Remember I am an old lady without too many gray cells and too few synaps going on in my head, : LUSENET : TimeBomb 2000 (Y2000) : One Thread

but will someone explain this to me. There are billions of dollars in stocks. When the bubble bursts, where does all that money go? I give the market $10 and it just disappears in thin air with regards to paper value. But where is the $10? It has to be in circulation someplace? Taz..who ain't too bright at times!

-- Taz (, February 04, 2000


Hum! I've wondered about this one too. Where did it go?????

-- suzy (, February 04, 2000.

I read somewhere that only 3% of what we call "money" is folding green, the rest is all digital......jim

-- Jim Sharp (, February 04, 2000.

Whoever got your money probably just bought more stock with both you and they are then SOL (so outta luck). A key thing to remember is that you still own the asset (stock), but now it is worth less...which makes it a poor investment. But we buy lots of stuff, such as cars, that will usually be worth less later on...

What really suffers is our net worth...assuming that we have any assets. There is also the consideration that because they have money (on paper) they will buy/consume more. This helps the economy. However, if (or when) there is a decline in the market value of the security, they may feel that they have less...and will consume less.

-- Mad Monk (, February 04, 2000.

Taz, when Wall Street crashes, we will witness the greatest destruction of paper wealth in history! Dr. Ravi Batra said it will go to "money heaven". No chance for reincarnation. Complete earthly demise. Can you say *POOF*?

-- dinosaur (, February 04, 2000.

It is new money. It basically consists of sand(silicon[chip]}. Remember what happened to the guy who built his house on the sand? And that rich man who had them overstuffed barns and sat back with his legs up? The term 'house of (pc)cards' comes to mind.

-- Kyle (, February 04, 2000.

damn that}...))))))))

-- Kyle (, February 04, 2000.

Yeah...and where does the electricity go when nothing is plugged in?

Taz, the simple answer is that all tangible assets are artificially tied to a monetary value. This is what frees modern culture from trading beans for silicon chips, for example: money is just a way of bookkeeping. That's why people complain when the dollar is not tied directly to a tangible asset such as gold--there is no ultimate "standard" for how much a dollar is worth; it is a giant contest of competing interests, fought mostly on paper. When real disaster strikes (the BIG METEOR, e.g.) currency standards revert back to life necessities such as beans, water, clothing and shelter. You may recall after WWII some European currencies required sacks of money to buy food.

When you put 10$ into a stock, the money goes to pay expenses of running the company, buying equipment, land, paying salaries, and so on. If the stock goes up in value, until you sell the stock, you only have a paper profit. If you sell the stock when it's high, you spend the money wherever you like. If the stock goes down, the books of the company will reflect that lost value--less cash on hand; more debt; lower paychecks; fewer employees; whatever. Too much of a bad thing and she goes belly-up--everthing tangible is converted to money, and this is distributed (usually) according to some bizarre scheme.

"When the bubble bursts", all that money will mostly go to:

1. A reduction in net worth of stockholders ( I was worth a million when I bought the stock; I was worth ten million when it went up; now I'm worth a million again. If I had sold when it was ten million, I could have bought something else but I was hoping it would go to fifteen million...)

2. Short-sellers (but that's another story)...

-- I'mSo (, February 04, 2000.

Right, the money is theoretical, not actual. You do own the shares. however. The shares don't vanish, just their make-believe value.

I'mSo, now you're schmoozing, huh?

-- Mara (, February 04, 2000.


I always thought too much "grey matter" would be a GOOD thing. :)


-- Someone (, February 04, 2000.


the money does not vanish, it does not go towards expenses of the company, it goes to the person who sold you the stock.

After you buy stock you own a part of the corporation (a very small part) and after you sell the stock you will receive (as valued by the market) the dollar value of that portion of the corporation that has issued the stock.


-- robert menger (, February 04, 2000.

It's like a pyramid scam. People who are buying stock in, for example, are buying nothing but hot air. They are buying a promise of future profit from a bunch of greedy con men who got their shares at bottom dollar and are now sitting at the top of the pyramid. But these fools who are buying Amazon now at very high prices don't know enough about the Internet to know that just about anyone can start a "" business and compete with them, which is already happening. Mr. CEO has promised, once again, that they will start to make money this year, but he knows damn well they are going to be devoured by other hungry pirahnas on the Net. He doesn't care because he can sell his shares anytime and still make 5000% profit on his investment. I can't believe people are stupid enough to fall for this racket, they might as well buy snake oil.

-- Hawk (flyin@high.again), February 04, 2000.

"After you buy stock you own a part of the corporation (a very small part) and after you sell the stock you will receive (as valued by the market) the dollar value of that portion of the corporation that has issued the stock."

Just make sure you get the dollar value in beans or gold or something. Toilet paper with 'dead presidents' printed on it must be pretty rough, I imagine. I think my substantial stack of WSJs will be much gentler when I run out of the real thing.

-- Kyle (, February 04, 2000.

Hawk, ROFLMAO!!!...thanks for making my nightly chuckle!

-- Kyle (, February 04, 2000.


So you take a bag a beans when you go grocery shopping?

gallon of milk loaf of bread 1lb ground beef

that will be 15 lbs of beans, sir!


-- robert menger (, February 04, 2000.

Yes Kyle, it is funny how people can be so stupid, but hopefully you understand that this time I wasn't kidding. This "new economy" is a joke and is taking us into very dangerous territory. New technology is making it possible for people to invest in ideas and things that don't exist, rather than proven productivity. You don't get something for nothing. A lot of people are going to lose, and it will mostly be those who can't afford to. The only thing this new economy is going to do is create a much wider gap between the rich and poor, and make the World a far more dangerous place than it already is.

