How to destroy money

When a market crashes, we often hear about large sums being “destroyed”.

Is this the whole story?

No, it is not. These sums are value. Not money. No money was destroyed, only value. Money changed hands.*

And as we speak, those sly investors who sold early are out in search of the next lucrative deal.

So how is money destroyed?
Answer: when a loan is repaid!
Money is created through debt, and destroyed upon repayment.

It may seem totally crazy at first. That’s because money creation itself is counter-intuitive. Let me help out any newcomers with another metaphor. Remember Sauron? (The Lord of the Rings) – The Ring could only be destroyed in Mordor, Mount Doom, in the fire that forged it. There’s your money-destruction!

See also How banks destroy money on our main site.

* “The money isn’t gone, it’s elsewhere.” (Volker Pispers)

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