22 ms·

It bums me out that a single press release can cause so much of the world's wealth to evaporate. Worldwide capital was something like $80T iirc, 2% of that woul

by netmau5 15y ago

It bums me out that a single press release can cause so much of the world's wealth to evaporate. Worldwide capital was something like $80T iirc, 2% of that would have solved every budget crisis in the world.

sliverstorm 15y ago
Was it real wealth if it can evaporate so? Before you immediately jump to your guns, roll the question around in your mind: was value destroyed?
- deleted 15y ago
  [deleted]
- hugh3 15y ago
  Indeed, no real wealth was destroyed. Well, a few cars were set on fire in London, but that was unrelated. Part of the secret to my happiness is this: I permit myself to feel happy on days when my stock portfolio goes up, but not to feel sad on days when my stock portfolio goes down. In this particular case I'd much rather be happy than consistent.
  - ars 15y ago
    Cars are not real wealth, they are negative wealth since they cost money, but don't make money. Wealth is owning things that can make money, not things that are money or that were bought with money.
    - hugh3 15y ago
      You're using a rather odd definition of "wealth" there. Cars are wealth because they are useful... and indeed can be used to make money.
    - pchristensen 15y ago
      don't make money A lot of people live farther than walking distance away from work.
    - dpark 15y ago
      Your definition of wealth is broken. A car is wealth. It may be a depreciating asset, but it is still wealth. It has value in its materials. It has value in its construction. It has value in its utility. A car most certainly can make money. Wealth consists of all things that have value. Shares in a company are wealth. Dollars in your pocket are wealth. A house is wealth. A coal mine is wealth.
    - rfurmani 15y ago
      Are you thinking Robert Kiyosaki's adamant distinction between asset and liability? Wealth is a different thing and cars are a form of it.
    - gnaritas 15y ago
      > Wealth is owning things that can make money No, that's an asset. A car is wealth, and could be either an asset or a liability, depending on the car and what you do with it, but it's still wealth.
- deleted 15y ago
  [deleted]
- 3pt14159 15y ago
  A guy named Silver Storm knows better. A magnifying glass and a bar of bullion is worth a magnifying glass and a bar of bullion. A magnifying glass and a $1B Bond is worth more than a $1B Bond, depending on the perceived stability of the economy's other banking institutions. When things get a bit less stable reserve ratios tighten up.
OstiaAntica 15y ago
It wasn't a single press release, but an "official" recognition that the U.S. is hurtling along on an unsustainable budgetary path. We're borrowing more money each year than we spent as the ENTIRE federal budget each year in the 1990s. Also, in many ways, Europe and Japan are in even worse shape, and the recent sell-off is probably more driven by European events.
- scarmig 15y ago
  If you read S&P's actual paper, it focuses on political dysfunction, not economic. For instance, they said that if the Bush tax cuts for people making 250k/year were allowed to expire, then they would have allowed the USA to retain its AAA rating, but the American political system seems incapable of making the necessary revenue adjustments to attain fiscal consolidation. Of course, S&P is really just a bunch of corrupt idiots, so either way you shouldn't pay much attention to them.
  - shareme 15y ago
    what they meant was in addition to the $4 trillion saved by current budget compromises over 10 years that getting rid of the Bush tax cuts would add $4 trillion in ten years thus placing $8 trillion of that $14 trillion deficit as no longer being an impact in ten years due to the surpluses we would have each budget year. It seems to me that reducing the deficit by 50% is damn good idea.
  - jerf 15y ago
    The political dysfunction is only interesting to them inasmuch as it produces economic dysfunction. If Congress was deadlocked for months on end on, say, Don't Ask Don't Tell legislation, the thought of downgrading the US's debt rating would never have crossed their mind. Slightly increasing revenue in an environment where increasing revenue is simply seen as a reason to spend 117% of the revenue increase won't prevent debt downgrades.http://online.wsj.com/article/SB10001424052748704648604575620502560925156.html?mod=djemEditorialPage_h http://online.wsj.com/article/SB1000142405274870464860457562... It's not a revenue problem, it's a spending-more-than-we-have-revenue problem. And I don't mean that it must be fixed with cuts only, but the idea that we can tax our way out of this problem is basically purely theoretical. With the real politicians we have, it won't work, unless after we fix the root spending problem.
