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Thread: $1,000,000,000,000 Lost Sep. 28th?

  1. #31


    Quote Originally Posted by TrueHeart View Post
    I do not intend this to be a confrontational inquiry. It's a sincere question. There are a lot of different kinds of folks here, from different backgrounds, and I think it might be better to ask this question on a forum like MBTI Central rather than on one devoted to, say, politics or economics.

    All the talking heads on television here in the USA have been telling us since yesterday evening (Sep. 28th) that "A TRILLION DOLLARS WAS LOST" in the DJIA drop of 700+ points.

    My question(s): in what sense are the words "wealth" and "lost" being used in that statement?
    $1.2 trillion was lost yesterday in stock value. The value of a stock is based on an estimate of its future return on equity. Therefore what was lost was (an estimated) $1.2 trillion of future returns. Of course these prices are always in flux. The $1.2 trillion is the loss in perceived value at the time. Today the perceived value is a little higher. Tomorrow who knows what the perceived value will be?

    To be concise: Assets lost $1.2 trillion in value, because the companies won't produce as well in the future.
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  2. #32
    Senior Member Array
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    Aug 2008


    Bah...this meta-economics makes my head hurt. Economics is built on enough conceptual bullshit as it stands, and now we're bringing in the metaphysical aspects of wealth?! Are you kidding me?

    Whether it's cash sitting in your account or shares or whatever, it's worth whatever anyone is willing to pay for it at that moment, since we're assuming that there are buyers of these securities at any given moment.

    Of course, the whole standard of reporting everything to that standard, even highly illiquid securities is what caused this entire mess in this first place. Mark to market on illiquid securities=oops, your securities are currently worth dog shit, meaning that currently, you are insolvent, and therefore, you have a run on the bank and go bust in short order.

    But that's a whole different issue.
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  3. #33
    Senior Member Array Fiver's Avatar
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    Sep 2008


    The economy losing a gazillion dollars of wealth because of a dramatic decrease in the-dollars-people-are-willing to-exchange for Wall Street shares is the same as this:

    I have lost wealth because the amount someone is willing to exchange (sales price) for my house has gone down by 20%. Did I ever really have that wealth? I don't know, but it sure feels like I'm a lot poorer now.

    Mark to market is a very important part of the issue (as is the giant sucking sound of rolling lines of credit, used by most companies to fund normal operations, drying up). Change the accounting rule and there is no crisis.

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