It vice versa where’s it coming from when the economy is booming?
When the economy is bad, it feels like there’s not enough money to go around, but when it’s good there’s plenty.
In: Economics
Money can “disappear” during a recession when real goods like houses and oil or virtual-but-valuable things (like contracts, debt, stocks, crypto-currency, personal data about consumers etc) are wildly overvalued and the market suddenly “corrects” and tries to assign a more accurate value. You bought something for $100 and suddenly it’s worth just $20. The “missing” $80 was just a guess as to how much your stuff was worth. The actual dollar bills kept moving and being spent.
This can be a big problem if you need a loan to keep your business going. Last year banks were happy to loan you money because your stuff was worth $100 and you could use that as collateral, now it’s only worth $20 they won’t loan you anything. You still need to pay back your loans from last year AND you don’t have the money you need to keep your business running AND sales are down because everyone is suddenly in the same situation and doesn’t have extra money to spend.
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