Posted on 01/31/2009 4:04:24 AM PST by TigerLikesRooster
WEF 2009: Global crisis 'has destroyed 40pc of world wealth'
The past five quarters have seen 40pc of the world's wealth destroyed and business leaders expect the global economic crisis can only get worse.
By Edmund Conway in Davos
Last Updated: 5:42AM GMT 29 Jan 2009
Steve Schwarzman, chairman of private equity giant Blackstone, said an "almost incomprehensible" amount of cash had evaporated since the financial crisis took hold.
"Business will be very different," he added.
His comments came on a day of the World Economic Forum characterised by the gloom of its participants and warnings that the crisis will endure for some time. News Corp chief executive Rupert Murdoch kicked off the meetings by warning that the atmosphere was worsening – despite global economic confidence plumbing the lowest depths on record.
(Excerpt) Read more at telegraph.co.uk ...
When the Russian mafia is selling apples on the street corners, we’ll know we reached bottom.
I am reminded of antique cars. I was told years ago that an antique car was worth exactly what someone was willing to pay for it. Notice this is not the value that I put on it, but the value someone else did.
This can lead to an interesting situation where I think it is worth $25,000 but a buyer thinks it is worth $6.000. What is its true value? What someone else is willing to pay. So it is with stocks.IMHO
The concept of wealth is highly psychological. If you have something (like a house) that people will pay a premium for, you have wealth. If they won’t pay what you think its worth, you’ve lost wealth. You can argue if its a real loss or not (as you still have the house), but perception is often reality.
Every time I see that picture, I think: We are soooo screwed.
Your Congress, with Dodd and Frank and others, fomented and abetted a financial crisis, which has had the effect of stripping $ 7.5 TRILLION from the value of American homes and $ 7.5 TRILLION from the value of Americans stock holdings in their 401K’s and IRA’s.
They also spent a total of $ 2 TRILLION last year between stimulus, TARP,pork, and Federal Reserve pumping money into the banking system.
Now they want to spend $ 819 BILLION. And that isn’t all!
Mr.Geithner now is pushing for a national bank to take over “toxic assets” to the tune of $ 2-3 TRILLION.
Not only have you been personally looted by your own Government, but so have your grandchildren and great grandchildren.
And with this proposed spending, there will be massive inflation by the end of 2009 into 2010, that will further erode your savings. Looted again!
Just remember, this money represents hours of your life that you spent working to build your future, and Congress squandered it.
Angry yet? Pick up the phone on Monday and let the grifters in DC know how you feel. After all, you’re paying for this fiasco.
The number comes from things like Z.1 flow of funds accounts, and mostly reflects stock market declines and real estate declines. Which is just rising rates plus lower inflation expectations. Which are a pay me later instead of pay me now thing, but not a real wealth reduction.
We have a $14.3 trillion a year income, and we can readily afford all of this. Anything that gets the economy growing again is well worth it. The Fed and Bush treasury were doing the right things, and Geithner will as well. Populists left and right throwing bombs are doing their best to wreck everything and make it all worse, but they will not be allowed to run anything.
JasonC, it’s a free country and you can spew your baloney anytime.
However, it’s not only me who has experienced a 40% drop in their 401K.
But you say, nah, that’s not real money. Guess you didn’t plan to retire soon.
Put your head back in the sand.
When inflation wipes out what is left of even pre-peak pricing, we’ll see who’s crying then.
And no, a $ 14.3 TRILLION dollar economy cannot absorb $ 5 TRILLION in deficit spending in the span of 12 months.
Unfortunately our glorious goobermint has just instituted a huge off-budget debt increase to this nation...that in of itself will create less wealth and less value in the private sector, i.e., debt is not wealth, agree?
My point being, the opportunity for the average consumer to acquire more wealth has been diminished for the future.
