The world suffered a loss of SGD 70 trillion in 2008. This is the drop in asset values in all the markets around the world. Prior to this drop, the world had assets of probably between $150 to $200 trillion. Is the world really poorer now, compared to 2007? Were the assets destroyed?
The same assets (i.e. businesses, hotels, properties) were still around. They are now partly unutilised, due to the drop in consumer demand, but in terms of physical quality, they are not impaired. In this case, why should they be considered as losing one third to half of their value?
This is a weakness of the free market system that formed the foundation of the economic system that has now collapsed. By depreciating the value of these assets to this extent, the world does not become better. In fact, it becomes worse when the values keep wpiralling downwards. People react to this situation by cutting down on their speding, making matters worse for the wider economy.
To solve this problem, we must give people the confidence to continue spending as before. This will generate demand, which will create employment, help to pay for the mortgage on their homes.
A possible solution: give people access to personal credit (especially if they lose their jobs or suffer a drop in earnings).
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