re: #387 oaktree

It’s all electronic nickels until you cash it out and compare to what you paid to get the security. And then compare that amount to the value change of the money due to inflation and other factors. And, if you’re real picky, what would have happened if you had invested in something else (or even nothing) instead.

It’s complex gambling on the economy - that’s all.

But it is real in very serious ways. A financial institution (bank, insurance company, etc…) lives or dies on how much equity it has: assets over liabilities. When their asset values sharply decline, the institution’s equity drops very quickly.

If the institution is using leverage to boost yields (and have therefore borrowed to make investments), then the shrinking of asset values can cause margin calls, which cause asset selling, which causes further asset value declines. The next thing you know, you have banks, insurance companies, hedge funds and the like that are insolvent: they have more liabilities than assets. That has real life consequences well beyond paper losses.