Where did all the money go?

sir_peanuts SG

just very curious due to my limited finance knowledge.

in this economic crisis, even people like warren buffet and steve jobs have their fortunes fractioned. almost everyone in the billionare list lost half their fortune or something.

where did all this money go then? when money is lost it has to go somewhere right, can't be into thin air.

(in the 1997 asian economic crisis, it was said that the rothschilds family was secretly gaining in wealth in a frighteningly huge scale from whatever the others lost)

Rednano SG

lost due to paper value...

their wealth are locked in shares in the companies they invested in the stock market...

Worldlybusinessman SG

Economy investment and banking are all about money flow and whose hands it ends up. Its a fight to win this money. In the chain of events, some are dishonest and try to manipulate the situation so that the money hands up in their hands.

it is all a game.

SGBelair SG

In simple terms:

1)People started buying houses

2)House prices went up

3)More people rush in to buy houses

4)People started speculating

5)Many profited from speculation of properties

6)Profits went into stocks, consumer goods, more houses, cars, driving prices and salaries up => inflation

7)In order to produce the cars, consumers goods houses, capital investment needed => more factories => more machinery => employment

8)Multiplier effect

9)Banks became lax in lending, rising property prices allows houses to be re-mortgaged and extra cash spent again

10)Go back to (1)

This cycle went on many times leading to a giangantic bubble.

So where did the money go? Into everyone's pocket! Look around, the 3rd world/developing countries got food and basic necessities from the boom. Citizens of the developed ones brought themselves LCD TV, luxury goods.

Wealth was "created" out of the housing bubble, but it was not sustainable.

seyKai SG

was there any money to lose?

so how do u lose money wen u have no money?

Worldlybusinessman SG

was there any money to lose?

so how do u lose money wen u have no money?

keep it simle. best thing is to keep yr money and spend on material items in conjunction with market prices.

Invest in housing, car, education, These are assets which will stay and u are using them in everyday lives.

SGBelair SG

yep there was, remember the property prices kept going up, people re-mortgaged their houses and got money, borrowed money to spend, banks were booking in all the interest they earned from the mortgages....and we all knew what happened after that.

seyKai SG

you lost your borrowed money? more IOU?

so come to aday no 1 want your IOU and u collapse

AndrewPKYap SG

just very curious due to my limited finance knowledge.

in this economic crisis, even people like warren buffet and steve jobs have their fortunes fractioned. almost everyone in the billionare list lost half their fortune or something.

where did all this money go then? when money is lost it has to go somewhere right, can't be into thin air.

(in the 1997 asian economic crisis, it was said that the rothschilds family was secretly gaining in wealth in a frighteningly huge scale from whatever the others lost)

You are thinking in terms of the laws of physics... energy cannot be created or destroyed.

If energy can be created, where will it come from and if energy can be destroyed, where will it go to?

Money on the other hand is only a concept in people's heads.

For example, a piece of useless junk, people can call it a priceless antique can be assigned a value to it. It can be valued at a $100 million.

The one holding the junk/antique is worth $100 million

If the junk/antique is revalued at $200 million, the owner is worth $200 million

If the junk antique is valued at $0 from $200 million, then the owner has lost $200 million.

What he has lost is the value of his junk/antique (or stocks and shares or propety...a nd so on and so forth) ... the value and thus, his worth.

tiera SG

keep it simle. best thing is to keep yr money and spend on material items in conjunction with market prices.

Invest in housing, car, education, These are assets which will stay and u are using them in everyday lives.

i think this is your first proper post. Congratz.

Takchek SG

http://themessthatgreenspanmade.blogspot.com/2009/01/where-did-all-money-go.html

The graphic makes it quite clear.

Snookerlover SG

soME body's pocketlor.

mancha SG

In the simplest of the simple terms.

The seller.

You buy an asset. You pay for that asset. Money goes to the seller. The asset goes to you.

Later when the price drops. The value of the asset you hold drops. But you still have the asset.

If you sell the asset at a lower price than you paid for it. You recover some of money. The difference between what you paid and what you recovered is the actual loss.

