Gladianton t1_j2cnilq wrote
They didn’t actually lose it. The more accurate way to say it is “the current market value of their assets decreased” by $400 billion. It’s called an unrealized loss.
If they sold their assets at the deflated vale it would become a realized loss.
ChickenEnthusiast OP t1_j2cnt7c wrote
That's a good phrase to keep in mind, current market value of assets decreasing. Thanks.
BurnOutBrighter6 t1_j2cq1ag wrote
Yes, this. It's like if you had a trading card and one day someone offered to buy it from you for $100. Nice! You don't sell though, maybe you'll get an even higher offer some later time.
The next day someone finds a whole sheet of that same card, and now the most anyone would pay for your card is $5. The value of your card has decreased by $95. In a sense, you lost $95 of value (because you could have sold it in the past for $100). But you didn't actually lose money. No cash has changed hands. It's just the agreed-upon worth of something that has changed.
That's what's happening when billionaires "lose millions". No money is changing hands, it's just the agreed-upon (aka "market") value of their assets changing.
ChickenEnthusiast OP t1_j2cqdyb wrote
So it's like we should stop talking about "the richest/wealthiest person" and start talking about "the person with the highest valued assets as dictated by the market", lol.
Is there ever a metric/list of the biggest hoarders of cash or gold in the world - something that is a bit more consistently and constantly valued with fewer fluctuations? Like a real-life Smaug? I always hear talk of Apple having ridiculous cash reserves, but never a particular person... maybe a sheikh or the Saudi king...
BurnOutBrighter6 t1_j2crbq1 wrote
>level 4ChickenEnthusiastOp · 4 min. agoSo it's like we should stop talking about "the richest/wealthiest person" and start talking about "the person with the highest valued assets
Exactly! For a recent example, see Bernard Arnault (owner of Louis Vuitton) passing Elon Musk this year for "world's richest" person - not because LV sold a bunch of merchandise, but because the things Elon owns became less valuable to potential buyers due to his damaging of them. In the earlier analogy it's like he dropped his own trading cards in the mud and "lost money" because their value decreased.
As for your second point, no I'm not aware of such a metric, but I agree that it would be useful and intriguing to see. Maybe someone else here can inform us. I imagine the problem would be where to draw the line re: "consistently valued". If gold is included, what about silver? Copper? Bonds? It could get complicated.
Economics_Troll t1_j2dq7qc wrote
Rich people (in general) rarely hold substantial sums of cash.
Cash gains you nothing, and actually loses value year to year due to inflation.
Even investing in bonds gets you 5% + annual returns right now, and if you're using leverage in new businesses you can see returns substantially above that with more risk.
This is where the "rich gets richer" theme comes from. If you've got $10 million, you can earn $500k per year (5% return) in a very low risk way. Once you have enough money, you can fund your lifestyle without touching your original money or working.
Toke_Ivo t1_j2cqy1u wrote
To add to this: Some people then say that it's not real money, and it's not like those billionaires actually have those money... But it's quite easy for them to sell they assets at some rate, like 100 million/month, if they wanted to.
So while it's not currently real money, that's like saying that you having money in your bank account is not currently real money. True, it's not, but it could easily be.
Goobadin t1_j2dc9n4 wrote
>So while it's not currently real money, that's like saying that you having money in your bank account is not currently real money. True, it's not, but it could easily be.
​
No, not at all. It's actually like saying the wages for your scheduled hours next week aren't real; it's only when you work those hours do you actually make that money.
Slammedtgs t1_j2djl58 wrote
It would only be a realized loss if they bought it for more than they sold it.
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