Ahem.

[ouraboros]

I wish people would admit that it's not that they LOST money in the market/housing/whatever over the last year.

It's that it NEVER EXISTED in the first place.

Ludicrously leveraged credit = fairy gold.
Making loans with no idea how likely they'll be paid back = mass delusion.

And now, back to our regularly scheduled lurk.

Comments

[necama]

Actually, I was wondering how much of the past few year's GDP was going to end up being "fairy gold," as you put it (a wonderful turn of phrase, BTW).

If you take that into account, it's quite possible that we'll see that the US has been in decline for a real long time now.

[ross_teneyck]

Every once in a while, when the stock market falls umpty-um points and the talking heads on the news say that a million billion gajillion dollars of value were erased, I've heard people ask "Where did it go?"

As you say, the better question is, "Where did it come from in the first place?" And really, the answer is: "We made it up. And, like Tinkerbell, when we couldn't believe in it hard enough any more it went away. *Poof!*"

[erich_schneider]

Where did it go? It went from the people who "bought high" into the pockets of people who "sold high".

[ouraboros]

See, I'm one of those crazy types who actually bought into the notion that the markets were not fundamentally a zero sum game...they do create wealth in the long run, by matching investors with people who try to make things, or make things better

[a_steep_hill]

Ah, no. Markets do not create wealth. That is a fallacy that the market marketers have managed to integrate into our thinking very deeply.

The problem is that the reality is more complex and subtle, and easily simplifies to the fallacy: markets facilitate the allocation of scarce resources by efficiently sharing information about the relative value of these resources to various individuals. What these individuals do with the resources is what creates the wealth. (Where "wealth" is things of actual value, not arbitrary markers.)

The reason I'm on about this is because I've become a pseudo-neo-Keynesian: I very firmly believe that we are going to require major investments to address both the immediate and (much more worrisome) long-term crises that we are facing. I am hoping those investments come from the US government, because any other entity that invests that much money in the US will wind up owning the US. This represents a big departure from my libertarian roots

[astroaztec]

being immersed in a household full of Artemis Fowl artifacts, it seems to me that Eoin Colfer has profited a great deal from fairy gold

[erich_schneider]

That's not strictly true. If you bought a stock for $100/share, and then it eventually got down to $10/share, and you had to sell it because you needed the money, you really did lose $90/share in the stock market.

[ouraboros]

The question there is what one was doing gambling, er, investing with money that might suddenly be needed.

Yeah, I know that if you played with short selling and margin calls, that kind of thing can force your financial hand.. but then does that not make a mockery of the notion of rational investing, and rather imply the markets are a form of n-dimensional poker?

Tragedy of the commons

[ouraboros]

In the short term, for individuals participating as middlemen in the trades, there was no delusion. Only perverse incentives.

And what is government for then, if not to allow large groups of people to continue co-existing vaguely peacefully with one another? Perhaps we have reached a scale of wealth/population/complexity that is beyond human governance. How many civilizations have ever weathered this many citizens, with a population growing for so long, without major political upheaval, at least in terms of political system overthrow?