I appreciate your opinion, and fully agree in so far as "wealth" is concerned. Certainly with stock market declines, wealth has been destroyed. No argument there.
I was talking about dollars, not wealth. There is a difference. In that regard, the markets can not extinguished more dollars than go into them.
Example:
If I sell a 1 dollar stock for 10 dollars, I have ten dollars.
If that buyer at 10 dollars holds as the prices goes to zero, I still have the 10 dollars that that trade represented. In the meantime, the company is busted. If you extend the same concept across the market, you can see that all the original dollars invested remain someplace, either in sellers hands, or in some combination with the remaining value of the equities.
As far as most instances of debt are concerned, again they are paper dreams created quite often out of thin air. In those cases, the most of these dollars were never "real" in the first place. Look at the effect of fractional reserve banking, for instance. Note that 100 real/fiat dollars invested can pyramid into something like 500 dollars in banking assets - i.e., wealth (100 dollars + 400 dollars in loans), yet only the first 100 dollar deposit exists to support the total indicated wealth of 500 dollars. The paper wealth can be destroyed, but that first hundred dollars remains in existence. So, the failure to repay debt may destroy wealth, but the "real" dollars behind it remain someplace with someone somewhere.
Again, dollars can't be destroyed, only the added paper wealth they may at times represent. |
