Who got all the money lost in the 1920's stock crash in America? It must have gone somewhere!?
Investors put their money into stocks which crashed and broke the American economy in the 20's, who were the gainers from this crash..where did the money go?
Answers:
Alot of the money was imaginary. Company values were over inflated. The same thing basically happened when the Internet Tech bubble burst.
Imagine this. Someone tells you a company is worth a lot of money. So you say--buy 1 share of stock for $100. The company in reality isn't making money from it's operations. It is bringing in money through its sale of stock. So as long as this continues, they can pay their bills, employees, etc.
But in time--people find out. When earnings reports keep being released that show no earnings, people get nervous and start selling their stock. The company has to pay them back--probably well less than $100 though. And since no one is buying stock in this company anymore, the company can't continue. What money it has left has to be paid to it's employees and the people it owes money to.
This is a very simplified example, but hopefully gives you a basic idea.
its gone to the same guy who got all the pennies when the money became decimolised when one pound had 140 pennies - where did all the other 140 penny chews go? ;-)
You're a genius. You've probably uncovered a conspiracy theory.
it went- this is why it is cripplng for a country.hard to imagine- but it went.
This is actually a better question than it looks like.
(Same thing happened to a lesser extent in the dot-com crash and in many other speculative crashes throughout history..)
Think it through.
Some poor guy bought 1000 shares of zzz.com for $500 each.
He was "sure" they were worth it, and could only get more valuable.
Now - he's already paid the $500,000 to someone (since someone else owned those shares and decided that $500 each was a great price to sell at).
No one has lost any money.
Suddenly - no one wants to buy zzz.com for $800 per share, or $500 per share, or even $5 per share.
The stock is worthless.
So, you could say that this last guy "lost" $800,000 or $500,000 or some other amount.
But - The money didn't vanish - that $500,000 went to someone else. However, the guy left holding zzz.com now has something that he expected was valuable but is now worthless..
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Answers:
Alot of the money was imaginary. Company values were over inflated. The same thing basically happened when the Internet Tech bubble burst.
Imagine this. Someone tells you a company is worth a lot of money. So you say--buy 1 share of stock for $100. The company in reality isn't making money from it's operations. It is bringing in money through its sale of stock. So as long as this continues, they can pay their bills, employees, etc.
But in time--people find out. When earnings reports keep being released that show no earnings, people get nervous and start selling their stock. The company has to pay them back--probably well less than $100 though. And since no one is buying stock in this company anymore, the company can't continue. What money it has left has to be paid to it's employees and the people it owes money to.
This is a very simplified example, but hopefully gives you a basic idea.
its gone to the same guy who got all the pennies when the money became decimolised when one pound had 140 pennies - where did all the other 140 penny chews go? ;-)
You're a genius. You've probably uncovered a conspiracy theory.
it went- this is why it is cripplng for a country.hard to imagine- but it went.
This is actually a better question than it looks like.
(Same thing happened to a lesser extent in the dot-com crash and in many other speculative crashes throughout history..)
Think it through.
Some poor guy bought 1000 shares of zzz.com for $500 each.
He was "sure" they were worth it, and could only get more valuable.
Now - he's already paid the $500,000 to someone (since someone else owned those shares and decided that $500 each was a great price to sell at).
No one has lost any money.
Suddenly - no one wants to buy zzz.com for $800 per share, or $500 per share, or even $5 per share.
The stock is worthless.
So, you could say that this last guy "lost" $800,000 or $500,000 or some other amount.
But - The money didn't vanish - that $500,000 went to someone else. However, the guy left holding zzz.com now has something that he expected was valuable but is now worthless..
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