If you smash your machines, you destroy real capital.
If you burn your money, the financial capital doesn't just go away. It's effectively reallocated to everyone else via deflation. That's why "destroying capital" isn't a good way to describe it.
If you destroy half the machines in the world, evenly distributed, the economy crumbles. If you destroy half the dollars in the world, evenly distributed, nothing really happens.
And back to this case, the VC money wasn't burned at all. It went to paychecks and service providers and customers and scammers. It didn't disappear, it moved.
You’re conflating the money supply with money. The inherent value of the money supply is constant. That’s why you could halve it uniformly without impacting much. But that also necessarily means that each unit of currency does in fact have value. So if you invest it in scams, you can call that destroying wealth.
Also worth nothing that we’re not really talking about money. We’re talking about equity in companies with the statement that billions of capital was destroyed by investing in BlockFi.
Capital can mean money. It was mentioned elsewhere in this thread, but Google "capital definition"
> wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing.
There is even a bank called "Capital One." Originally, Capital One's only product was credit cards, i.e. providing monetary loans. It feels like this entire thread has been arguing about what people "feel" capital should be. In the case of BlockFi, capital has very much been destroyed. Company equity going to 0 is the ultimate capital destruction.
The status was destroyed, the assets were not destroyed.
Take my last post and replace the word "capital" with "money", and I would say that version is just as true.
You can destroy money, but that's a totally different topic. The money that was invested in this exchange didn't get destroyed. It went to other people.
Remember that the original post wasn't talking about 'wealth'. You can't come in and say "capital=money=wealth, and investor wealth was destroyed, therefore investor capital was destroyed". That's like saying "nothing is better than happiness, and a sandwich is better than nothing, so a sandwich is better than happiness". The meaning of "nothing" changes halfway through, like the meaning of "wealth" changes halfway through.
Whether "capital" includes or excludes "money" is a distraction that doesn't really matter.
It matters, because if you aren't careful you'll jump to the wrong conclusion (such as thinking that capital was destroyed, when in fact no capital was destroyed at all). Resources can be bought with money. Someone who has money can be thought of having resources. However convenient this simplification may be, it's not true that money is itself a resource. And this is especially important to bear in mind when we're assessing the amount of resources in the economy (in order to figure out if any resources were in fact destroyed). Counting money as a resource is an accounting error known as double counting, which occurs when the same thing is counted twice.
If you burn your money, the financial capital doesn't just go away. It's effectively reallocated to everyone else via deflation. That's why "destroying capital" isn't a good way to describe it.
If you destroy half the machines in the world, evenly distributed, the economy crumbles. If you destroy half the dollars in the world, evenly distributed, nothing really happens.
And back to this case, the VC money wasn't burned at all. It went to paychecks and service providers and customers and scammers. It didn't disappear, it moved.