45% world's wealth destroyed

I believe that they define the ownership of the property as the individual home owner, however I think its a joke since you have to pay taxes each year or it will be taken from you and sold for the small outstanding tax balance. Seems more like rent to me.

1. yes
2. lack of confidence. Our perception of future values has changed. Over the recent past we've been conditioned to believe that home values increase at a given rate per year. This is a logical error, one that took us all by surprise. My personal feeling is this points to a error in our education, specifically business education. We should be focusing on the fact that just because something is true today doesn't mean it will be true tomorrow, next month, or next year.
3. no. The challenge this person could have with liquidating the home and switching to another type of asset for his wealth will point out a poor decision he made when purchasing. I am a prime example. I purchased a home in Sep '05, basically the top of the housing market. I made a poor decision and now I am paying the price for that.

Exactly. If it was "destroyed" it means it was not wealth...just numbers and paper money that existed only in Fed's book.

Good points made by mackus.

I distinguish and try to not confuse wealth, value and the price of something. They are interlinked but not quite the same.

Though wealth is not like energy that cannot be destroyed, it lies in the perception of the individual. A friend of mine goes nuts over "limited" Bathing Ape clothes and pays stupid amounts of money for it whilst I couldn't care less about it.

Value is determined how useful soemthing is to you. Sunblocker might not amount to much in the polar night but its value to you might be quite different if you find yourself in the desert.

What happened in this crisis is not that wealth got destroyed but a large enough number of people realised that the price tag has grown way too high and it couldnt sustain its ascend. So now it sale time and no one got money to buy, hence the FED and other central banks busy printing and buying.

Though money is not wealth, money has to be understood as debt or rather a debt agreement.
Because you can get someone else to give you a product or service by presenting them a bank note. (Weird if you think about it like that, since it is a faith system)

Therefore ultimately money is, if you buy into it, time, the time of your life and the more money there is floating about the busier you will have to be to earn it and to spend (a.k.a. inflation).
In that repsect money is also control over your life as we organise our lifes around it to a great degree.
Though there must be a physical limit to how busy you can actually be and therefore a limit to how much "wealth" is in circulation.

I think in this crisis the banks just overstretcht their extent of control but no worries the Fed is there to jumpstart them again.

Dont wanna sound like banks are evil per se as the have very helpful functions to our civilisation but there comes a point from where it becomes abusive and defeating the objective.

Correct the reason you pay taxes on it (rent it) is because you don't actually own it. I think the only way to truly own property is to have what is called Allodial Title. I think Texas is the only state in the union left where you can get allodial title.

This is all a technicality anyways and really doesn't change much form a practical perspective.

I like this one.

Person A transfered 200K to person B
Person B transfered house to person A

A still has the house
B still has the 200K

So where was the money destroyed?

OK A can't get back the 200K, but who said the house was worth 200K in the first place?

Still B has the money...

Or is wealth something completely different... like confidence and perception...

The real difference between those who actually are wealthy and those who think they are is the way they understand the world and markets around them. I once had it explained to me extremly simply this way.}

Those who understand interest collect it, and those who don't pay it. In the case of New Money vs Old Money, New Money rents it, leases it, finances it and Old Money OWNS it. Usually Old Money is leasing, financing or renting it TO New Money.

Money, after all is notihng more than the medium of exchange between the two. The real challenge, if one wants to become wealthy is to switch sides of the table from paying interest to collecting interest.

Markets are all manipulated. It does not matter if we are talking stocks and bonds, housing, Forex, collectibles or any other market. Someone is setting the price for the items exchanged.

In the case of housing, it is the banks (who quite literally create money for nothing in the process of financing a house), the people who "estimate" the market value, and the real estate agents who promote the bying and selling of housing.

In the case of Stocks, bonds, futures and so on, it is the "market makers" such as Goldman Sachs, Morgan Stanley and others whose job is specifically to create market interest and liquidity for "new issues" and to maintain the value of said securities by promoting them through broker/ dealer networks, ratings agencies, etc,. etc,. IN any event, having worked in that industry, being a "market maker" is quite literally a license to steal legally and to manipulate the price of stocks to benefit yourself and your clients.

In the case of the Forex market, is is again the banks who broker the larger currency exchanges globally and the networks of brokers and dealers who trade the securities (currency pairs) involved.

Same is true of jewels (DeBeers manipulates and controls the vast majorith of that market), Precious metals, coins, antiques, you name it. There is always a middle man somewhere setting, touting and promiting the pricing and escalation of same.

IN ALL of these scenarios, the basic premise still holds true. Those who understand interest collect it, those who don't pay it and in paying it become slightly poorer with each payment as those who collect it become slightly richer with each payment.

THAT is how wealth is really transferred in the world.

Think it is somehow different between nations? Really,,, then look at the trade imbalances. Those nations that produce are creating wealth, those that consume are exchanging wealth. In short, those who produce are collecting the interest and those who consume are paying the interest.

