The Fragile Forty & How The World Lost $17 Trillion In 6 Months

Tyler Durden's picture

It's official. More than 50% of the "wealth" effect created from the 2011 lows to the 2015 highs has been destroyed (despite the world's central banks going into money-printing overdrive over that period). Almost $17 trillion of equity market capitalization has evaporated in just over 6 months with over 40 global stock indices in bear markets...

 

As Bloomberg adds,

The U.K. was the latest market to fall 20 percent from its peak, while India is less than 1 percent away from crossing the threshold that traders describe as the onset of bear market. Nineteen countries with $30 trillion have declined between 10 percent and 20 percent, thereby entering a so-called correction, according to data compiled by Bloomberg from the 63 biggest markets on Wednesday.

 

 

Emerging nations bore the brunt of the meltdown, accounting for two out of every three bear markets. Slowing Chinese growth, the 24 percent slump in oil this year and currency volatility have driven developing-nation stocks to the worst start to a year on record.

 

Among equity indexes that are on the cusp of entering bear territory are Australia, India and the Czech Republic, each having fallen about 19 percent from their rally highs. New Zealand and Hungary are putting up the best resistance to the turmoil, limiting their losses to less than 7 percent.

So just before you (Jim Cramer et al.) demand the central banks do more, just remember what reality looks like - will you use any centrally-planned rally to buy moar or sell into as the smoke and mirrors of yet another bubble is exposed with the business cycle inevitably beating the rigging...

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FreeShitter's picture

17 Trillion lost? Better check the coffers of the Rothschilds first.

hedgeless_horseman's picture

 

 

Destroyed?  Someone sold to the suckers that bought at the top. Those proceeds were not necessarily reinvested in the stock market.

nink's picture

Perhaps this should be how 17 Trillion was siphoned off from the markets by the elite

hedgeless_horseman's picture

 

 

Some folks bought more cattle.
Some folks bought more guns.
Some folks bought more gold.

Stuck on Zero's picture

Some people bought more politicians.

Socratic Dog's picture

That 17 trillion may have evaporated, but it is still owed to the tribesmen who conjured it into existence.  Along with forever interest payments.

Quite the business plan.

Al Gophilia's picture

The markets didn't fall, they were drained.

The Merovingian's picture

Because it all sprang from nothing to start with, no wealth was actually lost. It is the quintessential zero sum game. Now, make no mistake there are plenty of people feeling pain, but the illusion of wealth and prosperity they thought they had was never theirs to begin with. Only with the establishment of sound money backed by gold can true wealth ever be established. For those that recognized that truth, the last 4 years have never been more prolific for creating true, lasting wealth.

What's in your sunken boat .. er, I mean wallet?

El Oregonian's picture

There are market makers, and there are market fakers. The truth flutters in the wind when actual physical is anchored to the bedrock.

As grandpa always said:Go with physical PM's every time...

BLOTTO's picture

The world owes 250 TRILLION DOLLARS.

.

250

.

TRILLION...dollars

.

To FUCKKKKKKKIN WHO!?!?!

hedgeless_horseman's picture

 

 

Apparently, you have never been to Monte Carlo.

BLOTTO's picture

No, too rich for my blood hh.

.

Btw, is that where the Rothschild live?

lincolnsteffens's picture

I don't owe it to anyone and no one owes it to me.

Al Gophilia's picture

Further to your point;  From where did they (?) get $250 Trillion to lend? That's a lot of accumulated work in excess savings for those 68 families, who apparantly have somehow first earned as much wealth as half the world's population in order to lend it. Busy little fuckers, no?

nmewn's picture

Won't someone buy my digital & paper products?

They're on sale ;-)

booboo's picture

it's bad enough being forced to use negative rate coupon bonds backed by the full faith and credit of the U.S. gooberment for every day expenses so who in their right mind would buy digital bonds backed by a prayer and a promise from some hebe in a boiler room.

nmewn's picture

I'm gonna go out on a limb and say, ONLY the ones who issued them, if we all "hang together".

Metaphorically speaking, of course, perhaps...lol.

We could just leave them in their own little ninth circle of hell, spinning off into the Keynesian economic universe if we all did it.

But that would require a little faith in each other ;-)

Al Gophilia's picture

Corporation currency Vs Money; which would you rather save and use?

