Where's all the money

[biggles330d]

What's happening right now is pretty scary. I'm actually more worried by the financial and economic fall out long term than the virus itself which will, eventually, run its course. It will involve many more deaths for sure, but it will either run out of people to infect or an effective anti-virus cure will be developed.

But what's happening now with the markets in free fall, the Government prepared to spend whatever it takes and the steady toppling of cards from demand falling away, businesses running out of money, supply side impacts potentially starting to happen as people stay home it did make me ask the obvious question... where is the actual money? If customers don't have it, business doesn't have it, banks don't have it and Governments creating it... is this current crisis exposing that 'economic activity' creates the illusion of wealth but in fact we're all just passing around the same hypothetical tenner? When the music stops, as it has, someone finds they are holding it and everyone else realises that there was only ever one tenner.

Company value and share prices are just an illusion. A perception of worth. When it comes to it, a company sitting on no stock, no assets, no cash and no customers as many 'asset light' businesses are, are actually near worthless. In the olden days, when companies tended to own their buildings or land, or were digging stuff out of the ground, that was actual, tangible worth. Today's economy is proving to be largely vapourware. When it comes to it, now the st is properly hitting the fan, it doesn't matter how big your company balls are or impressive you profitability or grand your headquarters are. It's been demonstrated that within just a few weeks, unless you happen to be sitting on a lot of actual cash in the bank, the only lifeline is for the Government to create money to keep things on life support. Magic money borrowed on the never never from the future.

I hope I'm wrong, but it's looking a lot like that to me.
Its making real the old adage, Turnover is vanity, profit is sanity but cash is king.

[Simpo Two]

I'm inclined to agree. You could argue that anything above the gold standard is pretend money. A banknote is an IOU.

Edited by Simpo Two on Thursday 19th March 21:02

[bogie]

Surely the value of gold is just a man made illusion too ? If we go back to basics its just about human labour, making and growing things. The value we attribute to "things" exists in our minds, we may as well use matchsticks so long as we agree that a matchstick is worth 2 loaves of bread

[anonymous-user]

biggles330d said:

In the olden days, when companies tended to own their buildings or land, or were digging stuff out of the ground, that was actual, tangible worth. Today's economy is proving to be largely vapourware. .

, I could create more wealth with an amazon cloud server than a field of coal. So it has value to me, and my employees.

[Dr Jekyll]

Sambucket said:

biggles330d said:

In the olden days, when companies tended to own their buildings or land, or were digging stuff out of the ground, that was actual, tangible worth. Today's economy is proving to be largely vapourware. .

, I could create more wealth with an amazon cloud server than a field of coal. So it has value to me, and my employees.

+1

I've never understood this idea that if you move coal a few hundred feet vertically or rearrange some raw material into a manufactured product you are creating wealth, but if you rearrange some data into a more useful form you aren't.

If the value of a company is the land it holds, then what's the point of the company? Why not do something else with the land? The value of the company is what it does, the value it adds, not the assets it uses.

[Simpo Two]

Sambucket said:

, I could create more wealth with an amazon cloud server than a field of coal. So it has value to me, and my employees.

That's good to hear - could you just create what my investments have lost and send 'em over? I'll give you 10% for your troubles, so you can't lose.

[anonymous-user]

Simpo Two said:

That's good to hear - could you just create what my investments have lost and send 'em over? I'll give you 10% for your troubles, so you can't lose.

Guessing you have the ftse or similar - oil gas and fags?

[CSLM3CSL]

I spend my spare cash on holidays, going to pubs and restaurants and going to football matches. At the moment I am staying at home and can't do any of those things. When there are millions of people in my position this has a huge impact on the economy.

[Behemoth]

bogie said:

Surely the value of gold is just a man made illusion too ? If we go back to basics its just about human labour, making and growing things. The value we attribute to "things" exists in our minds, we may as well use matchsticks so long as we agree that a matchstick is worth 2 loaves of bread

Absolutely spot on. The value of things are mostly to do with proving that work was expended to produce them. Matchsticks are a bit too easy to make, but check out the island of Yap and its Rai stones - they are pretty much a real world version of your matchstick analogy.

[BlackG7R]

bogie said:

Surely the value of gold is just a man made illusion too ? If we go back to basics its just about human labour, making and growing things. The value we attribute to "things" exists in our minds, we may as well use matchsticks so long as we agree that a matchstick is worth 2 loaves of bread

A company, or your labour produces wealth like a dynamo produces electricity, gold stores that wealth for use at a later date, like a battery stores the electricity. If you don't have a method of storage, it tends to just evaporate. That's how I view it anyway.