We can see very little has been done since The 0 took office, or for that matter sin Nov. 2006, to invest in this country's infrastructure as a point. Not increasing the efficiency of the infrastructure slows the time frame to allow users to conduct business, therefore slowing the growth of wealth of the private sector. The consistent increasing of the national debt removes wealth from the consumer as well as increasing the total tax burden at this same time (percentages). If one takes your statement to be truse of a real 4% shrinkage of the GDP with and increase in near term and long term debt, then the wealth has shrunk too. Without increasing the nation's wealth, credit cannot soundly be issued to grow wealth as a whole.
The government invests very little w/ respect to sound investments versus the average consumer.
Without income, the private citizen cannot increase his wealth. For the most part, government is just a huge overhead item on the entire balance sheet.
Arguments can be made as to the function (variable) government affects the national wealth model with it's physical purchases, but other than a few buildings, military hardware, and land, government is not allowed to possess much wealth...just redistribute it through taxation a legislation. With the total of a bailout package and a pork socialist program package equal to $1.5 trillion (off budget) we have to add in that interest too for the lending. So, what is the percentage of the GDP is the $1.5 trillion dollar scam plus the $2.7 trillion fed budget?
......Lots of fat is destroyed last year along with some meat......
You are correct. In the modern world, wealth is merely electron blips in a system hard drive. Banks are movers of electrons posted in ever increasing numbers to ledgers representing nothing of substance.
The current crisis is pretty much a hard drive failure. The real wealth is still there in the form of solid companies, real estate, gold and other hard assets.
Secondly, you make no mention of the hundreds of trillions of Credit Default Swaps and CDOs that are still leveraged against God knows what. Does this burden ultimately rest anywhere? While we are on the subject of what our GDP will and will not bear it seems to me trivial arguing whether it will bear several trillions when we don't have any measure of certainty about this issue. It is sort of like The Lord said about the Pharisees, they argue about swallowing a gnat but take a camel whole.
I have yet to read anyone who claims to know what the hell they are talking about deal with either of these issues.
Looking forward to some knowledgeable response.
Reposted, please forgive me, Mozilla stripped my paragraphs.
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.....it’s all paper money, folks......
A paper $$ is but a tangible representation of an electronic ledger entry. It is really all electronic money now days
Vert true see bail-out plan.
.......US real estate is worth about what it was in 2005....
To take it on a national basis misses the point. In many areas, the value has not diminished substantially. The collapse of the wildly inflated values is a coastal phenomenon
.....it’s not only me who has experienced a 40% drop in their 401K.....
Did you sell out? If so you lost wealth.
If you still hold the assets, you did not. The wealth true value will not be known till you actually sell.
If you are depending on the interest these assets were yielding, you have been made poorer, as a 40% reduction in principal yields less return.
The security millions depended on is no longer there. And why? Because a few Congresscritters screwed the pooch.
On paper or not, the losses are real. If a house is valued at $ 200,000 less than you paid for it, your mortgage doesn’t decrease nor do your property taxes and assessment decrease.
And if you have to move, you’re going to experience REAL loss over this “correction”.
And the average American family, carrying even a modest amount of debt, is being shafted. Add to the mix being unemployed and your world is going to fall apart real quickly.
This is the environment the looters have created. And despite the dispassionate and erudite discussion on this thread, this will affect all of us negatively soon.
A real president would rescind executive orders on assassinations and launch a strike on Davos. ........
That would put a serious dent in the world supply of smart alecs & wise guys...Financial wise guys that is. The con artist biz would also be severely impacted. Is it to much to hope that Jim (China) Rodgers would be there
It’s all promises.
And I'm not going to be crying about any of it, whatever the sequel. My house will continue to provide me shelter. My job will continue to provide me income. My habit of saving a solid portion of my income will get a better than average price for all the assets I ever by, and I'll accumulate more of them, not less, if the path getting there is rockier or lower. Not to mention the fact that natural beauty around me, friendship, intellectual interests, etc have more to do with my happiness than any of the above.
Sound principle trump fear mongering panic every day of the week and twice on Sundays. Sell your doom to some depressed liberal deadbeat who cares.
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