-- Hawk (flyin@high.again), February 04, 2000.

Hawk, I was not at all laughing about your post or you. It was so dead on that I couldn't help but laugh at the way you put it. I am mostly serious but I appreciate dry wit and try to make a stab at it myself....and as usual the other guy doesn't know I am winking. I did laugh, Hawk. Not at you; I guess, at the bizarrity(is that a word?) of the situation. I hope you understand that the way you put it made me laugh in the midst of desparation. Thanks, Kyle.

-- Kyle (, February 04, 2000.


I think that your 10$ go to the company that issued the stock if it is a company that starts its activities or if the company issues additional stocks on the market in order to get fresh money to invest; otherwise your $ go to the person who sold the stock to you exactly like the $ will go to you once you will sell the stock. I think the danger lies there because there is "sometimes" a complete disconnection between the market value of the company and its actual value due to its activities.

-- Ben (, February 04, 2000.

Understood Kyle, no offense taken. Most people on this forum are sharp enough to see what is happening, and there are others who will blindly laugh it off, but I didn't really think you were. I do have a tendency to use dry wit, but I am often misunderstood too. I have very ominous feelings about this bizarre phenomenon which has been occurring, being sold as a new type of booming economy. In the end it will turn out to have been a boom for few, but bad news for most. Good luck to you through the strange times ahead! :-)

-- Hawk (flyin@high.again), February 05, 2000.

Hawk, I try to laugh while looking into the maw. It is hard, but still I manage. You and others help me to laugh while I am crying on the inside.

-- Kyle (, February 05, 2000.

Hawk, would you like to play Hearts sometime? It is fun and I forget for awhile. Forget politics. No one makes a difference except for evil. I am trying to sit it out and learn how to be a pro at Hearts.

-- Kyle (, February 05, 2000.


Must not have seen my last ten posts if you think I'm schmoozing.

There is nothing (except jealousy on our parts) that makes the overvaluations particularly different from past excesses. Remember gold when it went off standard? Land in Florida? Oil in the '70's?

-- ImSo (, February 05, 2000.

"There is nothing (except jealousy on our parts) that makes the overvaluations particularly different from past excesses. Remember gold when it went off standard? Land in Florida? Oil in the '70's?"

I disagree with that. Gold, Oil, and Land are real commodities that have withstood the test of time and proven their value. Investing in dot.coms on the other hand, is sheer speculation about something that has only come into existence within the last 5 years or so, and has yet to be proven to have any real tangible value. I'll take a hunk of land over faith in a website any day.

Kyle, perhaps another time, thank you. I can't remember the last time I played Hearts, and I certainly wouldn't provide much of a challenge. :-)

-- Hawk (flyin@high.again), February 05, 2000.

Hawk, is my memory failing me, or did gold top out over $700 about 20 years ago. And what would the net return/loss be for the guy who bought it then at the high, adjusted for today's dollar?

-- ImSo (, February 05, 2000.

IMSo...Gold topped out at over $800. Thats when I still had some working gray matter. I bought in at $165/oz and sold it all at $804/oz. Then when it dropped to $536/oz, I bought in again. Sigh...that was many years ago and it has yet to hit my costs and though it makes a nice little nest egg to look at, none of it has hatched in 20 years!!! But I still sit on it. Taz

-- Taz (, February 05, 2000.

Hey, isn't all this imaginary money what they mean when they say we have a 'fractional reserve'? If I understand correctly, an example would be that for every $100 of paper or electronic money in circulation, there's about $5 worth of gold to back it up? Isn't this why everyone thought the bugs would destroy the economy by botching up the electronic records of everyone's electronic holdings?

-- Arewyn (, February 05, 2000.

Hey Taz--

You answered your own question. When you bought gold at 536 and held it, it was no different than buying a stock--just a different instrument to keep the books. Where did your $200/oz or so go from that price to the current price? Until you actually cash out an investment, you only have "unrealized" gains or losses.

The only money that "gets into circulation" is profit actually taken. When you bought at 165 and sold at 800, the difference went into circulation. Had you never sold, all that would have changed is your net worth. When you bought at 536, that money went to profit for the seller, middlemen, and mining companies, because that transaction was cashed out for the seller. Same thing with stocks.

-- I'mSo (, February 05, 2000.


While I'm on a roll, here, I doubt there is 5$ worth of gold in the treasury of the US for every $100 in paper currency. But the gold standard is an antiquated notion. The true cost of gold is the cost of mining it (say, $250 an ounce, or so) plus some reasonable profit (say 10-50%). The rest of the price at a given time is just supply, demand, and free market manipulation, like any other commodity. It really has historical cultural value, and there is nothing else about it that makes it a particular candidate to tie currency to. Might as well tie currency to platinum or corn. As a matter of fact, when TEOTWAWKI hits, corn will be a more valuable currency than gold, for sure.

-- Imso (, February 05, 2000.

Hawk --

Thanks for your above posts. You echo our sentiments exactly concerning the ".COMs." When the "Bubble" breaks, there are going to be a lot of unhappy campers.

-- Lurkess (Lurkess@Lurking.XNet), February 05, 2000.

Arewyn- Fractional Reserve System referrs to how much of the "cash" in your checking/savings account the bank is required to have on hand. (Now it is about .17 for every dollar if I recall correctly) which means that they can lend out the other 83 cents to generate more money. But let's NOT start the fiat Money Fractional Reserve stuff. htere is a LOT more in the archives.


-- Chuck, a night driver (, February 06, 2000.

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