Steve Schwarzman, chairman of private equity giant Blackstone, said an "almost incomprehensible" amount of cash had evaporated since the financial crisis took hold. "Business will be very different," he added. His comments came on a day of the World Economic Forum characterized by the gloom of its participants and warnings that the crisis will endure for some time. News Corp chief executive Rupert Murdoch kicked off the meetings by warning that the atmosphere was worsening – despite global economic confidence plumbing the lowest depths on record. "The crisis is getting worse," he said. "It's going to take drastic action to turn it around, if it can be turned around, quickly. I believe it will take a long time." Executives participating in an economic brainstorming session said that despite the trauma caused by the economic and financial problems, another crisis at some point in the future was inevitable. – Telegraph
Dominant Social Theme: A terrible shock, but concerned, serious bankers of the West shall forge on.
Free-Market Analysis: Are you a confused denizen of the West – or East for that matter? You can hardly be blamed if you are puzzled by headlines and stories such as these. Normal people go to work, make a living and try to save what they can. They may own a house, a car and have some savings. Then they read an article saying basically that almost half the world's wealth has been destroyed – that it has "evaporated" like boiling water – in about 18 months.
They know it feels right – they are hurting, too. Are they to be blamed for throwing up their hands and deciding that "high finance" is simply impossible to understand. But how do you lose almost half of the world's wealth in less than two years? Was it simply mislaid – did it ever exist in the first place? Did somebody have a bonfire?
Frustration is building. Already there are riots throughout Europe and China and sooner or later, as the financial debacle unfolds, there may be populist leaders, charismatic and passionate, who will reach high places by raging against fat-cat bankers, and by calling for "power to the people." Too bad. It's happened before.
Where did the money go? That's the salient point. In fact, there is no mystery. Central banks printed too much of it and fooled both producers and consumers, likely over decades, into building far more of everything than was necessary. When markets, efficient as always, reached a tipping point, the waste was recognized and the great fiat-money bubble of the 20th and 21st century began to collapse. Now there is nothing left to do but empty out those unusable buildings and raze them; take those expensive cars rotting on piers and junk them; turn those empty banks into something useful, or raze them as well. The aimless populations circling slowly around those ruined businesses will have to find something more productive to do with their time.
It will not happen quickly because the world's industrial surplus has been mal-invested for so long. In the meantime, of course, the monetary elite that brought the world to this place will continue to try to inflate with every breath of their collective body. They may even succeed. That will mean next time it will only be worse.
Here is what we're looking for. Somewhere, sometime, perhaps, a Master of the Universe will finally turn to a politely offered camera and say the following …
"No the money didn't disappear. No it did not evaporate. We printed too much of it and fooled the general public – and entrepreneurs and corporate businesspeople as well – into building things they did not need and that their communities could not use. When, inevitably, many of the things that were built were recognized as unnecessary, the market for them collapsed, and nearly half of what had been built at the cost of a great expenditure of time and energy was suddenly recognized as useless."