This is going to be my last post on this as I don’t think anything I write will illuminate my points to davelj nor do I care to. First off, I never said wealth cannot be destroyed, never wrote it in my last posts. I simply said I love it when people make that statement and I question if it goes into a vacuum. Like I said, looking at a singular instance, yes, it can be destroyed. I have not and am not talking about me, you and your neighbor. I’m not talking about individual specifics, I’m looking at this from a MACRO view.
Wealth is lost is even subjective – are we talking about paper wealth or real money? If someone bought a security at X, it then went to 5X, but the person cashed in at 2X, was wealth destroyed or did they simply fail to capitalize on their gain? $10M building destroyed in an earthquake, how much did this person pay for it? Is the land still commercially viable and if so, what is it worth immediately post earthquake versus in 1 year? If the land must be sold, is this an opportunity for someone else to buy it for cents on the dollar and wait for a recovery, to which a different person will make a significant amount? Davelj – is this your straw man example without all the details?
I have said and will say it again, at a MACRO level, wealth can and does get transferred. I don’t give straw man examples, I give simplified examples because unless you are an insider, no one really understands the implications, nor can it necessarily be measured looking at short term effects verus long term. An investment banks headquarters was destroyed on 9/11 and they lost much of their staff, including entire teams that were decimated. There were people that day who lost wealth- no argument there. The bank – helped along by its clients and competitors rebuilt their lost staff and came back and 5 years later, had multiplied in revenue from their pre 9/11 time, and had gone public. Net, this bank and its effect on the economy is clear. If you look only at 9/11 as a singular event, wealth in parts- was definitely destroyed that day, but what happened to that wealth that remained over time? There were many companies who were insured, their insurers paid, but many of those insurers were re-insured. How the re-insurers were further hedged, I don’t know all those details as each instance would be different. If you have the time to go chase down ALL the details and all the dependancies, links, hedges, go for it -maybe you can then build what you call – not a straw man argument. So one could argue that wealth was destroyed, others could argue that a year later, for some it had not – they had recovered. There are many ways to measure the net effect of this wealth, at different points in time. I challenge people to take a deeper look and evaluate whether people are losing wealth, temporarily or not, real or not, or whether people are failing to capitalize, failing to make the correct market bets, when others are finding opportunity amongst what is chacterized as all this wealth destruction.
There are economists who believe wealth is indeed not destroyed, but rather its transferred- macroeconomics is not a perfect science – that is why there are theories and many economists. If there is only 1 view on economics, why are there multiple theories and economists who evaluate the marketplace? There are many factors and until you evaluate all the factors, or are even privvy to all the factors – my argument is that WE (the public)are not privvy to all the factors of complex institutional transactions. I’m not here to say which theories are right and which are wrong, I merely am providing examples of a different vantage point. Decide for yourself, but the point is, in complex transations and macroeconomics, there is never just 1 view of any situation – even the world’s renowned experts will argue and come up with different analysis.
