03/11/09 :: [Other] Cause and Effects [permalink]
The Wall Street Journal had a couple of interesting pieces today. First the effects of the crisis:
Forbes found 793 billionaires in 2009, down 30% from a year earlier. This is the first decline since 2003.
The total net worth of people on the magazine's list this year fell 46% to $2.4 trillion. The average billionaire is now worth $3 billion, 23% less than in 2008.
So the "Entrepreneur" Bill Gates wins over the "Investor" Warren Buffet. Same for Michael Blumberg with Reuters.
The second piece was an essay by Allan Greenspan to exonerate himself from one of the cause of this crisis.
First he explains that:
the presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005.
He continues:
Global market competition and integration in goods, services and finance have brought unprecedented gains in material well being.
He concludes happily:
It is now very clear that the levels of complexity to which market practitioners at the height of their euphoria tried to push risk-management techniques and products were too much for even the most sophisticated market players to handle properly and prudently.
At the end of the day it is difficult not to believe that someone has been eyeing the treasure chest of the baby boomers. I belong officially to the last generation of Baby Boomers, being born in 1964, so I don't really feel like one, but looking at the wealth evaporation that happened in the past 12 months I can't stop but thinking that this crisis was aimed at them and their golden retirement. Mr. Greenspan seems quite naive to to believe that a Bank CEO would have no idea of the risk that was taken by their very own company. Bank panics are not new and thinking that none of that would happen in this instance makes us wonder whether Mr. Greenspan was really the right guy for the job. It makes you also wonder why Mr. Bush, who shun by appointing friends and common idiots like John Snow at the Treasury, all the sudden appointed heavy weights such as Paulson and Bernanke months before the crisis started. It is also coincidental that the uptick rule was removed just weeks before all that happened. The trap may have been bigger than this treasure chest and target China's and Sovereign Fund's piggy bank as well as, not to mention an evil plan to punish Europe for its lack of cooperation with the Bush grand plan using AIG and Madoff to propagate the banks panic across the Atlantic.
I am sure a lot of people will debate on the causes, I think that monitoring the effects will most likely point us the cause. Let's see who are the new world "leaders" in a couple of years.