45% world's wealth destroyed

Discussion in 'Economics' started by wildfirepow, Aug 13, 2009.

  1. NEW YORK (Reuters) - Private equity company Blackstone Group LP (BX.N) CEO Stephen Schwarzman said on Tuesday that up to 45 percent of the world's wealth has been destroyed by the global credit crisis.

    "Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half," Schwarzman told an audience at the Japan Society. "This is absolutely unprecedented in our lifetime."

    But the U.S. government is committed to the preservation of financial institutions, he said, and will do whatever it takes to restart the economy.

    U.S. Treasury Secretary Timothy Geithner plans to unfreeze credit markets through a new program that will combine public and private capital in a fund that would buy bank toxic assets of up to $1 trillion.

    "In all likelihood, that will have the private sector buy troubled assets to clean the banks out in terms of providing leverage ... so that we can get more money back into the banking system," Schwarzman said.

    He expects the private sector to end up making "some good money doing that," but added there were complex issues on how to price toxic assets.

    He put part of the blame for the financial crisis to credit rating agencies.

    "What's pretty clear is that, if you were looking for one culprit out of the many, many, many culprits, you have to point your finger at the rating agencies," he said.

    Rating companies have been the focus of intense criticism for their role in granting top "AAA" ratings for complex bonds that later plummeted in value, resulting in subsequent rating cuts, in many cases to junk status.

    "Once you bought into ... the Triple A paper and it turned out to be paper that was in many situations going to end up defaulting, then you really had the makings of a global problem," he said.

    Schwarzman said problems were then exacerbated by mark-to- market accounting rules. Those rules ask banks and other financial institutions to price assets at a value related to how they would be sold in the open market.

    Blackstone reported a quarterly loss in February after writing down the value of its portfolio and eliminated its fourth-quarter dividend.

    Asked where was a good place to invest, Schwarzman said it made sense to buy cyclical names, which are less exposed to the economic cycles.

    He said investors also may find value in debt products, including "senior layers of certain securitizations," where investors can see 15 percent to 20 percent returns, he said.

    Geographically, he said there were "pockets of strength" in China, which is committed to getting to an 8 percent growth level, and in India, where the economy is slowing but banks are in good shape

  2. Someone should tell these guys to read the papers. Most equity indices are up at least 50% from the lows and continue to move higher. Commodity prices are on fire. Housing prices have stopped falling. Yes, wealth has been lost. No, its no longer anywhere near 45%.
  3. Another 45% wealth will be destroyed due to this increase of prices.

    People who have money will invest now and another 45% wealth will be destroyed
  4. jnorty


    Yes the blackstone guy is a liar. mkts in us alone have added $4 trillion of wealth and worldwide at least $15 trillion. its down to a max 25-30% now. but it will be back down to 45% once this pig re crashes
  5. $15 Trillion has been added from the remaining 55% wealth.

    So now the remaining 55% wealth will be destroyed from the re-crash of world markets.
  6. It wasn't destroyed, it was stolen, err I mean transferred.
  7. Chagi


    Probably worth considering whether or not much of that wealth was legitimate prior to the fall.

    For example, the value of a commercial building or house can be determined by that of comparable units, but you cannot sell every commercial building or house in the city at the same time for that price. I would argue that a substantial portion of destroyed wealth was not legitimate to begin with...
  8. moarla


    how you define wealth? USD?
  9. World economy was worth $1600 Trillion (estimated). Now 45% wealth has been destroyed.

    This means world economy has suffered losses of $750 Trillion.
  10. Nattdog


    this is bogus. perhaps 45% of the worlds bubble, paper wealth has been destroyed. When a bubble blows up the realization is NOT that all that wealth was destroyed, but rather that it never existed to begin with.

    For example I put in a 20k share order in a thin 10 dollar stock that bids it up 1 a point... Did i REALLY just increase the value of the company 10%? OF course not. It is a short term bubble.

    That is what happened to our entire paper economy but on a grand scale, and the bogus money bidding everything up was excessive leverage created by our funny money system.

    Guys like schwartzman and the others who are right near the spigot of paper wealth creation were the ones best able to cash in. These Guys use the system to EXPROPRIATE wealth from others, they do not create wealth.

    The worlds real wealth is not all that different. We realize now NOT that we have lost so much, but rather that we were deluded into thinking "we" ever had that much to begin with.
    #10     Aug 13, 2009