We always here about how the top 10% or 20% has such a large percentage of the money. What do they do with this money. If the available money exceeds the viable investment market where does the money go? Do prices on investment just keep going up to accommodate this extra money?
The top x% has a majority of the wealth. Most of that wealth is in the form of real things: land, buildings, ships, airplanes, factories, farms, etc. Often, the ownership is abstracted through a corporation, so a wealthy person doesn’t literally own ships and airplanes, they own a percentage of a corporation that owns those thing and uses them as part of the business.
They’ve also got some money sitting around in various bank accounts, but most of their wealth isn’t in the form of money per se.
If the supply of money goes up but the supply of actual things people want doesn’t, you get inflation, and the price of things goes up.
To a certain extent, yes, the investments get more expensive just to soak up the available money. Look, for instance, at the stupid investments made by venture capitalists. They ran up the value of Theranos to nine billion (with $400 million invested) before the Wall Street Journal reported that their proprietary technology didn’t actually work. Or Juicero, which raised $120 million for a home machine to squeeze packs of chopped fruits and vegetables to obtain a cup of juice. Or that Tesla’s valuation exceeded that of the Ford Motor Company and last I heard was approaching that of General Motors, despite producing much fewer cars. In short, many of these Silicon Valley companies have valuations that exceed any reasonable measure.
On the other hand, though, Apple’s valuation is over 700 billion, which sounds crazy, but they do have over 200 billion in cash, and the PE ratio is under that of the S&P 500. And Warren Buffett, who generally only invests when he thinks a company is cheap and never really bought technology stocks, recently invested in Apple (about $18 billion). So some tech stock valuations aren’t insane.
A lot of that money is in the stock market, and isn’t “real” money until it’s withdrawn. Many of the well-known billionaires are, in a sense, billionaires only on paper. If you pay attention to the Forbes 400 lists, you’ll see that the rankings tend to vary somewhat based on how the stock of certain companies has performed in the previous year.
This isn’t quite the same thing, but it’s an example of how that general principle can play out.