Wall Street is sifting through the aftermath of the biggest single-firm meltdown since the financial crisis. Mr. Hwang alone lost approximately $8 billion in 10 days, a person familiar with the matter said, in what traders and investors say was one of the fastest losses of such a large sum they had ever seen.
The firm’s implosion has rippled through the financial world, eroding tens of billions of dollars from the shares of media conglomerates and investment banks.
Gregory Zuckerman, Juliet Chung, and Maureen Farrell
April 1, 2021
[I”m reminded of Understanding Complexity by Scott E. Page and similar content in RIckards’ books The Death of Money: The Coming Collapse of the International Monetary System and The New Great Depression: Winners and Losers in a Post-Pandemic World
The hidden interconnectedness of entities, the unpredictable tipping points,the emergent behavior, etc. The fragility of a critical component of all modern human society could be exposed and shattered in less than a week.
I doubt that this event is “the big one” but it reminds us there could be, and probably is, such a big one hidden in the non-linear, mostly opaque, complex, world financial system. And it probably is just a matter of time before the system implodes.—Joe]
Perhaps, but the effect has to some how go all the way to the top and hurt.So far it’s like a tree falling in a forest when no one is around.
The problem with this kind of logic is that since the Fed has the ability to create money it can easily indemnify investors and make them whole. And it’s not just investors. They are already doing this with basic income via unemployment insurance and supplemental payments for workers based on losses of income calculated using previous year tax fillings.
Is it even possible to for Fed to be hurt beyond recovery? As with all thinking of this kind the question is not what will happen if events are just extrapolated, it is what will happen given the reactions.
Mr. Hwang lost 8 billion in 10 days. But money doesn’t evaporate. It goes somewhere else. Mr. Hwang’s account got drained, only to fill someone else’s.
Crashes occur because people are in a position to be stolen from by others.
Money is an exchange medium. Financial systems are a way for lazy people to steal from the productive. Not always. But as we have seen time and again. A little good is being used to justify the most horrid of crimes.
Sometimes the money goes into someone else’s pocket. Sometimes not. If you buy a hundred shares of a $100 stock ($10k total) and then some bad news comes out about the company and the stock tanks to $20 a share, your investment is now only worth $2k. None of that appeared in anyone else’s pocket, unless they made a bet that it would fall using either selling short or buying a put.
Sometimes paper wealth can just evaporate.
And when I put out the 10k for the stock. Where did it go? I gave it to the company for stock and they put it where?
Obviously not into making the company more profitable. Cause my stock is only worth 2k now.
Did the other 8k go to hookers and booze? Or did the CEO invest it with a hedge fund that used it for hookers and booze? Then went Tango Uniform like Bernie Maddoff, who did so by spending it on?
When you lose. Somebody, somewhere, gets a payday.
isaac asimov once remarked, “nothing succeeds like success, and nothing fails like success.” or, put another way, what goes up, must come down. it is inevitable.
I’ve always thought that the game of “musical chairs” is a good description of the stock of any company. Sooner or later, the value will drop significantly, leaving people without a landing spot.
The current economy is built MOSTLY on intangibles. NOT on actual productivity and physical goods. Such an economy is mostly digital, not existing in the physical world. As such it’s possible to make LOTS of money in a very short time frame. But all things must balance out….in an economy where you can become a billionaire in a matter of weeks you can LOSE billions of dollars just as fast….or