Where did the money actually go? Are these small startups or individuals that have gone bankrupt that totalled this amount ?
In: Economics
The pretend value assigned to the shares by what people were prepared to pay for them (often in complete disregard for how much profit the company makes, etc.) dropped. Thus though the value was lost (i.e. if you had $1000 of shares, they’re now worth $0), the value was basically made-up in the first place anyway. It’s like a designer name going out of fashion and no longer being worth the $10,000 you paid for their handbag.
There are instances of tiny companies in the world that were valued at more than the worth of their ENTIRE GLOBAL INDUSTRY including all their centuries-old competitors despite never having made a product or a profit. At that point, someone, somewhere was willing to pay people that amount to get hold of their shares in that company… but they weren’t actually “worth” that amount.
Losses in the stock market are almost entirely made up of the PURPORTED value of companies suddenly dropping – hence “panic in the market” and so on. A billion-dollar company can be worth nothing tomorrow because of such things… something happens, everything holding the shares thinks they are about to lose money, so they sell off the shares. Other people see that, panic also, do the same, and before you know it the shares are worthless and nobody wants to take them off your hands for any price.
Share values are like art values. Someone tells you that a painting is “worth” $3m. Is it? Is it really? Why? The answer almost always is “because someone once paid $3m for it”. Or more likely “A painting like that sold for $2m recently but experts didn’t consider it ‘as good’ as this one”. It’s a made-up number. But real money changes hand, real losses happen, and there is SUPPOSED to be a real basis on those numbers (e.g. profit, company perception, the future of that particular company, or that particular market, hedging bets that THEY will be the first company to get a spaceship to Mars, and so on).
Fact is those trillions were made up. They didn’t really exist. They weren’t based on reality at all. But around the globe people did actually lose those trillions. In the same way that rare painting might be “worth” millions… until someone discovers it’s a fake, or it not really by that artist (but is a legitimate painting), or that it’s suddenly NOT the first Picasso that showed off his new style of art because another one was discovered, etc. So someone probably did pay millions for it. And now it’s not worth millions any more. The money didn’t “go” anywhere. The guy who owns the painting bought it decades ago, and that money is long gone already. But the supposed value of what he is now holding has become worthless. So he’s “millions” out of pocket. But nothing, actually, has changed.
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