scarmig 15y ago
The downgrade didn't cause this. At least, you need a rather complicated model to explain how it did. Interest rates fell on US Treasury bonds; this means investors think they're the safest instrument to invest in. Today we saw equities crumble, not bonds. I would guess it's mostly the evolving European situation that's throwing us headlong into the abyss, with a hefty serving of realizing the USA is run by clowns who are utterly incapable of addressing any important problems. Note that this is beyond simple "politicians are teh stupid," which applies in any country, but in the USA particularly. Europe's facing serious problems, but that's because they're burdened with very tough choices as a result of badly thought out institutions from the 1990s. The USA faces very easy choices, but we're facing serious problems because... well, we want to? Because we have a dysfunctional government? Who knows. Regardless, it's an unforced error.
- chriserin 15y ago
  Its worth noting that some investors are thinking this is a liquidity event because someone got a margin call rather than concern about euro economic concerns. I'd think its both. But yeah, u.s. bonds are doing fine despite the downgrade. http://brontecapital.blogspot.com/2011/08/who-has-got-margin-call.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BronteCapital+%28Bronte+Capital%29 http://brontecapital.blogspot.com/2011/08/who-has-got-margin...
trotsky 15y ago
It's unlikely that much of today's market action relates to the downgrades. Bonds rallied, and equities extended losses that started in July, not friday night. Don't get caught in the trap of connecting events because they happen about the same time, this is a global event: Germany is down 5% on the day, London 2.5%, japan 2%.
dualogy 15y ago
Evaporate? When you buy a stock for $10, that is the moment when your $10 are gone -- not the minute it plummets. If you can sell it later for $15, congrats, that is the moment where you can realize a profitable "exit". But in the meantime -- every second of it -- don't ever count on that stock, bond or other 'vehicle' to "hold your $10 through the winds of change" or protect it against changes in the perceptions and opinions of all the other gamblers, investors, savers, market participants around the globe. Any given day, its "ticker value" merely reflects the value judgments of the relatively small number of co-owners that happen to buy or sell the same asset that day -- it never reflects "your net wealth". Your net wealth is your cash, house, car, brain, any other physical asset -- minus any money you spent on counter-party future obligations, promises, thoughts, hopes -- speculation. That stock you bought? It can be $1 or $100 tomorrow or in 10 years, and you only ever know it when it's time to sell. Was money lost? Sure -- but not last week or today -- rather, on the day the individual investor bought into these markets. Anecdotically, I made a few nice profits with Bitcoins back in May/June when they were all the rage -- but I never ever confused them with physical wealth, I knew the nature of my gamble and I timed my exit -- not perfectly, but good enough to convert this "digital profit" or "paper profit" back into "physical goods". I'm not a full-time trader or gambler and I believe in investing my time more productively, but at the same time, sometimes it's fun to play money games. Too bad so many people on a world-wide scale believe it's a smart idea for their retirement estate to "take on debt to 'invest' in others' debts". This has been going on for a long time but it's not especially sustainable or otherwise inspiring -- especially since the debts are now backed by the children of your children. Think I'm off-topic by now? Think again!
- dpark 15y ago
  You do realize that cash is not a true physical asset, right? You can hold it in your hand, but it has no intrinsic value. The only value it holds that that which others assign to it, not unlike a share of stock.
  - dualogy 15y ago
    Good thoughts -- I did and do realize it, in fact! Some price stocks in currency, some value currency in stocks. Some price oil in currency, some "currency" in "oil". Some price gold in currency, others value currency in how much gold it buys (oil producers, for example!) That said, by "physical wealth" indeed I didn't really mean paper currency or receipts for commerce and I mentioned this mistakenly to "soften my message" for those purely and fully entangled in the paper world of yesteryear.
ams6110 15y ago
Some percentage of the worlds "wealth" has been standing on a foundation of bad debt which is, as it always eventually does, working its way out of the system. Sad that it's going to be painful, but it has to happen, and really the sooner the better.

