How Money Disappears During Economic Downtimes
When there is a recession, billions and trillions of dollars disappears from the market, thousands of people lose their jobs, and people lose all their fortune but one thing that you might want to ask is where is the money going to?
Since there is no one burning trillions of dollars or disposing it into a pit or canal, where are all the money being spent going to moreover, the government prints more money during recessions so the question remains, where are all the money going to?
One thing I have learned is that before there is a recession, money that people think is actually going into the market and the economy is actually not going so when there is a recession, the money was actually not there. Money is the price we give to something depending on the value we give and during recession, people lose confidence. At this point, people will be willing to pay less for everything because those who are selling are forced to sell.
Because the money in the economy is perceived money, the money starts to move very slowly during a recession. The money that changes hand in the economy drops drastically during this time and this is because the money in the economy begins to sit in accounts or savings. People want to store the value they have at this point and they almost neglect the purpose of being used as a medium of exchange.
This slows down the economy, slowing down opportunity, progress and growth in the economy because everyone is waiting for the economy to recover. During this time, a lot of money just stay unmoved because people do not want to make big purchases, businesses delay investments, and in bonds for the sake of stability.
During recession, inflation is very high and inflation burns money very fast so even when the money is still in the bank it lost its value. Asides from inflation taking the money away, another place the money go is to buyers. The money goes to them at a discounted price and this is because in a recession, people panic sell the market causing the price of assets being held to drop as there are a lot of people selling leading the money to go to the buyers at a discount price.
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