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45 percent of world's wealth destroyed: Blackstone CEO

DeeJayH

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45 percent of world's wealth destroyed: Blackstone CEO | Reuters
"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
that's a hell of a lot of money
is this just a guess, or is there really a way to calculate/estimate it
 
There's probably no way to calculate it, because defining "wealth" is very subjective. IMO, that is a gross overestimation.
 
There's probably no way to calculate it, because defining "wealth" is very subjective. IMO, that is a gross overestimation.

An excellent point. A good portion of those losses, if not most, are just people finding out that all these wonderful complex financial packages are actually worthless. They were never worth anything, people just found that out is all.
 
An excellent point. A good portion of those losses, if not most, are just people finding out that all these wonderful complex financial packages are actually worthless. They were never worth anything, people just found that out is all.

Do you mean hedge funds?
 
There's probably no way to calculate it, because defining "wealth" is very subjective. IMO, that is a gross overestimation.
Based on ?
 
I mean CDO's and CDS's and the like

Thanks, though I'm still not sure what they are. Are they investment plans you can arrange though a bank that packages shares of different companies? Sorry for the confusion, but if that's what they are, they are called something else here in Canada (RRSPs).

Anyhoo, if that's the case, why do you feel they're worthless? I can certainly see the value has gone down considerably, but they should eventually go back up again, no?
 
Thanks, though I'm still not sure what they are. Are they investment plans you can arrange though a bank that packages shares of different companies? Sorry for the confusion, but if that's what they are, they are called something else here in Canada (RRSPs).

Anyhoo, if that's the case, why do you feel they're worthless? I can certainly see the value has gone down considerably, but they should eventually go back up again, no?

I don't understand it well enough to explain to another person (I ****ing hate econ). Any overview of the financial meltdown is sure to have a brief explanation, though, so google is your best bet. The wikipedia page is informative, but a bit thick if you're not into econ. Basically, though, it's a number of assets (such as mortgages) that are packaged and rated, valued, and sold as a whole. An no, the 'value' is never coming back, because the toxic securities never had any value. They were junk loans and other bad assets that were made to seem valuable. When the illusion was lifted, that's when they 'lost value'
 
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"Wealth" isn't chicken scatching's in accountants' ledgers or their electronic equivalent.

Wealth isn't stock prices....but if the stocks are sold and turned into cash, that cash can be used to accumulate wealth.

Wealth is the sum of the material goods and professional skills of the people who make those goods or provide services to others.

If someone buys a house in a neighborhood for $100,000 and through the passage of time the houses in that neighborhood quadruple in value, that house has a paper value of $400,000....and if the owner just keeps paying his mortgage and does nothing, and the market retreats to the point where the home is again worth $100,000 he's gained nothing....and lost nothing. The "wealth" isn't realized until the point of sale and money or goods or services are exchanged.
 
Based on ?

Well, I would loosely define wealth as the amount of stuff in the world.

There aren't any fewer houses, cars, iPods, cans of Pepsi, and golf clubs in the world than there were a year ago (or if there are, it's just by chance).

This is what makes measuring wealth such a sticky issue. Even the most traditional measure, GDP, doesn't always account for wealth. For example, in the 1980s Haiti was able to raise its GDP by razing its forests and exporting lumber. What this overlooked was the fact that Haiti no longer had those forests and this was an unsustainable practice. Was Haiti actually any "wealthier" after they cleared all their forests? I think not.
 
45 percent of world's wealth destroyed

Imagined wealth is more like it. The vast majority of this lost "wealth" was in the form of financial instruments and credit. Not only that, but much of the growth upon which this wealth was dependent was entirely artificial. The government fueled these speculative wildfires with their insanely low interest rates, so after this artificiality got processed by the market there was a giant void in its place. The larger the artificial stimulus, the larger the void is when it stops working.
 
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