Stock market value evaporation.


B

BIG BEN

All these stocks on the Worlds stock markets, loosing tens of Billions of
Pounds.
All over in Japan. the US, Germany all over the place.

WHERE does all this money go. Does it go somewhere?.

Just evaporates into thin air!.

AS if it wasn't there at all.

Put your money in a nice building soc account.
A nice variable rate one to cash in on the national 5% base interest rate
we'll have within 6 months.
a good 0.5% increase.
Forget houses as an investment too.

Instant access 5.10% like the Coventry "first" account. they promise 0.6%
above the base rate for 12 months. Quids in!.

Why risk it.

I was going to get £40,000 of BT shares a while back when they were at 400+
They soon went down to 250. With calls for chairman to be hung.

We are in for a bumpy ride.
 
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N

neil

WHERE does all this money go. Does it go somewhere?.

Errr...., maybe into the accounts of those who can sell out at the
right time, and buy back cheaply later....
 
J

Jonathan Bryce

BIG said:
All these stocks on the Worlds stock markets, loosing tens of Billions of
Pounds.
All over in Japan. the US, Germany all over the place.

WHERE does all this money go. Does it go somewhere?.
It goes to the people who sold their shares before the crash.
 
T

The Truth

All these stocks on the Worlds stock markets, loosing tens of Billions of
Pounds.
All over in Japan. the US, Germany all over the place.

WHERE does all this money go. Does it go somewhere?.

Just evaporates into thin air!.
All this liquidity was created out of nothing,
and it returns to being nothing.

No doubt, booms and busts such as this helps transfer wealth /
tangible-assets
to those that had advance warning, or did enough research.

...
Instant access 5.10% like the Coventry "first" account. they promise 0.6%
above the base rate for 12 months. Quids in!.

Why risk it.
There is risk in any financial decision.

Having your wealth tied up in cash in a bank-account is far from zero-risk.

Do you honestly believe inflation is 2%?

If inflation is 10% and they're paying 5%.
Your losing 5% of your wealth a year.
 
T

Troy Steadman

The said:
Very good. You deserve some sort of maths prize.
Tim doesn't do ordinary maths.

If 100 pounds will be worth 90 pounds next year, but meanwhile it earns
5 pounds which will be worth 4.50, you will be (10-4.5)=5.5 worse off -
5.5%
 
T

Tim

Tim doesn't do ordinary maths.

If 100 pounds will be worth 90 pounds next year,
but meanwhile it earns 5 pounds which will be worth
4.50, you will be (10-4.5)=5.5 worse off - 5.5%
If you're trying to say that 90 pounds 'now' will buy the
same as 100 pounds will next year, then that would be
11.1% inflation. But the OP said "if inflation is 10%"...
 
M

Martin

Troy Steadman said:
Tim doesn't do ordinary maths.

If 100 pounds will be worth 90 pounds next year, but meanwhile it earns
5 pounds which will be worth 4.50, you will be (10-4.5)=5.5 worse off -
5.5%
10% inflation means your 100 pounds will be worth 90.909...% of the new
selling price ( i.e.100 div 110 )

With interest, you'll have 105 div 110 - so you're 4.5454...% short.

Of course, if you register for VATin the meantime, you'll be loads better
off :))))
 
J

jameshamilton777

You guys seem to be fairly expert to these kinds of numbers, but even
youse are getting different answers. What hope do the general public
have of grasping these concepts!!??
 
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D

Daytona

Do you honestly believe inflation is 2%?
Lets see comprehensive details of how the ONS has got the calculations
wrong then.

It's your word against theirs at the moment and I value theirs
significantly more than I value yours.

Daytona
 
V

Virgils Ghost

<
Instant access 5.10% like the Coventry "first" account. they promise 0.6%
above the base rate for 12 months. Quids in!.

Why risk it.
Because inflation slowly but surely erodes the real value of your money,
it's like boiling a frog. Growth of broad money supply in the UK is running
in the region of 13% annualised according to the latest M4 data from the
Bank of England. So even allowing for growth in GDP and your 5.10% (gross!)
the value of your money has eroded by 6% over the past year, in terms of
purchasing power for housing or gold, its value has eroded even further.

Money is a medium of exchange and a rather poor store of value over the
longterm, your savings are quite simply inflated away "into thin air" as
they keep pouring water into the whiskey bottle.
 
A

Andy Pandy

Daytona said:
Lets see comprehensive details of how the ONS has got the calculations
wrong then.

It's your word against theirs at the moment and I value theirs
significantly more than I value yours.
Which figure though? RPI is 3%. I take no notice of the CPI because it excludes most
housing costs (not just mortgage costs like RPIX), which makes it a pretty useless
measure.
 
A

Andy Pandy

Virgils Ghost said:
Because inflation slowly but surely erodes the real value of your money,
it's like boiling a frog. Growth of broad money supply in the UK is running
in the region of 13% annualised according to the latest M4 data from the
Bank of England. So even allowing for growth in GDP and your 5.10% (gross!)
the value of your money has eroded by 6% over the past year,
The value relative to what? The value relative to the "basket of goods" used in RPI
calculations has eroded 3%. The fact that there is more money than there was doesn't
mean the value of money has eroded in the exact same proportion.
in terms of
purchasing power for housing or gold, its value has eroded even further.
And in terms of purchasing power of telecom services, computers, DVD recorders etc
the value of money has appreciated over the last year.
Money is a medium of exchange and a rather poor store of value over the
longterm, your savings are quite simply inflated away "into thin air" as
they keep pouring water into the whiskey bottle.
And the value of the bottle varies with other factors, not just the concentration.
 
V

Virgils Ghost

Andy Pandy said:
And in terms of purchasing power of telecom services, computers, DVD
recorders etc
the value of money has appreciated over the last year.
Be careful not to confuse basic progress and economies of scale with
monetary deflation.

<
And the value of the bottle varies with other factors, not just the
concentration.
We can print money but we cannot print commodities like oil, all that extra
liquidity chasing a constrained supply has an effect.

You cannot just dismiss the effects of run away growth in broad money.
 
V

Virgils Ghost

Steve Firth said:
Of course if one is in debt, that's good news.
Well quite, but our friend Big Ben is on the flipside, his savings are
backing the fractional reserve for all those loans.
 
A

Andy Pandy

Virgils Ghost said:
Be careful not to confuse basic progress and economies of scale with
monetary deflation.
The point is that basic progress, plus other factors, counteract some of the effect
of the money supply increasing.
We can print money but we cannot print commodities like oil, all that extra
liquidity chasing a constrained supply has an effect.
Of course it has an effect. But it's not the only effect.

Your implication was that the money supply increasing results in a corresponding
decrease in the value of money. That logic would say that as we have more houses than
10 years ago, the value of houses must have fallen since 1996!

Obviously supply is a factor, but it's not the only factor. The only sensible way to
measure the value of money is to compare it to the value of other things. Which is
what the various measures of inflation like the RPI do.
 
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T

The Truth

Do you honestly believe inflation is 2%?
Lets see comprehensive details of how the ONS has got the calculations
wrong then.

It's your word against theirs at the moment and I value theirs
significantly more than I value yours.
lol
 

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