"Unspendable Wealth" (Molly Jong-Fast)

[jmbar2]

Fellow economics geeks: I've been pondering this concept for awhile, but didn't have a term for it.

Do any economic/monetary theories address what happens when wealth reaches extremes such as Musk? Assuming that unspendable wealth wants to be "put to work" somewhere, generating interest or further returns, where does it go? Does it eventually reach a point where it sucks all the money out of the system?

Or do central banks keep creating new money to pay interest on unspendable wealth?

Link to tweet

[bucolic_frolic]

1. Yeah it becomes the Monetary God account

King of the Hill

[markodochartaigh]

2. Somewhat along these lines...

I think that a big problem for the cryptobros is putting their millions and billions into the real economy before their bubble pops. Under Trump they have made massive headway, but still the bulk of their assets are locked into a form of "money" which is not readily liquid in the real world.

[dickthegrouch]

3. Think about all those Swiss accounts belonging to long-dead people

I would hope they all had succession plans, but the reality is probably that many didn't.

I suspect the bank is using that money to prop up its loan portfolios. Declaring the money to be the bank's assets rather than those of the actual, or putative, owners.

In theory that's they way new loans are made anyways. Assets the bank has on deposit are used as collateral for loans. I also assume the bank's expectation of having to give it back is significantly less for an account that's been dormant for 50+ years.

Of course, these days, much of it is so highly leveraged that the whole house of cards can come crashing down with the slightest unexpected provocation.

Risk management, just like many other sciences in the US, is becoming a dying art. (irony intended).

[markodochartaigh]

4. These days risk management is not done on the banks' ledgers,

it is done in the halls of Congress.

Much cheaper and more effective to buy Congress members than accountants.

[Hugin]

5. For them to cash out two things would have to happen...

They would have to be willing to take a discount. Which they are extremely unlikely to do. Their entire ego is based on having the most and their claims on what the most that they have is worth.

Secondly, assuming that they were willing to take less than the face value of their assets. A greater fool would have to be found who believes that they could buy the discounted assets and recover their money plus a return on the investment. Also, not likely.

I believe that this is why they are commandeering governments. They think it’s a route to finding a greater fool to buy their assets. The problem encountered is that governments really don’t have the kind of money to buy their crapto. Especially western governments who generally operate on a balanced ledger. That kind of money only exists in the coffers of sovereign wealth or religious centers which have been collecting assets for hundreds or thousands of years.

They have over leveraged zero.