yes this is part of what i want a compelling narrative about! is most of the "money" tied up in stocks or bonds or even more arcane financial instruments? how does fractional reserve banking and fiat currency tie into it? etc etc
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what does it mean for money to be tied up? after all, you don't "tie up" money in a stock: you buy the stock from someone, who now has the money instead of you, for example
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yeah so this sort of shit confuses me a lot. i have the impression that it's common to count stocks as part of e.g. net worth but like... what's up with that? lemme see if i can articulate my confusion about this more precisely
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so, suppose i tried to tally up the net worth of every single person, whatever that would mean, and in addition to their liquid cash and bank accounts also included the value of their stocks, bonds, property, other stuff like that. aren't i... double-counting in a sense?
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like setting aside fractional reserve banking, in order for the stocks, bonds, property etc. to turn into liquid cash they have to be sold, which means someone has to buy them, but it's impossible for everyone to liquidate everything because someone has to own it
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yes, of course. but that's irrelevant to the question of net worth, since we're not doing that
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so... what does net worth actually *mean* then? i have a similar confusion when people say things like "bitcoin is worth X dollars total" based on multiplying the total number of bitcoins by the current market price of bitcoin which doesn't make any sense to me
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it means you could sell it for that much
*you* could. we're not talking about *everyone* selling it for that much. just you
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we are using the approximation that you selling it would not affect the going market price
in complex cases, "net worth" can be misleading, e.g. if you owned enough bitcoin, it could be the case that trying to sell it would crater the market price.
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an example is when people say "this asteroid has 13 quadrillion dollars worth of metals on it". this is obviously nonsense from any meaningful perspective; what they actually mean is "the metals would be far more than humanity could possibly need, or anyone could possibly buy"
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okay so it's basically a linear extrapolation. welp. that's fairly unsatisfying. maybe the better question is to ask what people use these sorts of numbers to do
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in 99% of cases the linear extrapolation is fine, so it's what people use for accounting
e.g. what are the assets of a person or company worth?
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net worth seems to be largely a dick comparison game
i guess with companies it also factors in like “fundamentals” for stock trading but that also feels kinda woo-ish
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It becomes an extremely significant number when the state takes a wealth tax, which is an annual tax obligation as a percentage of net worth. Corporations often have to pay tax on the net increase of their net worth, but household wealth taxes are rare.
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