by netmau5 15y ago

sliverstorm 15y ago

Was it real wealth if it can evaporate so? Before you immediately jump to your guns, roll the question around in your mind: was value destroyed?

deleted 15y ago
[deleted]
hugh3 15y ago
Indeed, no real wealth was destroyed. Well, a few cars were set on fire in London, but that was unrelated. Part of the secret to my happiness is this: I permit myself to feel happy on days when my stock portfolio goes up, but not to feel sad on days when my stock portfolio goes down. In this particular case I'd much rather be happy than consistent.
- ars 15y ago
  Cars are not real wealth, they are negative wealth since they cost money, but don't make money. Wealth is owning things that can make money, not things that are money or that were bought with money.
  - hugh3 15y ago
    You're using a rather odd definition of "wealth" there. Cars are wealth because they are useful... and indeed can be used to make money.
  - pchristensen 15y ago
    don't make money A lot of people live farther than walking distance away from work.
  - dpark 15y ago
    Your definition of wealth is broken. A car is wealth. It may be a depreciating asset, but it is still wealth. It has value in its materials. It has value in its construction. It has value in its utility. A car most certainly can make money. Wealth consists of all things that have value. Shares in a company are wealth. Dollars in your pocket are wealth. A house is wealth. A coal mine is wealth.
  - rfurmani 15y ago
    Are you thinking Robert Kiyosaki's adamant distinction between asset and liability? Wealth is a different thing and cars are a form of it.
  - gnaritas 15y ago
    > Wealth is owning things that can make money No, that's an asset. A car is wealth, and could be either an asset or a liability, depending on the car and what you do with it, but it's still wealth.
deleted 15y ago
[deleted]
3pt14159 15y ago
A guy named Silver Storm knows better. A magnifying glass and a bar of bullion is worth a magnifying glass and a bar of bullion. A magnifying glass and a $1B Bond is worth more than a $1B Bond, depending on the perceived stability of the economy's other banking institutions. When things get a bit less stable reserve ratios tighten up.

OstiaAntica 15y ago

It wasn't a single press release, but an "official" recognition that the U.S. is hurtling along on an unsustainable budgetary path. We're borrowing more money each year than we spent as the ENTIRE federal budget each year in the 1990s. Also, in many ways, Europe and Japan are in even worse shape, and the recent sell-off is probably more driven by European events.

scarmig 15y ago
If you read S&P's actual paper, it focuses on political dysfunction, not economic. For instance, they said that if the Bush tax cuts for people making 250k/year were allowed to expire, then they would have allowed the USA to retain its AAA rating, but the American political system seems incapable of making the necessary revenue adjustments to attain fiscal consolidation. Of course, S&P is really just a bunch of corrupt idiots, so either way you shouldn't pay much attention to them.
- shareme 15y ago
  what they meant was in addition to the $4 trillion saved by current budget compromises over 10 years that getting rid of the Bush tax cuts would add $4 trillion in ten years thus placing $8 trillion of that $14 trillion deficit as no longer being an impact in ten years due to the surpluses we would have each budget year. It seems to me that reducing the deficit by 50% is damn good idea.
- jerf 15y ago
  The political dysfunction is only interesting to them inasmuch as it produces economic dysfunction. If Congress was deadlocked for months on end on, say, Don't Ask Don't Tell legislation, the thought of downgrading the US's debt rating would never have crossed their mind. Slightly increasing revenue in an environment where increasing revenue is simply seen as a reason to spend 117% of the revenue increase won't prevent debt downgrades.http://online.wsj.com/article/SB10001424052748704648604575620502560925156.html?mod=djemEditorialPage_h http://online.wsj.com/article/SB1000142405274870464860457562... It's not a revenue problem, it's a spending-more-than-we-have-revenue problem. And I don't mean that it must be fixed with cuts only, but the idea that we can tax our way out of this problem is basically purely theoretical. With the real politicians we have, it won't work, unless after we fix the root spending problem.

