circumstances those investors would buy stocks and start loaning money to companies in need, but becuase the government is also seeing revenues dry up and spending increase, they are instead putting cash into the apparent safety of government debt. I realize this is a simplified answer, but hopefully it is one that will suffice for students.


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## ksinc (May 30, 2005)

Q1: Is entreprenuership a factor of production?

Each school of thought has an answer; which is often dependent on whether they see economics as a physical or social science.

1st Law would be applicable to the physical; no?

My view is: entreprenuership is a value creation process and not a factor of production.

Q2: Is deadweight loss a realized or an unrealized loss? Do we ever recognize this loss?

And for your viewing pleasure an interesting blog post on the topic at hand ... 
https://www.coyoteblog.com/coyote_blog/2007/04/wealth_creation.html


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## Nerev (Apr 25, 2009)

ksinc said:


> https://www.coyoteblog.com/coyote_blog/2007/04/wealth_creation.html


That was a very interesting article. The only problem I have with it is that while human intellect is a limitless resource, everything is tied to the physical world which is limited. That sand on the beach being turned into the microchip, again a physical product is transformed with our intellect into a useful and expensive product. While the human intellect still did 99% of the work that 1% came from a limited resource; you still need something to make another. But, it's damn hard to apply somethign from physics or philosophical to business practices and vice versa. Have we improved over the years? Absolutely. But through technology, innovention, something is still improved and gained and there's a cost to everything; pollution, deforestization, etc... But that's way out of the scope of business.

Now that I thought about it, applying Laws of Thermodynamics to economics is pretty funny. You just really can't compare the two.


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## ksinc (May 30, 2005)

Nerev said:


> That was a very interesting article. The only problem I have with it is that while human intellect is a limitless resource, everything is tied to the physical world which is limited. That sand on the beach being turned into the microchip, again a physical product is transformed with our intellect into a useful and expensive product. While the human intellect still did 99% of the work that 1% came from a limited resource; you still need something to make another. But, it's damn hard to apply somethign from physics or philosophical to business practices and vice versa.


I'm sympathetic to your argument in some ways, but I can't agree with either of you two because of the mixing of terms: money, wealth, and value. I'm just far too literal/pedantic. I think you both have said some things right and some concepts are wrong, but it's too mixed up in terminology to decipher.

For instance: Yes; the sand that is turned into a microchip takes work (specifically Labor to design and manufacture), but the value of the microchip is greater than the cost of the sand + the cost of the labor (with apologies to any Marxists that are offended by this reality.)

IMHO ... This is value creation and it is not limited; it is does not violate the 1st Law of Thermodynamics; nor is it a zero-sum game.

I think you would agree and sort of got side-tracked/suckered into a debate on wealth when you were trying to discuss money.



> Now that I thought about it, applying Laws of Thermodynamics to economics is pretty funny. You just really can't compare the two.


Yep; economics is a social science and not a physical science; although many will disagree. There is a connection here to the question of Economists and the role of modelling and predictability in economics.

https://mises.org/efandi/ch23.asp

https://mises.org/journals/scholar/Thornton6.pdf


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## agnash (Jul 24, 2006)

ksinc said:


> For instance: Yes; the sand that is turned into a microchip takes work (specifically Labor to design and manufacture), but the value of the microchip is greater than the cost of the sand + the cost of the labor (with apologies to any Marxists that are offended by this reality.)


I agree with a lot of what you are saying, but disagree with this statement. I believe it is possible for the value of the microchip to be equal to, less than or greater than the cost of the sand + the cost of the labor. The actual value will be based on the desirability of the chip to the market.


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## ksinc (May 30, 2005)

agnash said:


> I agree with a lot of what you are saying, but disagree with this statement. I believe it is possible for the value of the microchip to be equal to, less than or greater than the cost of the sand + the cost of the labor. The actual value will be based on the desirability of the chip to the market.


Yes indeed; thank you for correcting that slip up. I was speaking in optimistic terms! LOL

What I meant to say was that the value of the output was not simply the sum of the value of the inputs. It is based on the market perception.


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## 16412 (Apr 1, 2005)

During a depression or recession money just vanishes into thin air. When things get over priced there is a correction where the over valued drops to real value. You don't want to be the sucker buying the over valued because when it can not hold the over price numbers it slides to real prices which means the money above the real price or worth is gone into thin air (this happened with the Enron recession, though some walked out with lots).

It has to do with supply and demand. Big supply means low price. The higher the demand keeps raising the price until not enough people can/will pay anymore, or people think it is to high and then stop, so no demand. When nobody is buying anymore or hardly anyone the price falls until people start buying again. The price between the top and bottom during the fall all of that money is gone. When the price is low many people can buy but usually don't. When something becomes popular as people buy there becomes less and the price goes up. As it goes up less and less people can buy, so less demand, But the _stupid factor _or_ stupid math_ is people are no longer thinking sinceably, their feeling are making the decision instead of their brains, so they buy when they shouldn't. The super dumb ones buy just before all the hot steam runs out of power, so they loose lots. When the increasing price cannot be substained it will hit the top and then fall. Those who sold at the top made lots of money and those who bought at the top have nothing. When the price is falling nobody wants to buy until the price has slid to the bottom. Many times the money goes with those who sold at the top, but sometimes money disappears and the dollar becomes more valuable, which is anti-inflation (anti-inflation happened with Reagan, but not because money disappeared).


