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Pet Peeve: "Study: World Lost $50 Trillion In Assets In 2008"
That headline appears on TPM financial wire listings as a link to:
'as if' is not 'as is' except in fiction.
March 9 (Bloomberg) -- The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report. ... Global stock markets lost about $28.7 trillion in 2008Oh they just vanished into the aether? I mean, really, the world didn't lose real assets to that tune. Market capitalization is not a real asset. Market price is only a funhouse mirror reflection of current trade value, which is hardly real use value.
'as if' is not 'as is' except in fiction.
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Thanks for this bit of info. I've been wondering where all that money went. But it seems there never was money, just numbers on paper and that fooled many including Warren Buffet?
March 9, 2009 3:38 PM | Reply | Permalink
Which comedian said that if you got rid of all the mirrors in Florida it would be half the size?
Jackie Mason maybe?
March 9, 2009 4:23 PM | Reply | Permalink
I was just in a condo like that last night. Good long room had a huge mirror at one end so it would feel even larger, according to the owner.
Is the such use of mirrors a form of narcissism? If so then the losses might be taken very personally!
March 10, 2009 6:58 PM | Reply | Permalink
.
Huh?
Just numbers on paper? No one worth their salt would keep anything on paper, don't wish to leave a paper trail, ya' know.
Oh and uh ... Eds...
Remember the "competition" statement I made last week as to what the "debate" was going to come down to?
Don't miss it:
Have a good week...
~OGD~
March 9, 2009 4:01 PM | Reply | Permalink
wow. I am not going to pretend I know what this means. Millions of people individually or as members of corporations or pension plans woke up one day with a loss. Was it 50%, 80%?
Can a human being really grasp such numbers?
March 9, 2009 4:07 PM | Reply | Permalink
People who bought houses for speculative purposes probably lost their expectations. Are expectations of future gambling winnings real assets?
People who had to sell a house got less money then they might have expected, but are those generally real losses?
March 10, 2009 3:04 AM | Reply | Permalink
That is where I get so gd confused. Sold the house for less but it cost less to buy a new home in a down market.
But the poor who purchased a home with a come-on 4 percent mortgage, six months later had an eight per center and they LOST THEIR HOMES. The bank no longer held the mortgage, sold it long ago. Some pension fund had that loan on the books at a certain price.
The pension fund now has less on its books than it started with.
The individual who worked for thirty years at some company and is part of that pension, now receives one third of what he thought he was going to get.
I am no economist, but I understand that much. The primary and secondary bundler markets, so to speak, made off with billions and billions of dollars in gambling wins. We are discovering that few taxes were paid on these gambling wins.
I am not going to go on for one hundred pages, but it seems easy to me; that millions of poor people have no homes. Millions of the middle class are not in the middle class anymore. Because of the business slow down caused by the banking crisis, millions have no jobs and millions more have low paying part time jobs without benefits.
The government, under conservatives were not watching the mortgage markets, or the bundling, and over rode state protections under the commerce and supremacy clauses, were not watching the stock markets.....
What do I know, I have a buck till next month.
I did not lose anything. So far.
March 10, 2009 4:23 AM | Reply | Permalink
"The pension fund now has less on its books than it started with."
So its assets are priced less than they were.
Have pensions been hit yet? I thought GM et al were not throwing away pension payments. Also, if rents are down (income from real assets), the assets are not lost, the income is reduced. Treating income as as if it were a real asset is part of what created the problem, esp when it's passive income (active income would be such as farm wages where your skilled labor is effectively an asset).
I have not seen a huge rise in homeless stats to account for all the foreclosures. Etc.
March 10, 2009 6:51 PM | Reply | Permalink
Agreed-what they are reporting are just paper assets.
If resources and extinct species and pollution were given figures and tabulated in the economy (which they should, but aren't as it's hard to pin a figure on them), who knows what figure we'd come up with for last year's losses?
March 9, 2009 4:41 PM | Reply | Permalink
Calling them paper assets doesn't quite cover it, they are not lost as such either. If you will call them "magical thinking assets" then we're maybe talking the same story. Sometimes confidence is an asset, and sometimes it's the tool of the con artist.
March 10, 2009 6:56 PM | Reply | Permalink
Just wait till global warming leads to loss of assets in terms of houses washed away or under water. Those are not paper assets. But they're gonna go too!
March 9, 2009 4:53 PM | Reply | Permalink
Yes, those would be real asset losses.
Now, since we know what the fake asset losses are, what are the real asset losses so far in the past 6 years?
March 9, 2009 8:38 PM | Reply | Permalink
Good point, eds.
