
45 percent of world's wealth destroyed: Blackstone CEO - gaika
http://www.reuters.com/article/ousiv/idUSTRE52966Z20090310
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pg
Price of world's wealth decreased by 45 percent: YC Partner

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gaika
Not really, most of it was really destroyed - debts not repaid, foreclosures,
etc.

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pg
You're confusing money and wealth. When a house is foreclosed, it is
transferred from one owner to another, but it isn't destroyed.

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gaika
When a company goes bankrupt, is wealth destroyed? When creditors are not
repaid, is wealth destroyed? When pension fund investors lose their money and
would have to retire later, is wealth destroyed? Current stock and bond prices
imply that 10-20% US companies will go out of business in the next 5 years.

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pg
No, no, and no. Wealth could end up being destroyed as a result of rapidly
falling prices-- for example, if a company that goes bankrupt then shuts down,
and lets its machines sit and rust-- but they are not identical.

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netcan
I think it is a mistake of some sort not to think of the companies themselves
as machines. After all, what use is a tractor apart from the farming it can do
in the future? Same goes for a farmer. Same goes for a farm.

Our economies create real wealth from nominal by taking into account future
wealth creation. You can call assets (eg stocks) 'nominal' (not real) if you
want because they are paper assets. That's correct in a sense. If the market
decided to value them lower tomorrow on a whim, no real wealth is destroyed.
These assets (in the stock example these are the companies behind the stock)
go on creating wealth as usual. Future wealth creation is not disturbed.

On the other hand, if the company alters its wealth creation patterns (eg by
going out of business). Real (future) wealth is lost.

Basically, I think you need to take into account future wealth creation in
these definitions. Call it reverse capitalism (in the Marxist sense). Future
wealth controlled the means of production.

