Where does all money and wealth go in the recession?
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Wealth is very fluid. The values of everything constantly fluctuates, including how much a dollar is worth. During a recession when markets crash, wealth on “paper” can simply vanish. If I own $1000 in stocks, and the value drops by 50%, and then sell, my wealth has dropped by 50%. But somebody else bought those shares, and if they hold and it rebounds they gain a lot. If I just held those shares until they rebounded, then I didn’t lose anything(no including inflation to sinplify this).
Takpeople often think of their wealth as how many dollars can I sell this or that for, but it really isn’t that simple. That metric only really matters when it comes time to sell an asset, so you can use those dollars for some other product or service.
That is why we have paper gains and realized gains. Paper gains are what you could sell for, while Realized is what you have sold for to get currency.
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