Tan Kin Lian's Blog: Loss of SGD 70 trillion in 2008

Tuesday, March 10, 2009

Loss of SGD 70 trillion in 2008

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).

5 comments:

zhummmeng said...: "In the near term, governments around the world must continue to take forceful and, when appropriate, coordinated actions to restore financial market functioning and the flow of credit." said Bernanke
There must be strong end effective regulation to bring back confidence but our regulator is still adamant about self regulation.
Even Alan Greenspan admitted the crises were due to no regulation, a systemic problem.
Is MAS sticking to its gun of caveat emptor? Public confidence in the FIs is at an all time low.
Insurance companies are at wits end and are rolling out rubbish products. They are passing off new products as the good old products of the good old days as going back to basic. The consumers must not be fooled to believe them that these risky new product could give good returns and protection at low cost.
It is a marketing deception and it is cheating.; March 10, 2009 11:24 PM
zhummmeng said...: Hope that a new rule book is not yet another book to gather dust somewhere in the regulator's storeroom.
We already have those rules but they are still 'brand new', unused and resulted in financial fracas. Insurance companies too have mission statements like the 'hippocritical oaths' to decorate the walls at service lounge.
They are phoney and are intended to deceive the public; March 11, 2009 9:29 AM
ym said...: the crisis wasnt due to under-regulation and free-market...

the crisis was due to greenspan/bernanke themselves who manipulates int-rates..

is the market really free when int-rates are controlled by the overated-wits of the central banks?

back to more credit as solution : the flipside of credit is debt.. isnt too much leverage and debt got us here at the 1st place?..

so how can more of the same solve the problem?..

ym
mises.org; March 12, 2009 8:50 AM
Solomon said...: My guess this is the result of supply and demand. The Banks in The US now want to change the rule so that they can package their garbage at high price again and sell them to the unsuspecting investors.

Their intention is not to save the financial system, they want to save their own skin.

the collapse of the system was not due to the rule. It was due to the non-ethical management and lack of enforcement of the rules; March 12, 2009 10:23 AM
David said...: What goes up must come down. Why should the world of assets and stocks be any different? Sometimes this is also the system's way of seeking equilibrium.; March 12, 2009 8:53 PM