100 Trillion Dollars in global wealth vanished

[I Shrugged]

John Mauldin's most recent newsletter spells out the basic math about the value of oil reserves. The drop in world wealth, balance sheet wise, is $100 trillion.  He points out how this dwarfs any of the drops we've ever seen in more conventional balance sheet wealth items like home values, stocks, etc.  Pointing out that the negative wealth effect of this will most likely be huge, if not as easy to pinpoint as what happens after stock market crashes.

It is a startling number.

[Fred]

John Mauldin's most recent newsletter spells out the basic math about the value of oil reserves. The drop in world wealth, balance sheet wise, is $100 trillion.  He points out how this dwarfs any of the drops we've ever seen in more conventional balance sheet wealth items like home values, stocks, etc.  Pointing out that the negative wealth effect of this will most likely be huge, if not as easy to pinpoint as what happens after stock market crashes.

It is a startling number.

Well, hopefully some of that 100 trillion didn't just "vanish" but enough went into gold and LT bonds to drive up the price.

Haven't been in the PP as long as a lot of you but it seems to me in my limited experience that this is just the kind of headline the PP thrives on.

[Fred]

Nope, the oil wealth vanished, temporarily at least. If the gold price dropped by 50%, your gold wealth would drop by 50%. It doesn't "go" anywhere. It goes away.

You'll have to explain what you mean by this. When I started the PP I converted 25 percent of my wealth into gold, 25 into LT bonds, etcetera.

I realized that each sector of the PP was at risk and each could decline or increase in value, but at what point would I say that any portion of my investment "went away".

[Libertarian666]

John Mauldin's most recent newsletter spells out the basic math about the value of oil reserves. The drop in world wealth, balance sheet wise, is $100 trillion.  He points out how this dwarfs any of the drops we've ever seen in more conventional balance sheet wealth items like home values, stocks, etc.  Pointing out that the negative wealth effect of this will most likely be huge, if not as easy to pinpoint as what happens after stock market crashes.

It is a startling number.

So if the US minted the trillion dollar coin to "pay off the deficit", then somehow the coin was destroyed, that would destroy $1 trillion in wealth?

Then I really hope there isn't a fire in the office where Social Security keeps the "trust fund"!

[dragoncar]

John Mauldin's most recent newsletter spells out the basic math about the value of oil reserves. The drop in world wealth, balance sheet wise, is $100 trillion.  He points out how this dwarfs any of the drops we've ever seen in more conventional balance sheet wealth items like home values, stocks, etc.  Pointing out that the negative wealth effect of this will most likely be huge, if not as easy to pinpoint as what happens after stock market crashes.

It is a startling number.

So if the US minted the trillion dollar coin to "pay off the deficit", then somehow the coin was destroyed, that would destroy $1 trillion in wealth?

Then I really hope there isn't a fire in the office where Social Security keeps the "trust fund"!

If the treasury minted a $1 trillion dollar coin, it wouldn't be destroyed.  They would give it to the fed to pay off debt.  Then they would issue more bonds up to the debt ceiling.

[Libertarian666]

John Mauldin's most recent newsletter spells out the basic math about the value of oil reserves. The drop in world wealth, balance sheet wise, is $100 trillion.  He points out how this dwarfs any of the drops we've ever seen in more conventional balance sheet wealth items like home values, stocks, etc.  Pointing out that the negative wealth effect of this will most likely be huge, if not as easy to pinpoint as what happens after stock market crashes.

It is a startling number.

So if the US minted the trillion dollar coin to "pay off the deficit", then somehow the coin was destroyed, that would destroy $1 trillion in wealth?

Then I really hope there isn't a fire in the office where Social Security keeps the "trust fund"!

If the treasury minted a $1 trillion dollar coin, it wouldn't be destroyed.  They would give it to the fed to pay off debt.  Then they would issue more bonds up to the debt ceiling.

But if it were destroyed, would it "wipe out $1 trillion in wealth"? I say it would not.

[dragoncar]

So if the US minted the trillion dollar coin to "pay off the deficit", then somehow the coin was destroyed, that would destroy $1 trillion in wealth?

Then I really hope there isn't a fire in the office where Social Security keeps the "trust fund"!

If the treasury minted a $1 trillion dollar coin, it wouldn't be destroyed.  They would give it to the fed to pay off debt.  Then they would issue more bonds up to the debt ceiling.

But if it were destroyed, would it "wipe out $1 trillion in wealth"? I say it would not.

I see what you're saying. 

[I Shrugged]

I think I'm not an eloquent enough writer to be posting here.

[ochotona]

Debt, defaults, and devaluations: why this market crash is like nothing we've seen before

A pernicious cycle of collapsing commodities, corporate defaults, and currency wars loom over the global economy. Can anything stop it from unravelling?

UK TELEGRAPH LINK HERE

[Kbg]

How many times has the economic world almost fallen apart in the last 15 years? And yet, life goes on.

Bad news sells and news sellers know that...

How about we attribute the "market crash" to a correction or bear market after one heck of a bull market that lasted 5 1/2 years. It all seems entirely normal to me.

As for oil...yeah, never seen this before.

http://www.macrotrends.net/1369/crude-o ... tory-chart

[MediumTex]

Rather than measuring the price of oil using an abstraction like dollars, why not measure it in something real like BTUs?

If you measured using something real like BTUs, you would find that we have lost nothing.  We have exactly the same amount of potential economic activity in today's oil reserves as we would have if oil were $100 per barrel.  In fact, I would say that we have more because economic activity that was not viable at higher oil price levels has now become viable because energy has become cheaper.

Isn't that the right way to look at it?

If I am reading Mauldin's argument correctly, he would say that $200 per barrel oil would be great for the world because of all of the new wealth it would create in those who controlled oil reserves.  The problem, of course, is that at $200 per barrel the world economy would basically shut down because a vast number of economic activities would no longer be profitable because the cost of the energy inputs would be greater than the expected profit from the economic activity, right?

You don't want to live in a world where the only people getting rich are those who own natural resources.  You want to live in a world where the people who are getting rich are the ones taking affordable natural resources and adding value to them through the products and services they create using the natural resources.