I know this is a simplistic way of looking at it, but if there’s a whole lot of people losing money, then there’s gotta be a whole lot of people making money.
Who are they? What professions are they in?
The people selling books teaching people how to save money. 
This isn’t true. An economy is not a zero-sum game - there is no law of conservation of wealth. A recession is when the GDP shrinks, which means there is less money/wealth to be divided among the world’s people. Even when someone’s wealth increases during a recession, it isn’t generally necessary for others to lose money for this to happen.
Yeah I’m aware of that, that’s why I said I was speaking simplistically. In recession, assets devalue, and money doesn’t move around as freely and voluminously as it does during times of economic prosperity, meaning most sectors experience a drop in overall revenue.
But the cash that’s out there still has to be in somebody’s hands. Whose?
Probably investors that were pessimistic about the economy (which proved to be realistic) and speculated for a downturn of the economy (for instance put options)
The cash doesn’t have to be in anyone’s hands. Say someone is worth 12 million bucks. He has 2 million in the bank, and 10 million in general motors stock. When general motors stock goes to 0, he only has 2 million bucks, and NOBODY has the 10 million he lost.
That’s what happened, except it wasn’t just one stock. The whole goddamned stock market lost about 50% of its value. The market as a whole is worth less than before. Money is not some magical thing that has value itself. It’s only one convenient tool people use to trade, and it’s more useful in the abstract than it is in the literal. There are much fewer actual dollars in circulation than all of the wealth represented in dollar terms, giving a whole lot of wiggle room for stuff to grow and shrink in value without any hard money going from one place to another.
I believe you have a point, in terms of real wealth, with the exception of productivity.
In a recession people are less likely to invest and buy stuff, which means that productivity goes down and unemployment goes up, therefore fewer goods and services are being produced, therefore everyone has fewer goods and services on average, and …
therefore…
everyone is poorer.
The investors who make money in any market are those who correctly predict the future. In a boom, the folks who realize asset X is going to go up before other people notice will make money. In the beginning of a bust, the people who correctly predict that will make money. During the down trend, there is plenty of turbulence, adn the folks who predict that well can make money on the peaks and valleys.
Traditionally, the real money is made when seriouly distressed sellers have to sell what are normally valuable assets for pennies on the dollar. Somebody with the money and the guts to buy will reap quite the reward as the economy picks up and the assets return to more normal values. These could be financial assets, or hard assets like factories and brands and people.
The challenge nowadays is the woolrd has been on a debt-fuelled binge for 20+ years. Anybody younger than age about 45 has no clue what “normal” looks like and there will be a lot of people buying assets early at too high a price. Or people expecting a V-shaped recovery to 2007 = normal and buying way too soon.
I think today is pretty close to the new normal in terms of total economic activity. And at this level, most financial assets, and a lot of houses, have another 50% to fall before they reach “normal” prices.
If Bill Gates was nominally worth $100 billion at one time and he’s now nominally worth $50 billion, he’s still the richest guy around. Note the “nominally.” That’s because as everybody keeps saying the value of stocks owned changes over time and value is created or destroyed out of thin air.
So the value is still 99% in the same hands as before. They just have less of it. The other 1% can be bankrupted by an industry tanking or simple fraud, and a tiny handful can gain money by guessing correctly, but most of the money goes nowhere.
That said, there are investors who are, if not making money, trying to gather wealth, as I would be if I could get my hands on the cash. Thy are looking at devalued assets of others and snapping them up at bargain prices. Then, when/if things get better, they can sell those assets or just profit from them.
Very little of the “money” in the economy is actual cash, and almost every investor is going to lose money in a crash regardless of whether they’re selling.
You don’t make money in a market crash, unless you get very lucky selling short. You make money right after a crash the Warren Buffet way - correctly predicting the point where the market begins to rebound, and starting to buy right then. Then you hold your new stock for a really long time, and since you bought it at or near an all-time low, you aren’t going to give a shit if the market drops a couple of hundred points on any given day since you’re almost guaranteed to make money over time.