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## ksinc (May 30, 2005)

WA said:


> During a depression or recession money just vanishes into thin air. When things get over priced there is a correction where the over valued drops to real value. You don't want to be the sucker buying the over valued because when it can not hold the over price numbers it slides to real prices which means the money above the real price or worth is gone into thin air (this happened with the Enron recession, though some walked out with lots).
> 
> It has to do with supply and demand. Big supply means low price. The higher the demand keeps raising the price until not enough people can/will pay anymore, or people think it is to high and then stop, so no demand. When nobody is buying anymore or hardly anyone the price falls until people start buying again. The price between the top and bottom during the fall all of that money is gone. When the price is low many people can buy but usually don't. When something becomes popular as people buy there becomes less and the price goes up. As it goes up less and less people can buy, so less demand, But the _stupid factor _or_ stupid math_ is people are no longer thinking sinceably, their feeling are making the decision instead of their brains, so they buy when they shouldn't. The super dumb ones buy just before all the hot steam runs out of power, so they loose lots. When the increasing price cannot be substained it will hit the top and then fall. Those who sold at the top made lots of money and those who bought at the top have nothing. When the price is falling nobody wants to buy until the price has slid to the bottom. Many times the money goes with those who sold at the top, but sometimes money disappears and the dollar becomes more valuable, which is anti-inflation (anti-inflation happened with Reagan, but not because money disappeared).


 No you didn't?


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## 16412 (Apr 1, 2005)

ksinc, do you ever think outside the box? Are you afraid to think outside the box? Sometimes, or all the time, your answers are from inside the box. Lets say you were going to college when Reagan first ran for P. What would you say about Reaganomics? Reaganomics was outside the box and there were many college professors who knew the _in the box complex theories_ that "proved" Reaganomics to be wrong. Reagan took a lot of abuse from the smartest minds in the world about economics and he was right, not by theory, but by the market showing he was right. You come across as somebody who never ask, "What if?" All you resort to is what somebody else says. Do you never do your own thinking? Most stuff that has been inside the box was first outside the box that replaced something else inside the box. Therefore, staying inside the box your not really safe. The only thing that staying inside the box does for you is keep most people from laughing at you. If you have a bright mind why are you staying in the box?


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## ksinc (May 30, 2005)

WA said:


> ksinc, do you ever think outside the box? Are you afraid to think outside the box? Sometimes, or all the time, your answers are from inside the box. Lets say you were going to college when Reagan first ran for P. What would you say about Reaganomics? Reaganomics was outside the box and there were many college professors who knew the _in the box complex theories_ that "proved" Reaganomics to be wrong. Reagan took a lot of abuse from the smartest minds in the world about economics and he was right, not by theory, but by the market showing he was right. You come across as somebody who never ask, "What if?" All you resort to is what somebody else says. Do you never do your own thinking? Most stuff that has been inside the box was first outside the box that replaced something else inside the box. Therefore, staying inside the box your not really safe. The only thing that staying inside the box does for you is keep most people from laughing at you. If you have a bright mind why are you staying in the box?


That's probably THE single thing you've ever said that is the most dumb.


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## Nerev (Apr 25, 2009)

Nevermind.


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## TBOWES (Nov 29, 2007)

PedanticTurkey said:


> The short answer to your question is that the money doesn't go anywhere. There's a lot more stuff in the world than there is money in circulation, but things are only valued at what you can sell them for. So when there's a "credit crisis," people won't pay as much for everything, so everything becomes worth less.


Could not have said it better.


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## Laxplayer (Apr 26, 2006)

WA said:


> ksinc, do you ever think outside the box? Are you afraid to think outside the box? Sometimes, or all the time, your answers are from inside the box. Lets say you were going to college when Reagan first ran for P. What would you say about Reaganomics? Reaganomics was outside the box and there were many college professors who knew the _in the box complex theories_ that "proved" Reaganomics to be wrong. Reagan took a lot of abuse from the smartest minds in the world about economics and he was right, not by theory, but by the market showing he was right. You come across as somebody who never ask, "What if?" All you resort to is what somebody else says. Do you never do your own thinking? *Most stuff that has been inside the box was first outside the box that replaced something else inside the box. Therefore, staying inside the box your not really safe. *The only thing that staying inside the box does for you is keep most people from laughing at you. If you have a bright mind why are you staying in the box?


I'm confused. Could you please tell us more about this box?


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## 16412 (Apr 1, 2005)

Laxplayer said:


> I'm confused. Could you please tell us more about this box?


