Liquidity

So the economy keeps going in the toilet.  I've not gotten a straight answer from any show I've seen about why assets keep being devalued while prices of goods keep going up.  It is a mystery.

However, I've gotten the feeling lately that it's related to 20somethings in a room playing a video game.  I believe moving stocks from one portfolio to another is just another form of Tetris to these kids.  Really.  It's easy to do with the click of a mouse, and often you can win the game by increasing your score.  Sometimes of course you lose.  Oh well, you can start over the next day.

And of course you can.  And if no one really needs the monopoly money you are playing with, that's fine.  Because in the game and on the screen and even on your statement, it's not real money.  It's a representation of money.  It's a Platonic ideal of money.  Until the owner wants to take it out of the game.

This is called liquidity.  People need the money to be money.  Not an ideal of money, but the real thing.  None of the entities who have these Tetris games have all the money to cover the ideal money.  And, as in Monopoly, if all the money is removed from the game, the game is over.  This is called a run on the bank.  It's when everyone cashes in, makes liquid, at once.  And it is likely to happen when assets become devalued.  Other sources of money are needed if the price of the house won't cover a loss.  Non-liquid assets must become liquid.

And ultimately, the need for liquidity is caused by someone else's greed.  Oil profits jump out of sight.  People need to cover the unexpected outlay.  More money goes out of the game.  Eventually assets are devalued.  Even the assets of the people who started it.  So it bites everybody in the butt eventually.

At least this seems to be the answer.  I'm a little scared by the powerlessness of "the experts" and people in control of the game.  They don't seem to know how to stop it. Or don't want to.  I don't know.  It is a mystery.  But it ought to be a crime for it to hurt all the people who aren't even in the game.  I'm fine with someone's 5 million dollar house falling to 4.75, but I'm not ok with someone's 60,000 dollar house falling to 40,000 when they are carrying a 45,000 dollar mortgage.

Maybe solving the mystery might be in order here.  Ya think?