Quote:
Originally Posted by mastertop101
I'm looking for a book that would help me answer the following questions:
a) Suppose that the whole market cap of the stock market is 100 trillion. Suppose that tomorrow, everyone tries to sell and the stock market collapses and is worth almost nothing after a 10 trillion worth was sold. How does this affect the world? How does this affect the purchasing power of people?
b) Suppose I have 1 billion dollars. I decide to withdraw it from my investments and burn it. How does this affect the world? Does this hurt the economy in any way? If so, when would it recover from it? I understand that 1 billion is nothing, but just think of it as a theoretical problem.
c) What would happen if the debt levels continue to increase up to a level where people barely have any disposable income anymore? Is this state even possible? Why not? What would happen? In a way, if people keep working as hard or harder, the world can't possibly get less rich (in terms of amount of physical goods, etc...)
tl;dr: I don't understand how money works. Looking for a book(s) that would help me understand such issues better
Don't know about any books for you but I can answer.
A.People's purchasing power would be destroyed. All of their retirement / college savings would be gone. They would spend much less because they lost their safety net. No telling what the government would do. It would crush corporations. They would all default, and shut down, being unable to issue stock or get debt. It also would never happen though. It's extremely unrealistic unless the world is literally ending anyway.
B. Burning money just increases the value of all of the other money of that currency.
C. There would be a depression. That state is possible given the right circumstances. The world can absolutely get less rich. The world gets less rich every time a natural disaster strikes. Other causes would be wars and government intrusion on a mass scale (read the US suddenly converts straight to soviet style communism.)