- Marin County
One thing that I've been thinking about lately (with the background of a pretty crazy stock market and massive government stimulus) is what will happen if/when there is a large (>40%) stock market crash. What happens in any stock market crash? Isn't it essentially a redistribution of wealth from the people who didn't get out in time to the people who cashed in at the peak? While valuations are destroyed, valuations only exist on paper...the cash that went into the system is preserved, is it not? So if a few people come out of the stock market mania with enormous wealth, while most probably lose than what happens to the broader economy? Too many dollars chasing too few products results in inflation. That's a common refrain. But can many many dollars exist that do not chase products/services? I doubt many billionaires hold much of their cash in savings accounts...but if they did, doesn't that effectively remote it from the system? As wealth inequality continues to soar is liquidity and money velocity decreasing? If it is, that would lead me to believe that inflation won't happen.