This is quite true. However, it is equally true at every moment, even at the top of a bubble. It’s just part of capitalism. There may be more opportunity in recessions, but the transfer of wealth is no different. That’s primarily because the people in a recession with the money to snap up these bargain assets are the same ones who had money before the recession hit. They’re never you. 
This company is doing pretty well - it said last week annual net income more than tripled and sales gained 29%. Having said that, the company gets more than three-quarters of revenue from administering corporate bankruptcies …
This is true. Ever since leaving the gold/silver standard, the world (especially the U.S & Eurozone) has relied on fiat currency – which means, essentially, the cash in your wallet has no “real” value beyond the paper it’s printed on, and the wealth in your bank statement/stock portfolio/money market account/etc. is even more ephemeral. The only reason wealth and currency have any value at all is because people believe it has value – as long as people retain confidence in their money’s value, the economy rolls forward.
During an economic crash, or severe recession, the consumer’s confidence gets shaken. That’s what made the global financial near-collapse last year so dangerous – all that money invested in mortgage-based securities and other supposedly “safe” funds practically evaporated overnight. We’re talking trillions of dollars here, merely going “poof!” The U.S. economy was shaken to its very core, and could have completely collapsed the way Zimbabwe or Ireland or Greece did. However, it did not, and we’re left with a very severe recession instead – but it could’ve been worse.
So…who makes a killing when economic times are tough? The people who are smart enough to see it coming, that’s who! Wells Fargo Bank looks like one of the players who will come out on top (mainly because they avoided the MBS mess in the first place) and Warren Buffett ain’t doing too badly, either. My own grandma had millions invested in General Motors until she was advised to sell everything two years ago – at a time when others were encouraged to invest even more. It’s all comes down to who knows how to play the Economic Game, really – some are gifted at it, some make conservative and wise decisions, and some just get plain lucky.
The shifts you see in a recession are not shifts of cash. As others have pointed out, cash value can disappear without any offsetting gains.
The shifts, rather, are based on changes in consumer preferences. For example, Dollar General is reporting 30% increases in sales between this year’s first quarter and last year’s. Wal-Mart and McDonald’s are also thriving. These are all money-saving options and generally fall into the category of “inferior goods” - which is to say that consumers prefer other options when they can afford them, not that the goods themselves are of low quality.
The repo industry is doing well, too. So are bankruptcy lawyers.
Changes in the dollar’s value are helping many US manufacturers and US exports in general, as products are now relatively cheaper than they were before. The expansion of the potential market seems to be offsetting the fact that the rest of the world is mostly in a recession too.
Yupp, Repo Men.
Just watched the show Inside: Repo Men last night. He was saying how repos were up by 10%, and due to be up another 10% the following year. I’m not sure when the show was recorded, though, so those figures could actually be worse (or better, if you’re a Repo).
Currency had value on the gold standard only because everybody agreed it did so. The difference between then and now is purely imaginary. Confidence was the value of currency at all times.
Buffett had his worst year ever and issued an apology to his stockholders.
Of course, as with Bill Gates, half of everything is still everything.
Buffett did poorly by his standards, but rather well by everyone else’s. He outperformed all three US indices, and Berkshire Hathaway still turned a fairly tidy profit.
Repo Men, Bankruptcy Lawyers and Speculators who accurately predict recessions before they arrive. Some good answers there.
Thanks everyone.
First let me say that I’m new here, and you guys have one of the best groups of people who post on your board that I’ve ever seen.
Now for the topic. I own a small computer shop and over the past several months we’ve seen unsustainable growth. I feel it has to do with people repairing their computer equipment rather than buying new stuff. I’m not getting rich by any means (yet) but I’m a very happy camper. =)
Now if the commercial real estate prices would drop I’d be even happier so I can get a new place and grow some more. It’s time for more techs, more room, and more inventory.
My recent observations,
Xaidin