Much of financial news of recent note has typically been about how much money has been sucked into a black hole. People bemoan the falling value of their 'nest egg' real estate; stocks hopped onboard a time machine and revisited the Nineties; California real estate is already in the Nineties, and seems to have a hankering to see some disco. There's a distinct possibility that some financial sharkskin suits might be spotted in the near future, and we wouldn't rule out a resurgence of the Zoot suit.
But what, really, has been lost? In our examples, and indeed in general, money hasn't actually gone down a black hole: all that has changed is the hypothetical price tag on a given investment. Nothing changed physically about the houses in California (usually); the same can be said for stocks. One day they were value X, and the next they were value Y... the bad news: Y was less than X.
Such fluctuations are normal in a market's valuation of a given 'thing,' and are to be expected. Just because 'the market' says a certain Californian condo appraised at $450,000 doesn't necessarily mean someone will actually buy the place. The condo is worth what someone will pay, and not a cent more. Trouble sets in when people confuse a market valuation with 'money in the bank,' and spend $400,000 as if they had already sold the condo.
We suppose it's all well and good to do this when the market is forever going up... but surprise! No market is immune to the inevitable downturn, and now the average Californian real estate speculator is 'under water' (i.e. owe more than their properties are worth). They're saying they've lost money, but have they really? They didn't sell their property, but yet they spent like they had a big pile of cold, hard cash. They thought they were wealthy, but clearly weren't... so what did they have?
Perceptual wealth, dear Reader; the perception of wealth, without actually being wealthy. These real estate speculators (a.k.a 'homeowners') truly believed they were wealthy, and so they spent and lived as if they were wealthy, but in the end what made their 'wealth' wasn't real. It was an opinion, a valuation; it was what someone said the investment was worth. Writ large, the real estate bubble more resembles a confidence scheme, but it all began with someone feeling wealthy because they bought a condo in California.
Thursday, December 4, 2008
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2 comments:
The points you made have triggered thoughts in my mind. I laid them down raw as they are.
I should have sorted them out but I will leave them as they are.
Allow me to leave them here as a record, a deposit to be visited again as certainly I will continue to ponder on them, elaborating them further.
The following quote started me of
"..all that has changed is the hypothetical price tag on a given investment."
what you mention here, it makes me think, (is that what money is)
this is what money 'is'. Hypothetical. Something that it is not real,
(as it does not reflect) something that the people can be make use of?
Since you mention as well
"Nothing changed physically about the houses in California"
What actually is useful, as it provides shelter, comfort, protection, has not changed at all?
these are goods that are real and surpass any notions attributed by money
money is a cloak that supposedly reflects on the significance of 'goods' or 'services' individuals make use of,
but instead it shrouds goods and services, obscures their objective(?) value
warps and distorts
all in all, money has exceeded its role as a vehicle of exchange for goods and services distributed
acquired a (stature)... of their own
replacing real value with perceived value
which alas it warps and distorts
there is something wrong in this practice where everything is channeled into(through) the medium of money to that extent that what matters for people, goods and services to better their lives, is warped and distorted
goods and services are warped and distorted
become caricatures
warped and distorted view
as by looked upon by the money angle or perspective, seem as if there is no value on them
whereas in reality the value survives, and continues to benefit the individual regardless a perceived loss of value which is attributed by adopting the money angle or perspective.
value as it is bestowed by looking at it through the medium, carrier, vehicle, namely money
as if it is not there, but it is
loose touch with reality
This is a problem that I and my co-writer have been wrestling with. For instance, the fruit of one's labour is typically represented in U.S. dollars. However, with the dollar losing value, how does one protect the quality of one's labour?
The quality of one's labour does not change, but the way it is represented does. This would suggest that one should invest... but invest in what? Frankly, I really cannot say for certain.
Thanks for the post, and I look forwards to further ideas!
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