I know this is an extremely simplistic explanation of an extremely complex issue, but it is also the best way to see how and what "true wealth" really is.

A man living under a bridge with nothing to "pay" interest on is actually practicing the basics of aquiring weatth better than someone in a new home with a great paying job and lots of bills they "pay interest" on.

Car dealers and manufactures (as long as they understood this and practised it) collected interest and consumers paid the interest, and wealth was exchanged.

So,,, want to become extremely wealthy? Find a way to collect the interest and to quit paying it.

Trading Forex, as well as any other type of security is a way to do that, as long as you realize the market is manipulated against you and you can find an "edge" to trade with that allows you to start collecting that interest instead of paying it and thereby providing the liquidity for others who collect it.

It all comes down to this. Are you "new money" or "old money" minded. Do you look for the comforts of life before you can "own" them and end up "paying interest" or are you willing to wait a bit and learn to collect that interest?

As a trading account grows, one begins to move from "paying interest" to "collecting interest" and at somepoint, to actually begin to understand the principles of "compound interest" where the real money is.

Ok,, off my soap box now.

God bless,
Clay

Only when actual cash is invested into an asset it's valuation equals it's monetary value.

Example-: World economy was worth $1600 Trillion which mean actual cash $1600 Trillion was invested into world economy.

Now 45% wealth has been destroyed which means there has been actual cash losses of $750 Trillion.

Clay, clearly this is the way markets work. But I see something in this theory. Lets say the smart money buys houses on mortgage and gives them on rent thus creating a spread of positive cash flow in favor of the holder. For some years the smart guy applies the same concept and accumulates a good number of property in California which 'pays him' the interest. Meanwhile the new money pays interest by renting the properties. The old money uses this earning in buying new properties and making it a big business. Then one day California is hit by a major earthquake. All the properties accumulated by the old money got collapsed in one day. Now if the smart guy has not taken any kind of insurance policy for the property his loss is major and may be he becomes bankrupt (if he has any outstanding mortgage loan). The new money in this case may just leave California and start living in New Jersey without much of a monetary problem. What are your thoughts on this....

I think this is case with the world financial markets today. Big banks sell naked options and collect premium over a period till one day the options are exercised and they become bankrupt. If they would have used proper protection against a blow up condition this would have never happened. But then it would have eaten some part of their huge profits and they knew what they were doing..

very nice post dude... learned a lot from it

The part you're missing is that "old money" is also usually pretty conservative and therefore insurance would ALSO be paid by the "new money" renting the units.

The difference in the markets is this. There is an actual "tangible" item being "rented" in the previous scenario and NO TANGIBLE asset in the markets, it's ALL paper and electronic digits. NOTHING tangible in that.

Just ask someone who owned a share in any of the "dotcoms" that went bust. The issue in that bubble/bust scenario was exactly what I am talking about. The companies were "touted" based on that fact that the Internet was exploding, markets were skyrocketing, IPO's zoomed through the roof. THERE WAS NO TANGIBLE product, good or "recurring service" item on which most of those companies were based.

The rest, as they say "is history." HOWEVER, it was Old Money selling those companies to New Money. Goldman Sachs, Morgan Stanley, and many others had the legal right to promote their agendas and the companies as much as they wanted to. If YOU of I did that, we would go to jail quick fast and in a hurry.

If you want real wealth, it will never be based on "paper" or on electronic digits in a computer, it WILL be based on when you take those "profits" and turn them into something "tangible."

Now, the one area of possible exception to this is when the amount of "paper money" becomes so huge (Warren Buffet, Bill Gates and several others) that your moving or exchanging them can actually move a market one way or another. THEN, it's tangible, but not until then.

If Bill Gates or Warren Buffet were to announce some large play, you can bet the markets would move. The "tangible" item now, is NOT the paper money, it is the power it represents because so many other people are affected when it moves.

Even in a trading account, the money is not "real" until you "realize" it and remove it to your own personal account or withdraw it to make a "tangible" purchase. The exception is if you manage to get the balance high enough that your trades make some heads sit up and take notice. Those do not have to be national level heads by the way, just the ones at the broker you work through.

They may ask you to either leave, or to trade less, or put you in a special category of some kind to protect themselves from your trades.

If you get an account large enough, like perhaps Jacko of Jacko's House of Pleasure and Pain, you may have to trade through several brokers, or directly through a bank. Being that I am nowhere close to that, I don't know that part yet.

In any event, the truth holds the same. Old Money charges interest and collects it in one way or another. New Money pays it until the point comes that New Money begins to understand and is willing to do what it takes to quit paying. Then the transition between being "new money" begins.


God bless,
Clay

Worldwide forex transactions are worth $3 Trillion per day.

World stock markets are worth $40 Trillion (estimated).