Here’s a bit of hysterics:
Private equity company Blackstone Group LP CEO Stephen Schwarzman said on Tuesday that up to 45 percent of the world’s wealth has been destroyed by the global credit crisis.
“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.”
Clearly, Schwarzman, like so many others, equates wealth with money and market valuations expressed in monetary terms. But almost the first thing one learns in basic economics is that money is a medium of exchange and that wealth is to be found in one’s real assets. Now, it is very doubtful that 40 – 45% of the real assets owned by humans have been destroyed over the past year and a half. In fact, it is probable that increasing productivity has increased these assets, if not their market evaluation.
Folks like Mr. Schwarzman ought to keep that in mind, because a lot of that real wealth could very well melt away, if the various countries in the world, out of fear of inflation, or being judged profligate by international financing “authorities,” persist in anti-stimulus financial policies that doom workers all over the world to unemployment. A few years of that, and a large proportion of the real wealth of the world will melt away, because the international economic system will produce further consumable goods at much below its productive capacity. President Obama is calling for other nations to join the United States in stimulating their economies, and in coordinating the efforts of all in attempting to end the global recession. So far, he’s getting less than an enthusiastic response from the rest of the world. Too bad, because if this trend continues, the hysterics we are seeing now about the economy might begin to describe reality, rather than just the imperfect monetary measures humans create along with our other cultural artifacts.