_Most stuff that has been inside the box was first outside the box that replaced something else inside the box. Therefore, staying inside the box your not really safe._

Most stuff that has been inside the box was first outside the box. So it replaced something else inside the box (lots of times it is replacing another theory that has been forgotten or less peruasive). Therefore, staying inside the box you are not really safe (because, 99% of what is in the box you depend on is going to be replaced). (There are theories outside the box, that are extremely far away from the box, that bring in lots of money with almost zero work, while inside the box you have 50% chance of bringing in the money, or it takes so long it is funnier to watch paint dry). Outside the box you get ridiculed beyond reason, such as Reagan. Many people who figure out if a theory is true or false never say, because they will be mocked and scoffed for years, and they don't want to take that kind of abuse, plus you have to write some mile long paper, or few will read it. (Don't put your faith in something that has 99% chance of being replaced, which is maybe everything in the box.) Some people think outside the box, but they are so close to the box it hardly counts as outside the box.

Much that is inside the box is theory. A theory is one of two things; Fact or Horsefeathers. While complex theories are good mind exercises you have to remember that if the theory is not true you have wasted a huge amount of time on something that is false. Which sometimes, makes one wonder, why would an intelligent person do that?

Sometimes I write of thoughts of the past, that I figured out, but I don't remember the details, and I'm finding out I don't even remember all of the summary anymore. When you are young you think you will never forget somethings, but 20+ years later you may wish you had written at least the summary down.


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## ksinc (May 30, 2005)

WA said:


> _Most stuff that has been inside the box was first outside the box that replaced something else inside the box. Therefore, staying inside the box your not really safe._
> 
> Most stuff that has been inside the box was first outside the box. So it replaced something else inside the box (lots of times it is replacing another theory that has been forgotten or less peruasive). Therefore, staying inside the box you are not really safe (because, 99% of what is in the box you depend on is going to be replaced). (There are theories outside the box, that are extremely far away from the box, that bring in lots of money with almost zero work, while inside the box you have 50% chance of bringing in the money, or it takes so long it is funnier to watch paint dry). Outside the box you get ridiculed beyond reason, such as Reagan. Many people who figure out if a theory is true or false never say, because they will be mocked and scoffed for years, and they don't want to take that kind of abuse, plus you have to write some mile long paper, or few will read it. (Don't put your faith in something that has 99% chance of being replaced, which is maybe everything in the box.) Some people think outside the box, but they are so close to the box it hardly counts as outside the box.
> 
> ...


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## 16412 (Apr 1, 2005)

In the past one way to sorta figure out something people would go to another field like perhaps forestry. I believe it is called cross over ..... 

The question is, Where does money go?" If you would try the cross over method you might think of a forest fire. Good standing timber is reduced to smoke (which is gone with the wind), ashes (when it rains next you might get some potash), and timber laying down that most became in the fire to brittle to use (can't cut it with a saw, much more pound nails into it). If money = timber, then it is gone. Nobody else took it. The trees didn't run across the lake. They vanished.


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## 16412 (Apr 1, 2005)

So, you are saying, Duh! Everybody knows that!?

Your right.


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## fenway (May 2, 2006)

In my local paper yesterday:

_When is the money lost?_

*Dear Dave,
*
*If you invest in the stock market, and the market goes down, what happens to the money? Is it lost?
*
*Danny*

Dear Danny,

This is a great question! So many people misunderstand how investments work when the market declines. No actual money disappears. What goes away is value!

Think about it this way. What happens when you buy a car for $25,000 and its value drops to $15,000? There's no actual money involved. It's not like you took bills out of your wallet and threw them away, although it may seem like it when you first roll off the showroom floor. You bought an item for $25,000, and now, after time has passed, it's not worth $25,000 anymore. It works the same way with stocks. If you bought a company's stock at $50 and the price of it drops to $40, that $10 didn't go anywhere. It's just lost in terms of market value, or what someone else will pay you for it. Make sense?

So many people believe we operate with a fixed-pie economy. They think money is gone forever if it leaves one place, but this is a faulty premise, because it can just as easily go to another place. My good friend, Rabbi Daniel Lapin, has a wonderful explanation for how this works. He calls it a comparison of cake versus candles. If you slice a cake and give yourself a bigger piece, there's less for me. But money isn't like the cake, it's like the candles! If you light a candle and use it to light other candles, no candle is diminished. There is even more light!

Communists and socialists believe money is like a cake, and if you get some, there's less left for me. But if you understand and believe that money is more like the candles, then you're probably a capitalist. In capitalism, it doesn't mean you lose just because I win; it can just as easily mean that we both win. Once you get adjusted to this kind of thinking, the marketplace isn't nearly as scary!

*- Dave*

from https://www.davesays.org/index.cfm?FuseAction=dspContent&intContentId=12298


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## Nerev (Apr 25, 2009)

What Dave should have finished off on is that money is only realized, gain or loss, when you sell. If you put money in the stock market, and the market goes down, nothing beyond the valuation of your money has gone down. If you sell for less than what you put in than, the value becomes real and you lose money.


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## ksinc (May 30, 2005)

Money is like a cake. Wealth is not like a cake. Why take advice from someone who can't differentiate the two?


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