Henry C K Liu, writing at atimes.com, has, unlike the US Securities and
Exchange Commission, apparently not been spending his days downloading
pornography on his computer, and instead has looked at the sheer amount of
money that was lost worldwide since October 31, 2007, when "the total market
value of publicly traded companies around the world reached a high of $63
trillion. A year and four months later, by early March 2009, the value had
dropped more than half to $28.6 trillion."
To add a little perspective, "The lost $34.4 trillion in wealth is more than
the 2008 annual gross domestic product (GDP) of the US, the European Union and
Japan combined." (See
The crisis of wealth destruction, Asia Times Online, April 13, 2010.)
The upshot is that this money ain't never comin' back, as "This
wealth deficit effect would take at least a decade to replenish, even if these
advanced economies were to grow at mid-single digit rates after inflation and
only if no double-dip materialized in the markets."
He goes on that "At an optimistic compounded annual growth rate of 5%, it would
take more than 10 years to replenish the lost wealth in the US economy", which,
I assume, is an inflation-adjusted 5% growth, although since John Williams at
shadowstats.com has calculated that actual inflation in prices is a terrifying
9.5%, this means that we "advanced" economies must grow at 13.5% for more than
a decade for the losers to break even! Hahahaha!
As for just us Americans, "US households lost almost $8 trillion of wealth in
the stock market on top of the $6 trillion loss in the market value of their
homes," which is so much money that "The total wealth loss of $14 trillion by
US households in 2009 was equal to the entire 2008 US GDP."
And, worse, I remember that money comes into existence by borrowing money (to
buy stuff), and so all that money is still owed, but it won't be repaid,
because it can't be repaid, because it is just So Freaking Much Money (SFMM).
This means that a lot of guys are going to take a lot of losses, which means a
drop in capital gains taxes paid, and so a lot of capital gains tax revenue
will not be coming into the Internal Revenue Service for the next (looking at
my watch for the correct time) a hundred years or so.
And since the maximum loss tax write-off is $3,000 per year, neither will the
government get the income tax on the $3,000 of deductions!
And none of this mentions the economy-killing general grumpiness that losses
and bankruptcy and unemployment create.
In response, the morons in the Federal Reserve think that if they can keep
creating more and more money, and using some of it to meddle in the markets by
actually buying stocks and bonds, then people will be happy, and profits will
still be made because prices of everything will be going up! Hahaha!
I looked up from my laughter to see that Junior Mogambo Ranger (JMR) Terry L
sent an essay by Randall Hoven, where we learn the news that "The CBO
[Congresional Budget Office] reports that total (federal government) revenues
in 2009 and 2010 were $4.28 trillion. But outlays were $7.042 trillion", which
seems odd since this is only April of 2010.
Immediately, figuring that I had merely gone through a normal space-time
continuum and was in the future, I reached for my calculator to determine the
government's shortfall, which looked like a deceptively easy subtraction
problem, which was not the case, what with all those zeroes everywhere, and I
was soon lost, but it looks somewhere in the neighborhood of $2.8 trillion. In
Two Freaking Years (TFY)!
Whatever the exact result, Mr Hoven figures that "Revenues are paying only 61%
of our bills; the rest is borrowed. On the other hand, entitlements plus
interest on the debt accounted for 65% of spending in 2009 and 61% in 2010. In
short, every bit, and then some, of current revenues is totally used up by
entitlements and interest. Every dollar spent on national defense, highways,
courts, veterans, energy, education, etc, etc is 100% borrowed."
And when looking at such exponentially rising money creation by the Federal
Reserve with which to finance such massive, exponentially rising borrowing by
the federal government, one's mind immediately goes into Mogambo Panic Mode
(MPM) at the stark terror of such massive inflation in prices, resulting in a
frenzy to buy more gold, silver and oil.
At least mine does, anyway! And yours should, too, if you know what is good for
you.
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
Republished with permission from
The Daily Reckoning. Copyright 2010, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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