Donald J. Trump's picture

The peakes and valleys keep getting bigger.  Gear up for the next doozy in 7.5 years.

sleigher's picture

7.5 years?  I was thinking get ready for about 7.5 months.  Hell even weeks for that matter the way things are beginning to look.

nink's picture

How about 7.5 days.  What are you up to next Friday....

chinoslims's picture

I question the word "wealth" in wealth effect.

Rockatanski's picture

The Law of conservation of mass or money.....

fiat is not actually lost, just transfered to someone elses account

lucky and good's picture

We may be entering the period where after decades of modern monetary theory the world reverts back to the tried and true. The great reset is a time where the market can fall like a stone or in the case of a "realizing market" slowly grind its way downward. Regardless of how it unfolds the coming adjustment will come and it will most likely be ugly.

Market crashes generally are the result of panic, but so far what we have seen has been more on the level of a minor concern. Only after the market blows through several key support levels and starts making what some people view as crazy new lows that panic will set in, and by that time it will be to late to escape the carnage. The article below explores this subject.

 http://brucewilds.blogspot.com/2016/01/the-great-reset-has-it-begun.html

Fed_is_Love's picture

The idiocy effect.

VarenneRiver's picture

So well-connected and immoral people used fake money to buy real assets that will gaurantee them rents and interest for life?
Where is the line in the sand?

HalinCA's picture

I think what they buy are merely claims on the real assets.  Until the asset is sold for real cash, you don't know what it is worth.  If the 'asset' is a financial instrument, then there probably is a cash stream they get as long as the own it.  But they will only get the face value of the bond if they hold it to maturity.  If they sell it before then, they get what whatever the market thinks the bond is worth.  That's why bond holders always worry about interest rates going up.

Back in the mid '80s, I held a bunch of bonds that I sold for way more that face value - I sold them before the were recalled - because I bought them when interest rates were high and sold them when interest rates were low.

This is why negative interest rates seem to be a bad idea:  If rates go negative, there will be a stampede of bond holders selling [low coupon rate] bonds so they don't lose more of the face value of the bond.  But who will buy them?  Only people I can see would be central banks.

 

fightapathy's picture

Ben Bernanke farted $17T out his ass one fine October morn in 2008. And now its "wealth" and its "lost"!? WTF???! Since when did the Fed collateralize the chairman's flatulent emissions?

BeerMe's picture

The only thing the world lost is numbers on a computer screen.

Twee Surgeon's picture

As a 'Financial Ignoramus' who only got a clue from finding Z.H. I was under the impression that "Money" did not simply disappear, There is always a Counter Party, is the impression I got, two sides to every deal is the Legend I have come to understand.

Please Educate me further, I mean that sincerely and i'm not trying to be clever, I just read people that are smarter than me, I know selling and trading, please help me (And I am sure, many others.) to Understand where 17 Trill has 'Gone too.'

17 Trill? what is next? 17 Bazill? A Million trillion Geoffrey Dollars at Toy's are Us.

Fucking Geoffrey Dollars.https://www.youtube.com/watch?v=zLGgFI_4u8Y

 

Quebecguy's picture

Just stack and you'll be OK.

HalinCA's picture

Anyone/entity that invests in stocks or bonds does give their real money to someone else to secure the stock/bond certificate.  Same thing with all the 'synthetic' or derivitive 'instruments' the financial industry has created.  But if he, in turn, cannot find someone willing to buy that certificate from him for the same price he bought it for, he will lose money if he sells it at a lower price.  That is why they are called 'negotiable' securities. 

When they say '$17 trillion was lost', thay mean 'take the aggregate total amount of the value of the stock exchanges at the top and subtract what those values are today'.  That is what was lost.

But it doesn't mean $17 trillion was stacked up in a boiler, and burnt.  To find out how much real money was lost, you would have to know how much was lost on all the individual trades maed by people who lost money.  I would estimate that to be much less that $17 trillion.  Sotck/bond prices are set on the marginal sale.  It is never 100% accurate that the price of an investment represents its real value.

Recall stock markets got started at gentlemen's clubs or coffee shops in London and Amsterdam ... where speculation in stocks was something bored rich people did instead of whoring and gambling at cards or races.

