Originally posted by Metal BrainThe real estate and credit bubbles burst, which has resultated in - among other things - a huge fall in the stock market and a finansial crisis. Since the wealth really wasn't stabil in the bubble, and hence not a long term solution, the markets have to return to their intrinsic values. Normally bubbles bursting are refered to as destroying wealth, since a lot of people lose wealth and no one gains it.
Some people say that the stock market crash is destruction of wealth. I think it is transfer of wealth because nothing tangible was destroyed.
Am I right, or did I overlook something?
Originally posted by quackquackDoes it? If you buy low and sell high that is not necessarily creation of wealth. Just as buying high and selling low that is not destruction of wealth, it just means you bought overvalued stock.
A transfer of wealth means the money goes to someone else. It is generally considered destruction of wealth because the entire sum total of wealth decreases.
Originally posted by LundosSomeone does gain it. They gain wealth by selling overvalued stock when they bought it at a lower price. They gain wealth from the sucker that bought the overvalued stock shares from them. That is how some people profit from bubbles.
The real estate and credit bubbles burst, which has resultated in - among other things - a huge fall in the stock market and a finansial crisis. Since the wealth really wasn't stabil in the bubble, and hence not a long term solution, the markets have to return to their intrinsic values. Normally bubbles bursting are refered to as destroying wealth, since a lot of people lose wealth and no one gains it.
People buy overvalued stock because they are not aware of the bubble. Nobody would buy the stock if they knew it was overvalued.
Originally posted by KazetNagorraIt is a pretty standard definition of a destruction of unrealized wealth. For example, if a house was worth $1M and now it is worth $600,000. It is probably more accurate to say you lost $400,000 of value than to say you lost nothing because you still have the house.
It's not a destruction of wealth, at least not directly, since you need to reduce the amount and/or quality of the goods (material and non-material) available to reduce wealth.
Originally posted by quackquackYes, but that doesn't mean society as a whole got poorer.
It is a pretty standard definition of a destruction of unrealized wealth. For example, if a house was worth $1M and now it is worth $600,000. It is probably more accurate to say you lost $400,000 of value than to say you lost nothing because you still have the house.
Originally posted by Metal BrainNothing has been transferred. Certain pieces of paper can now be traded for a lesser number of other pieces of paper.
Some people say that the stock market crash is destruction of wealth. I think it is transfer of wealth because nothing tangible was destroyed.
Am I right, or did I overlook something?
Originally posted by KellyJayThe dollar doesn't have now and never did have any intrinsic value. Its value relative to other currencies is currently rising because of the worldwide recession. http://useconomy.about.com/od/tradepolicy/p/Dollar_Value.htm
Before it is all said and done, do you think the dollar will remain
something that has value?
Kelly