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>You can imagine it being like if a farmer had a bunch of grain stored in a silo and it somehow went bad. It's fundamentally different, practically the opposit
by vba616 4y ago
>You can imagine it being like if a farmer had a bunch of grain stored in a silo and it somehow went bad.
It's fundamentally different, practically the opposite.
Paper losses are like a farmer realizing that the grain in his silo is bad. Knowing this when you were oblivious before is a good thing, whereas the grain going bad is obviously not.
Once you start regarding bad news as a loss, very bad stuff happens. In some contexts, we'd all agree. "Shooting the messenger" is an age-old cliche for counterproductive use of power, right?
Just saying that $X billion dollars were "lost" by market price fluctuation is dangerous, because it suggests it can be weighed numerically against real things and real peoples' lives lost.
If you were a CEO or a politician or someone powerful, would you justify destroying one warehouse or home or hurting one person, in order to avoid, say, a trillion dollar "loss" of paper value in some assets?
I mean, don't you think people do this, directly or indirectly, and it's wrong?
Stock market declines are called "corrections" for a reason.
>The money spent on that commercial real estate is gone. Those big fancy buildings will have been wasted resources and effort.
Maybe, but nobody can say for certain what the world will look like in 5, 10, 20, 50 years anyhow.
- cortesoft 4y agoI wasn’t making an argument about the overall benefit to society, which is why I said it depends on what you mean by value being destroyed. It might be a long term benefit for society, but that doesn’t mean value wasn’t destroyed.
- justin_oaks 4y agoYou're saying that they were unrealized gains, not losses. In some cases, building something that nobody will use is still a loss. It still cost money to build a building, and if the one paying for that building doesn't recoup the cost the it's a lost. Beyond that, of course you're right. It's unrealized gains, not a loss.
- nonrandomstring 4y ago> Once you start regarding bad news as a loss, very bad stuff happens. I like this. It's insightful, and stated in a plain way. And equally we can say, once we start regarding good news as a gain, very bad stuff happens. The idea of "confidence" rather than measurable, tangible facts as an economic basis has been the road to many bad things. In some ways confidence and pessimism can be seen as the ability to ignore reality. We've been inventing ways to delude ourselves in western economies for decades. For example, film and record companies counting copyright infringement as if it were an actual loss, or Twitter over-counting its users as a kind of corporate egotism. What might really help our societies on multiple levels is a return to fact-based economics, instead of what is essentially information warfare directed at pulling off ever more audacious confidence tricks.
- naveen99 4y agoNews is gain (of knowledge) good or bad. bad news is an opportunity to fix some weak links. Good news is an opportunity to reduce leverage, replenish reserves. Confidence is useful. It reduces volatility in the market.
- nonrandomstring 4y agoWe're using two different senses of a word that seem irreconcilable. You offer a very narrow, statistical definition that pertains to the goodness/accuracy of information. I am using a psychological term that reflects the feelings people have irrespective of ground truths. These are almost opposite (at least incompatible) interpretations. And yet semantically I suspect we completely agree - acting on good information is good, and acting on bad judgement is bad. As I am sure you know, a "confidence trick" is a way to defraud another by influencing their (psychological) confidence (or pessimism) against their better judgement and in spite of the objective facts.
- naveen99 4y agoConfidence is short for confidence interval. Measurement improves confidence (tightens the margin of error).