A recent book review, entitled "Greed Layered on Greed . . ." (The New York Times; 16, 2009) begins with the following paragraph:
"In her useful new book, Gillian Tett of The Financial Times writes that the global financial meltdown, which economists estimate could result in total losses from $2 trillion to $4 trillion, was "self-inflicted.' Unlike many banking crises, she adds, "this one was not triggered by a war, a widespread recession, or any external economic shock." Rather, the "entire financial system went wrong as a result of flawed incentives within banks and investment funds, as well as the rating agencies; warped regulatory structures; and a lack of oversight."
What does term "total loss"? mean, as far as our economy is concerned? How were two or four trillion calculated? Suppose the country was hit by a meteor so that many towns and factories were destroyed, many farms were inundated by oceans, etc. In that case the term "loss' is well defined. The term is also well defined when a bank is robbed or when when a fortune is wasted in a casino. In such cases the bank or the gambler loses while the robbers or casino gain. But our land, and our productive capacity did not change very dramatically in the last ten years. Yes, many people lost money because the stock market went down; this can easily be evaluated in terms of dollars. Suppose that such losses amount to 3 trillion (3000 billion). Was it a real loss or was it a loss of something that did not exist? A person believed that s/he had a million dollars of assets but it was worth much less. If this is true then the ongoing economic crisis is correcting such illusions.
And even more people lost jobs, i.e. dependable income. These are real and painful losses to individual households. They can also be calculated in dollars. The term "loss"- implies that there was a "gain" somewhere. Who gained 3 trillion dollars lost by workers, and by owners of stocks, bonds and other "I will pay you" promises? Who benefited from a huge number of lost jobs? Thieves, like Bernie Madoff, and CEOs of major banks, did gain something. But that is still probably much less than 10% of 3 trillion. And most of their gain (in the form of houses, yachts, gold, secret bank deposits, etc. etc.) is probably recoverable. Where did most of our losses go?
Ludwik Kowalski is a retired physics teacher (Professor emeritus, Montclair State University, New Jersey, USA). He is the author of two recently-published FREE books:
1) "Hell on Earth: Brutality and violence under the Stalinist regime" (more...)
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