Very little has changed, except the PR spin.

So far so good.  No one cares if rich people lose money gambling, either on horses or stocks.  If you fell for the con and put your own pension funds into those stocks, oh well, go back to work 'cause you can't ever retire.  Bad for you, but still nothing for the world to worry about.

But the scary part is now, other people (fools) make loans of real money based upon the stated value of the investments.  When the price of the investments go down, the loans are supposed to be written down. That triggers all sorts of bad things to happen on a global basis.

That's another reason why so many at ZH consider our banking/financial system to be a giant Ponzi scheme.

 

 

 

 

East Indian's picture

You are right; money does not simply disappear, there is a counter party that has gained these $17 trillion. But this $17 trillion did simply "appear" miraculously in the accounts of the Fed, which then loaned it to the TBTF, who then "invested" it in the equity, etc. As someone pointed out above, those loans of $17 trllion will not disappear.

 

Most probably, the counterparty in the above $17 trillion are the elites who owned these stocks, etc; they will be all now laughing their way to Caymen Islands...

HalinCA's picture

They don't gain a nickle until they sell the stock/bond/whatever certificates for real money - dollars or whatever.  That's why the changes are considered 'notional' - until the loss or gain is realized, you don't really know what you have.

mendigo's picture

With asset investment you only realise profit or loss when you sell. The rest is paper profit.

Golden Showers's picture

I won't tell you the details but... I lost 17 trillion sperm in the last 6 months.

It was alright but I feel a bit feeble in the mornings now. I hope that the markets will understand my exuberence for spending but I doubt it.

All things being equal it's just spring. New money in spring. Oh, spring! All that's green is gold!

Until there are guillitines set up on Main Street, this shit is going round like the syphilis.

Hang 'em High!

mrwhoohoo's picture

That's what happens with sperm banks.

Quebecguy's picture

Follow the Money...

Quebecguy's picture

Kendal: When I say a crash, I don't mean a crash across the whole financial sector, these individuals here, will go up and down, because effectively what you've got, the derivatives bubble, or derivatives bomb, is pushing one asset up, and bringing one asset down, and what this [using block chain technology as an accounting tool for the unregulated derivatives market] will do, is this will level everything out. Just to give you an example...

Keiser: (Interrupting Kendal) Ok, so what's the most abused, manipluted, undrpiced asset in the world today?

Kendal: Gold. And silver. 100%. Without a shadow of a doubt.

Keiser: (Hesitates) So we're talking price targets of gold and silver of multiples of their current price?

Kendal: Several multiples, several multiples. You only have to look at the short position of silver alone.

Keiser: People who've made a negative bet with borrowed money.

Kendal: Absolutely. 300:1. For every ounce of silver in the ground, in the trade, there's 300 being sold off.

Omega_Man's picture

no wealth was lost, it was all as phoney as QE 

Batman11's picture

Assets bubbles and imaginary wealth ....

One house worth £100,000
Housing boom ......
Same house worth £200,000
Housing bust ......
Same house worth £100,000

£100,000 of imaginary wealth created and destroyed, underlying asset unchanged.

Use appropriate multiplier for effect on national level.

Oh my god it's 2008, where did all that imaginary wealth go?

 

Alan_F's picture

Seen that very thing on a corporate level. The Pet Rock lives on.

Batman11's picture

What about the derivatives multiplier?

James Rickards in Currency Wars gives some figures for the loss magnification of complex financial instruments/derivatives in 2008.

Losses from sub-prime - less than $300 billion
With derivative amplification - over $6 trillion

The derivatives loss multiplier was found to be 20x in 2008.

The derivatives wrecking ball has grown bigger since then (now 1.5 quadrillion):

https://www.youtube.com/watch?v=ILAvlQsgeno

watch from 12.5 mins in.

 

NotApplicable's picture

Loss in market cap does not equal a loss of cash transferred to other counter-parties, as price is set at the margins.

HalinCA's picture

Bingo.

 

Do you know a way to calculate/estimate the real cash gained/lost?  I think/hope it is much less that the lost notional market valuation.

lindaamick's picture

The $17T did not evaporate.  The dollar strengthening caused especially emerging markets to have to pay a much greater debt service.  The creditors won....as usual.