Burn it all!

[Adonis1x23]

If Bill Gates took all the money he has--aside from like a billion or two--and literally burned it, would the value of American Currency go up?

Like if he sold his company, withdrew all his investments and had a big, ol' pile of cash and straight up burned like 55 billion dollars(his net worth is 58 billion), would the value of an American dollar go up a small percentage?

Just out of curiosity.

[Thanatos 51-50]

I'm not sure economy works that way. From what I understand, more money in circulation increases the value of money. Everybody immediately starts hording their scratch when they hear the economy is starting to go into the toilet, though.

[skywalker]

If Bill Gates took all the money he has--aside from like a billion or two--and literally burned it, would the value of American Currency go up?

Like if he sold his company, withdrew all his investments and had a big, ol' pile of cash and straight up burned like 55 billion dollars(his net worth is 58 billion), would the value of an American dollar go up a small percentage?

Just out of curiosity.

Maybe a little bit. But the amount of paper in circulation really has nothing to do with the value of the currency. So he actually wouldn't really affect the "money supply" that much, because so much of the "money supply" isn't money, but bits (literally hunks of digital info) that can be turned into "money" on very short notice. Whereas there are about $800 billion in currency currently circulating, the US economy is on the scale of trillions. And $55 billion is only 5.5 percent of 1 trillion. When your economy is up there in the $14 trillions, well, he's not even a 10th of a percentage point.

EDIT:
I'm not sure economy works that way. From what I understand, more money in circulation increases the value of money. Everybody immediately starts hording their scratch when they hear the economy is starting to go into the toilet, though.

He actually wouldn't be putting any in circulation, because he would be burning it. And more money in circulation reduces the value of the money. Because it's not as rare. Just like more gold in the world would reduce the value of gold.

[Moonshadow]

Isn't that kinda like what the Big Bad of Die Hard 3 was doing, what with the whole stealing all the bullion from the National Reserve and pretending to blow it up? :smallbiggrin:

[thubby]

the US gdp is 14,204,322 million dollars.
if we assume he could liquidate his net worth in full (he couldn't), that's 55,000/14,000,000 that's ~.004%

in terms of dollar value that's noticeable but not disastrous. the real hit would come when his holdings were ripped to bits when everyone tried to buy it up.

[Crimmy]

As far as I understand, the value of money comes from the Gross Domestic Product. As such, burning his billions would do nothing, really. Now, if he invested in production of several kinds of things, that would affect the economy.

(Also, no, the more money on circulation, the less it's worth. Ask Germany if you don't believe me.)

[Syka]

Actually the value of money comes from supply/demand. How much of foreign goods/services/what have you that Americans want compared to how much of American goods/services/what have you that foreigners want.

Technically, I don't think Bill Gates would actually be doing anything to affect the supply of American money. It would change the physical supply, but the actual supply isn't so much based on the physical supply since that can be easily changed by the Treasury (or whatever).

Basically...I don't think it would have a large effect on the value of the dollar.

[skywalker]

Actually the value of money comes from supply/demand. How much of foreign goods/services/what have you that Americans want compared to how much of American goods/services/what have you that foreigners want.

Technically, I don't think Bill Gates would actually be doing anything to affect the supply of American money. It would change the physical supply, but the actual supply isn't so much based on the physical supply since that can be easily changed by the Treasury (or whatever).

Basically...I don't think it would have a large effect on the value of the dollar.

He wouldn't actually change the physical supply, because he would temporarily increase it, and then rapidly decrease it back down. What he would do is remove a (large to us, but) terribly small chunk of purchasing power from the economy. "The supply" does matter, but the supply actually incorporates so many other things besides actual hard currency. Hard circulating currency accounts for less than an 8th of the US money supply.

[Pyrian]

Burning it is almost irrelevant, interestingly enough, compared to stuffing it in a mattress or whatever. Collecting it would have an immediate effect, however. That effect, though, would be localized to the investments he sold off to get his value in cash - those investments would immediately decrease in value. If such a thing happens en masse and across a wide spectrum, then we call it deflation, and it's effectively a supply/demand judgment for the currency (often referred to as money supply).

As others have said, Gates simply isn't rich enough to really tip the balance much. If he were, though...

If deflation happens, and American goods (and/or investments!) drop in price against the dollar while retaining their inherent utility, it would make sense that the dollar would increase in value against other currencies. However, the U.S. dollar right now seems to have more value in "mystique" than in what you can buy for it, honestly, so it's hard to say if such an effect would hold; the value of the U.S. dollar has been defying (and indeed encouraging) a massive trade deficit for a long time.

[Telonius]

To the OP: a bit, but not as much as you might think.

Bill Gates net worth
58,000,000,000

M2 (basically, the total supply of dollars), roughly
8,000,000,000,000

Bill Gates only controls about .00725 percent of all US dollars in existence. Still an awful lot, but overall not anything like a majority stake.

Although it would be kind of awesome if he did, Bill Gates does not actually have a Scrooge McDuck-style money bin. Most of his wealth is tied up in assets. In order to really obliterate his wealth, he'd have to sell all of his assets, and burn the bills. This would cause some issues with liquidity for a time - not everybody is going to have $53 billion in spare change lying around. But all of those (presumably wealth-producing) assets would still be in existence. The value that the money represented would still be there, it's just that somebody else would own it. And there would still be a demand for liquidity.

So one of two things would happen. Either the Federal Reserve does nothing, in which case the US dollar appreciates slightly, making it harder for people to import goods. Or, the Fed "prints more money*," in which case it would inflate right back to where it was before Bill went nuts.

* - It doesn't actually physically print money, but adjusts the Prime Rate ... and that's about all the Economics my brain can handle at 4:15 on a Friday.