But if the price of the asset drops until it is worthless, you really lost the money you paid for it. Not only that, there is a possibility that you have to pay for any incidental cost that comes with being an owner of that asset. Therefore not only lost all your money, must pay some more.

The seller gets the money.

AndrewPKYap SG

In the simplest of the simple terms.

The seller.

You buy an asset. You pay for that asset. Money goes to the seller. The asset goes to you.

Later when the price drops. The value of the asset you hold drops. But you still have the asset.

If you sell the asset at a lower price than you paid for it. You recover some of money. The difference between what you paid and what you recovered is the actual loss.

The seller gets the money.

You buy at $1. The seller gets $1. The value goes up to $100. Your worth is $100.

So where did the $99 come from?

The value goes down to $40. You worth has dropped to $40. So where did the $60 go? The seller got only $1.

See how your logic failed?

mancha SG

PKYap, paper loss/gain need not be explained to you. You understand that concept better than most of us here.

maxtor SG

Let me try -

There is a ficitional stock market with only 1 stock trading. It's stock price is trading at $1 and 15 people buy at incremental amounts of $1. That is, Person 1 buys at $1, person 2 buys at $2, person 3 buys at $3 ... so on and so forth.

This would mean that the marginal investor ( the last person) who buys this stock would have bought the stock at $15. Assuming that there is 15 shares of this stock trading, the total value that 15 investors paid $120 in total. ($1 + $2 + $3 + $4 ..... + $15)

However, based on the last traded price, the stock is worth $15 and ALL investors have a paper gain (15 x $15). (with the exception of the last investor who has no gain)

This means that the total notional value of this stock is is 15 x 15 = $225.

However there is only $120 of real value in this stock. The remaining $105 is a notional, perceived value. ($225 - $120 = $105)

It is this $105 that is being wiped out from the market. In times of panic, more than $105 can be wiped out from the market due to a lack of demand and an oversupply.

AndrewPKYap SG

Let me try -

However, based on the last traded price, the stock is worth $15 and ALL investors have a paper gain (15 x $15). (with the exception of the last investor who has no gain)

This means that the total notional value of this stock is is 15 x 15 = $225.

However there is only $120 of real value in this stock. The remaining $105 is a notional, perceived value. ($225 - $120 = $105)

It is this $105 that is being wiped out from the market. In times of panic, more than $105 can be wiped out from the market due to a lack of demand and an oversupply.

Who says that the real value is $120? Is there such a thing as "real value"? Is the real value the value that is real today or real tomorrow? Is the real value the NTA of the stock? Is the realy value a PE of 10 or 11 or 12?

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Value (economics)

The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods which can be exchanged. From this analysis came the concepts value in use and value in exchange.

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angel7030 SG

to the outside world, i dun really know or care so much, cos my Uncle said, ignorances is blissful, i prefer to remain blissful, knowledge can be both good and bad, at times, knowing something is suffering.

To what i know, our money S$ near my place had all gone to PRC gals or other 3rd world nation gals. On behalf of them, i thanks Singapore Uncles and Ah peks for their generous contribution.

seyKai SG

angle - singapore uncles n ah pak banks are loaded so need to empty also they need to release otherwise if explode then got more problem

of coz i m referring to their sperm banks

angel7030 SG

angle - singapore uncles n ah pak banks are loaded so need to empty also they need to release otherwise if explode then got more problem

of coz i m referring to their sperm banks

sperm banks also dun accept uncles and ah pek ones,...anyway, singapore uncles and ah paks should conserve themselves for the better of family happiness and desendents better future.

Imagine they toll and sweated for their past years to build singapore and then just throw it away at geyland or my place coffeeshops it just too wasted.

Confucians family theory apply. If one is good, one family shall be good, when one family is good, very likely his town will be good, if his town is good, most likely his state will be good and if one state is good, the country will be good, and hopefully the world will be at peace and harmony.

So, the ideology here is first, Uncles must be good, take care of families.....and so on...if Uncles take care of prc gals and other gals with no thought or care for their families...then the nation will fall sooner or later.