March 9, 2009 6:34 PM | Reply | Permalink
Exactly correct. It's just like Peter Schiff said.
March 9, 2009 7:36 PM | Reply | Permalink
Peter was talking about fake assets? No wonder he got burned last year on his real investments!
March 10, 2009 12:08 AM | Reply | Permalink
hee hee hee hee hee
(oops, sorry. I cluckle sometimes. Can't help it really.)
March 10, 2009 12:15 AM | Reply | Permalink
Nice post Eds! I like these kind of statistics. I had read the number was somewhere around a loss of 20 tn rather than 50 tn. There's this paper from Delong which I quite like on the reasons for the fall in asset prices.
March 10, 2009 7:02 AM | Reply | Permalink
Oh?
March 10, 2009 6:42 PM | Reply | Permalink
Check out page three of delong's paper. He says, on january 20, 2009, that the value of global 'marketable financial assets' had fallen to 60tn from 80tn some 18 months earlier.
He doesn't include talk of fall in 'currency' like your Bloomberg, but I don't see how currencies can collectively fall, unless its inflation. But inflation has gone down. So don't really understand the discrepancy...
If you get what this is about, do let me know...
March 10, 2009 6:50 PM | Reply | Permalink
Oh, I'm not at home and this computer monitor renders links in a color which doesn't stand out so I missed it the first time through!
Your link took me to a comment by RW at 8:07. ?
" More generally, risk modelling by traders was similarly complete nonsense. I don't know to what extent the traders were tricked and to what extent they were in on the scam (nor I suspect do they)."
Cute.
DeLong: What Has Happened to Milton Friedman's Chicago School? DRAFT
He was writing for early January. How much further fall has there been since then, in whatever indices etc. are used?
He specifies 4 factors (and see RW's two sequential comments, too). He says housing price falls are 5% of the overall picture.
Currency shifts are not something I understand at all well enough to deal with. The simple ideas are all ungrounded. In a sense, currency is the least real asset even though hard money is the most real financial asset as long as it lasts.
March 10, 2009 7:19 PM | Reply | Permalink
De Long makes a point with his comment on p4 about "no fundamental cause" (I cannot copy-paste excerpts). I don't have time to read more so maybe he deals with it later.
I think he's wrong. Labor (jobs) is less productive because the jobs are going away. Labor is also less productive because labor requires capital to be productive in most cases, and capital is suddenly expensive or otherwise risk averse. One fundamental factor is that economic activity leverages on other economic activity (eg., services sector). Consumer borrowing (home equity, home sales, unsecured loans) kept a demand economy inflated for years. When that inflation became unsustainable (incremental costs of borrowing started to go up sharply) deleveraging was required. The economy was literally living on borrowed time. I mention Producer vs. Consumer borrowing in at least one earlier blog of mine.
And I have more objections, but not the time just now...
March 10, 2009 7:31 PM | Reply | Permalink
I was just pointing out the discrepancy between Delong's number of 20tn and Bloomberg's number of 50tn in losses. Markets have fallen a bit further since january, but it's not that 60% of the losses just happened in the last 50 days. just very strange.
oh - and no idea why the link took you to the comment and not the paper. sorry...
March 10, 2009 7:42 PM | Reply | Permalink
Brad is talking financial only?
I did have to look read his draft further. He seems rather muddled and lost.
March 10, 2009 8:14 PM | Reply | Permalink
"marketable financial assets" is the term he uses. He's really not muddled and lost, to my mind. He's had some great posts up with questions and attempts at answers on the financial crisis all through last year. I'm too lazy to dig them up for you now though...
March 10, 2009 8:33 PM | Reply | Permalink
Not in general, in that article. He wanders around take loose potshots.
March 10, 2009 10:37 PM | Reply | Permalink
Modest leverage means relatively real money, as in a savings and loan bank loaning out at about 4:1, or holding about 25% deposits to cover the mortgages and business loans. But all money is based on trust---the depositors trust the bank not to risk their money, and the bank trusts the depositors not to withdraw their funds.
When large institutions, and whole countries, leverage at 30:1 or more, borrowing so many more times their cash worth, it is trouble asking to happen.
It is like most conservative/elitist actions, OK when a few do it (junk bonds and corporate raiders), but destructive and paradoxical when everyone does it. Like privatized SS, sounds good until everyone retires and stocks are selling for cheap, as the rush to liquidate gluts the market.
Bets that every single "wealth" loser still has a house, some money in the bank, a car, and friends with all the above.
March 10, 2009 2:03 PM | Reply | Permalink
Yes, thus Donaldson and Cox as key culprits.
Lehman tried to make money work too hard.
March 10, 2009 8:16 PM | Reply | Permalink