“The difference between assumed value and actual value is simply a faulty assumption, not the loss of real money”
But the bank loaned real money......and that money is not going to be repaid.
If I loan you $100k, and you repay me $50k we have more than just a faulty assumption at play. This is what is happening every day now. Real money disappearing.
I really did not think this was going to be that hard to communicate, but hey, I’m gonna keep trying....
The bank was not repaid money that was paid to the original seller. The bank’s former money is now the seller’s money. ALL of the original money is accounted for. It has just changed hands.
The bank bet that the asset’s value would cover their loss in case they had to foreclose and resell it. An assets value is not controlled by the bank, but is determined by what someone is willing to pay at the time of sale. If the bank decides to sell at a time that the value of the asset is less than what they “bought” it for, then this is a new transaction and it too is zero sum.
In the stock market, if a guy buys a stock for $50 and sells it for $30 does $20 disappear from the money supply? No, the original seller to the $50 buyer got the $20 difference.
Then I have the other $50k or gave it to someone else. You lose $50k, but someone else gets it. Zero sum game. My point exactly.