What would happen in the economy if

1. Jul 13, 2011

fluidistic

I've googled this question and saw some answers already, but they do not convinced me.
What would happen in the economy if everyone in the world wake up and see 1 billion dollars in their house or stuff in where they live.

Some people would want to build a huge house or buy lots of apartments but the workers wouldn't want to work anymore since they are rich so that people could only buy buildings already built. It seems like nobody would want to work and people would start to starve until prices get very high (huge inflation) so that the money is still worth something. Some lucky guys who bought apartments would never get poor even when the economy stabilizes later.

I'd like answers from people that studied economy or people that know about it somehow well; unlike me.

Thank you.

2. Jul 13, 2011

If everyone had $1Billion - the value of each dollar would be less - prices would increase. 3. Jul 13, 2011 fluidistic Yes, inflation is something that would occur. I'd like to know how much time would it take for inflation to occur and more or less the percentage of inflation. Also, once people spend their billion dollars, there would be some deflation. How much time for that to happen? Maybe some people could save some of their billion dollars? What exactly would happen? A total redistribution of the poor/wealthy and medium class? 4. Jul 13, 2011 WhoWee If everyone had$1Billion - who would work - and what would their wage expectations be?

5. Jul 13, 2011

fluidistic

As I said in my first post, it seems like nobody would want to work. This would be true at least for the first days or until inflation gets significant enough so that the 1 billion dollars isn't so huge.
Not sure the wage would have time to change though.

6. Jul 13, 2011

WhoWee

The money would be worthless if you couldn't spend it - the economy might turn to barter for goods and services.

7. Jul 13, 2011

talk2glenn

Whowee is correct - it is not the case that nobody would want to work, but it is the case that nobody would want to work for dollars.

8. Jul 13, 2011

Mythic

Everyone suddenly having 1 billion would have the effect of devaluing the currency to the point where most prior wealth would be lost. Maybe Bill Gates, who had say 70 billion, would now have 70 times a person's worth rather than 70 million times a person's worth (rough numbers but so what). Most millionaires would have lost everything. Everyone could throw away their money and the old rich would be no more. Keep dreamin'.

9. Jul 13, 2011

phinds

I think you're missing the point. Whoee had it right but was a bit mild. Your scenario would result in total chaos. Currency would be essentially worthless because no one would really know how to price goods in it and we'd go back to a barter system and because we're not even CLOSE to being ready for a barter system, commerce would break down most likely. As the guy said in GhostBusters "STARVATION, MASS HYSTERIA ... "

I don't thing I'm exaggerating on this.

10. Jul 13, 2011

WhoWee

The reality is that we are not self sufficient as individuals.

11. Jul 13, 2011

talk2glenn

You folks are inventing apocalyptic consequences which just are not there. The vast majority of the worlds wealth is not stored in dollars. Bill Gates, for example, probably holds all sorts of assets - equities, real property, etc. At most he holds a few million in cash or equivalents for regular expenses.

Highly unlikely. There would be a transition period, but the market would work itself out relatively quickly and with minimal disruption. People can trade in anything; we use paper currency for convenience and other such practicalities, but the world is full of episodes where the national currency was either debased or just unavailable. It certainly wasn't helpful, but it wasn't catastrohpic in and of itself. Usually, currency debaseing follows broader economic problems; its more symptom than disease.

12. Jul 13, 2011

EntropicLove

with the qty of the money increasing relative to other economies it would just increase price equilibrium and cause inflation unless you add 1billion in actual capital/value in which case our country would have a net worth increase.

13. Jul 13, 2011

phinds

Reread the OP. He said everyone in the WORLD, not everyone in our country.

14. Jul 15, 2011

EntropicLove

Oh my mistake:

WORLD not national (eg United States).

Obviously if world money supply increased relative to economic capital (human, land etc) it would cause inflation because fiat currency isn't worth anything and the numerical increase would dilute everyones on-paper investments--Hyper-inflation but since it would be on world scale this would eventually stabilize but not be as bad since increase would be across the globe.

Increase in net value (including all capital) would strengthen the value of every currency, it would also have the indirect effect of decreasing bank interest rates since many requesting fiat would have assets to support their demand.

15. Jul 15, 2011

WhoWee

On the other hand - anyone living in a country with a 90% top tier tax rate would find themselves with a large tax bill.

16. Jul 15, 2011

phinds

Why? It isn't income and some places don't have a gift tax.

17. Jul 15, 2011

WhoWee

If \$1Billion appeared in your bank account overnight - it wouldn't be income?

18. Jul 15, 2011

EntropicLove

Actually it would be nationally (for either Australia or US since the OP mentions dollars); 1 billion AUD is not equal to 1 billion USD.

19. Jul 15, 2011

WhoWee

The op said dollars - each country has it's own tax policy.

20. Jul 15, 2011

phinds

No, it's a gift and some places don't have gift taxes. Income comes from employers or investments.