scarmig 15y ago

The downgrade didn't cause this. At least, you need a rather complicated model to explain how it did. Interest rates fell on US Treasury bonds; this means investors think they're the safest instrument to invest in. Today we saw equities crumble, not bonds. I would guess it's mostly the evolving European situation that's throwing us headlong into the abyss, with a hefty serving of realizing the USA is run by clowns who are utterly incapable of addressing any important problems. Note that this is beyond simple "politicians are teh stupid," which applies in any country, but in the USA particularly. Europe's facing serious problems, but that's because they're burdened with very tough choices as a result of badly thought out institutions from the 1990s. The USA faces very easy choices, but we're facing serious problems because... well, we want to? Because we have a dysfunctional government? Who knows. Regardless, it's an unforced error.

chriserin 15y ago
Its worth noting that some investors are thinking this is a liquidity event because someone got a margin call rather than concern about euro economic concerns. I'd think its both. But yeah, u.s. bonds are doing fine despite the downgrade. http://brontecapital.blogspot.com/2011/08/who-has-got-margin-call.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BronteCapital+%28Bronte+Capital%29 http://brontecapital.blogspot.com/2011/08/who-has-got-margin...

trotsky 15y ago

It's unlikely that much of today's market action relates to the downgrades. Bonds rallied, and equities extended losses that started in July, not friday night. Don't get caught in the trap of connecting events because they happen about the same time, this is a global event: Germany is down 5% on the day, London 2.5%, japan 2%.

dualogy 15y ago

Evaporate? When you buy a stock for $10, that is the moment when your $10 are gone -- not the minute it plummets. If you can sell it later for $15, congrats, that is the moment where you can realize a profitable "exit". But in the meantime -- every second of it -- don't ever count on that stock, bond or other 'vehicle' to "hold your $10 through the winds of change" or protect it against changes in the perceptions and opinions of all the other gamblers, investors, savers, market participants around the globe. Any given day, its "ticker value" merely reflects the value judgments of the relatively small number of co-owners that happen to buy or sell the same asset that day -- it never reflects "your net wealth". Your net wealth is your cash, house, car, brain, any other physical asset -- minus any money you spent on counter-party future obligations, promises, thoughts, hopes -- speculation. That stock you bought? It can be $1 or $100 tomorrow or in 10 years, and you only ever know it when it's time to sell. Was money lost? Sure -- but not last week or today -- rather, on the day the individual investor bought into these markets. Anecdotically, I made a few nice profits with Bitcoins back in May/June when they were all the rage -- but I never ever confused them with physical wealth, I knew the nature of my gamble and I timed my exit -- not perfectly, but good enough to convert this "digital profit" or "paper profit" back into "physical goods". I'm not a full-time trader or gambler and I believe in investing my time more productively, but at the same time, sometimes it's fun to play money games. Too bad so many people on a world-wide scale believe it's a smart idea for their retirement estate to "take on debt to 'invest' in others' debts". This has been going on for a long time but it's not especially sustainable or otherwise inspiring -- especially since the debts are now backed by the children of your children. Think I'm off-topic by now? Think again!

dpark 15y ago
You do realize that cash is not a true physical asset, right? You can hold it in your hand, but it has no intrinsic value. The only value it holds that that which others assign to it, not unlike a share of stock.
- dualogy 15y ago
  Good thoughts -- I did and do realize it, in fact! Some price stocks in currency, some value currency in stocks. Some price oil in currency, some "currency" in "oil". Some price gold in currency, others value currency in how much gold it buys (oil producers, for example!) That said, by "physical wealth" indeed I didn't really mean paper currency or receipts for commerce and I mentioned this mistakenly to "soften my message" for those purely and fully entangled in the paper world of yesteryear.

ams6110 15y ago

Some percentage of the worlds "wealth" has been standing on a foundation of bad debt which is, as it always eventually does, working its way out of the system. Sad that it's going to be painful, but it has to happen, and really the sooner the better.