Reply #20: I have one quibble with something you say. [View All]

[JVS]

"Money does not disappear. It has to go somewhere; what is lost is always found. Most all of us have spent the last several years losing money hand over fist, while Forbes tells us that the richest among us have increased their wealth by vast amounts in one year."

Actually money can and does disappear. In fact, the very trigger for this economic crisis was that the property bubble popped, which meant that a lot of the money people were spending and investing with suddenly had nothing behind it. This caused the banks (who were heavily invested in it), and the insurance companies (who by backing credit default swaps were also invested in real-estate) to lose tremendous quantities of money. (Technically speaking they lost the value of the assets which permitted them to use money backed by the assets' value, for a microcosmic view of this consider the person whose home was valued at $100K and has now had it sink to $50K and is no longer able to borrow $100K against the title) Where did it go? It disappeared just the same as a dozen eggs do when you drop them.

What happened in the crises was that money disappeared to such a degree that the banks were no longer solvent and instead of lending they needed to recapitalize. This is why lending nearly stopped. The banks didn't have money to lend and instead just became debt collectors.

Now here's where things get interesting. Although the crisis affected many rich and powerful people, the rich and powerful are able to make sure that they don't lose. They are able to get the federal government to bail them out. They run the businesses, hire and fire, set pay, and basically make all the most important decisions within the economy to their own benefit. Have you ever been waiting for a flight that got cancelled and seen the rush of people to ticket counters or onto smart phones so that they can book something before the rest of the crowd does? What we are experiencing now is the aftermath of a massive loss of money within the system and the resulting scramble to to make sure that those losses are someone else's problems, to make sure that the long waits for a flight to the destination are other people's waits. And it is the rich who have the best phones, the fastest legs, and the best level of service from the airline. It's no different in the economy. This is the war.