45 Percent of World's Wealth Destroyed....Blackstone

Discussion in 'Economics' started by libertad, Mar 11, 2009.

  1. Euler

    Euler

    Very true.

    To take an extreme example, if someone starts a Ponzi tomorrow, tells the investors they have made 10,000,000 times their initial investment every year, then is exposed several years later, is it really true that "wealth was destroyed"? Hardly -- it never existed.

    Similarly, though I certainly don't consider them "Ponzis", the banks were writing and/or depending upon insurance that either didn't really exist or was a massive liability in itself. The banks' (investment and commercial) market caps were bogus the past 10 years, at least -- that wealth never existed. How can you destroy something that never existed?

    "Destruction of wealth" would be the destruction of something real, like California sinking into the ocean, Superman-I style.

    This crisis more a correction of perception, which is not to say it isn't very painful. Said pain can, in fact, lead to a destruction of real wealth, e.g. if everyone holes up out of fear and simply stops producing anything.
     
    #21     Mar 12, 2009
  2. Good points....

    What appears to be the case is that "valuation" is a perception.

    Unfortunately at the moment....the legal constraints regarding agreed upon prices "valuations" are reaping havoc on the economies throughout the world....

    And "currency" questions abound as to "fiat" status etc....particularly when viewed through the eyeglass of central banks and their abilities to further dilute their money stocks....

    So a factory becomes idle that costs $billions to create....and tomorrow the valuation is rendered negative in legal terms....

    A house side by side an identical house built of the same materials costs 2x one year later....and in another 6 months costs 30% less....


    Etc...etc....

    Perhaps there are issues with "legal valuations" that need to be better addressed....
     
    #22     Mar 12, 2009
  3. Cutten

    Cutten

    Their real nature is the same, but people do not consider them as anywhere near as valuable. There is no such thing as intrinsic value in economics, value is by definition totally subjective. Thus the only way to measure wealth across society is by what item X can be exchanged for i.e. its price.

    Your house may provide just the same benefit to you as a place to live, but it cannot be exchanged for as much in goods as back in 2006 or 2007. Thus you (if you're a homeowner) have suffered a real loss.
     
    #23     Mar 12, 2009
  4. Cutten

    Cutten

    Exactly. Someone 1 year ago could sell their 500k condo for 10 times their annual salary. Now it's 5 times. Their equity may have gone from 200k to minus 50k. That's real wealth, since 200k can buy things and minus 50k makes you a slave to debt or a bankrupt.

    If anyone thinks going from plus 200k to minus 50k net worth is "unchanged", please PM me as I have an intriguing business proposition for you.
     
    #24     Mar 12, 2009
  5. Wealth is never destroyed. It is just transferred. Stolen as some people are now buying assets under priced.

    What you guys are talking about is just value, the asset itself has not been bombed in war or something like that.

    Let me point out that I am talking about real assets, not financial assets as some of you might think of.
     
    #25     Mar 12, 2009
  6. That was the point. This post addressed that the losses were on paper. The assets are unchanged.
     
    #26     Mar 12, 2009
  7. It´s called "wealth redistribution". :cool:
     
    #27     Mar 12, 2009


  8. The idea that wealth is never destroyed is bogus. Thats to view a service as being worthless vs a "thing".
    If I live in a cardboard box next to your home and cut your lawn for free for something to do, we are both gaining something. If your lawnmoyer breaks and you can't afford to replace it, we have both lost something in addition to the replacement cost of the lawnmoyer.
    Nothing was transfered, its just gone.
     
    #28     Mar 12, 2009
  9. I dont think we are on the same page. Get more information about business cycles and winners vs. losers during these periods.
     
    #29     Mar 12, 2009
  10. Agree, these were paper profits and paper wealth.
     
    #30     Mar 12, 2009