Hi Jay- I wouldn't be so fast in saying the money came out of thin air. If you mean that when a stock loses value, the money goes to money heaven, that wouldn't apply to money spent to buy bonds, which is how J6P's great-grandfather loaned money to Great Britain, France, Germany, Latin America, etc., from 1914-1928. The money didn't come from the US government, and it didn't come from banks, it came from individual investors buying bonds. Despite what you read about "easy money" policies during the 1920's, a big chunk of that money came from J6P's great-grandparent's savings accounts.
Same thing now, I think. Most of the money that individual investors have in the stock market is in retirement accounts, which are a form of savings. Many on this thread argue that people cashed out the equity in their homes to buy stocks. Yet, the so-called "real estate bubble" was non-existent during most of the 1990's. In fact, there was a real estate crash in the early 1990's. Real estate prices didn't turn around here until 1999 - so if people were cashing out home equity to buy stocks before 1999, they were using real equity, not thin air. |