Edited by BlackG7R on Friday 20th March 00:11

[Hungrymc]

BlackG7R said:

A company, or your labour produces wealth like a dynamo produces electricity, gold stores that wealth for use at a later date, like a battery stores the electricity. If you don't have a method of storage, it tends to just evaporate. That's how I view it anyway.

Edited by BlackG7R on Friday 20th March 00:11

But the gold only stores wealth because we say it does?

I think that's part of the point being made.

[grumbledoak]

You can't print gold, or land. And you can't eat money.

[Benbay001]

fesuvious said:

Think super long term, think what existed and was available and logical to attribute value to 500 years ago, and you likely have an indication of what will store value going forwards.

Horses.

[anonymous-user]

How do we generally store records of who owns gold or land?

[biggles330d]

BlackG7R said:

bogie said:

Surely the value of gold is just a man made illusion too ? If we go back to basics its just about human labour, making and growing things. The value we attribute to "things" exists in our minds, we may as well use matchsticks so long as we agree that a matchstick is worth 2 loaves of bread

A company, or your labour produces wealth like a dynamo produces electricity, gold stores that wealth for use at a later date, like a battery stores the electricity. If you don't have a method of storage, it tends to just evaporate. That's how I view it anyway.

Edited by BlackG7R on Friday 20th March 00:11

I tend to agree with this description. When the dynamo starts up again I think people might have to readjust their perception of what their labours are worth, when their customers have needs but little ability to pay. It'll take some time for the dynamo to get up to speed again. I don't think we can expect that incomes will immediately return to pre-virus levels but I'm certain there will be many who will assume they will.

[Behemoth]

Benbay001 said:

fesuvious said:

Think super long term, think what existed and was available and logical to attribute value to 500 years ago, and you likely have an indication of what will store value going forwards.

Horses.

I don't have a link to hand but it's the cow that has more consistent purchasing power than anything else over thousands of years of history. More stable value than gold. It's worth much the same today as it did in the middle ages and in ancient civilization. Pretty crap store of value though.

[Hungrymc]

Sambucket said:

How do we generally store records of who owns gold or land?

And what happens in times of massive disruption when someone comes along and decides to tax or redistribute etc.

[robinessex]

fesuvious said:

Gold lasts forever.
It doesn't tarnish.

Fiat currency, can be destroyed.
Cloud servers can be turned off.

Think super long term, think what existed and was available and logical to attribute value to 500 years ago, and you likely have an indication of what will store value going forwards.

We, here now are a moment in time. Right now economically we're about to reap the reckoning we postponed @12-15 years ago. We're deep in the st.

Everybody values what they do. Inc me. I'm under no illusion however that the 'wealth' is in the land owned. Everything else only has a wealth or value if it's in demand or use.

Land, (like precious metals) has been a store of value for a very long time. It may rise, it may fall. It cannot be removed, superceded, or made obselete. It isn't subject to fad, fashion or desire over a long term.

Land & precious metals will exist after war, famine, or disease.

I'm not doing down what anybody has said. The lon term picture I paint sees us all long since dead and buried!!!

Gold isn't a precious metal, it just has a notational value. It has useful properties, it doesn't tarnish, it is very malleable. and a good electrical conductor. There are more 'expensive' metals out there. What about diamonds? Just bloody carbon, only practical use is the they're very hard, and make good cutting tools !! Try getting an economist to explain where 'money' comes from.

[Dr Jekyll]

Hungrymc said:

But the gold only stores wealth because we say it does?

I think that's part of the point being made.

+1

When the Spanish found plenty of gold in South America they thought 'We use gold as money, now we have lots of money, we're all rich.' Unfortunately the rest of the economy didn't produce more real wealth to match, so they just had an inflation problem.

As PJ O Rourke said, it was as if they'd robbed a bank and stolen a pile of paying in slips.

[anonymous-user]

Behemoth said:

The value of things are mostly to do with proving that work was expended to produce them. Matchsticks are a bit too easy to make, but check out the island of Yap and its Rai stones - they are pretty much a real world version of your matchstick analogy.

Some things that originally involved work plummet in value when they go out of fashion.

It's "fashion" that ascribes the value, not the work itself.

Sometimes things start out needing a lot of work and become fashionable because they are useful or attractive but hard to make. If they later become easier to make the value is likely to plummet.

Some things get value from fad and fashion whilst lacking any real substance. They tend to evaporate into thin air when everyone finally recognises they've been kidding themselves and the Emperor isn't actually wearing any clothes.