Via Hopmebuyers' Strike, from The Telegraph.
The article is full of statistics on credit volume, the oil price, share prices etc and other relevant background.
Surprisingly well-informed by Telegraph standards, but they let themselves down with this:
"The stock market collapse will also destroy wealth."
Share prices, like land prices, are not really wealth at all, and they are certainly not net wealth.
A share costs $100 - what does that mean? It means that somebody has paid somebody else $100 for it recently. The seller's net wealth is unchanged and the buyer still owns exactly the same thing, a smaller percentage of a company. Nine times out of ten, the fall in value of the shares is not because the company's prospects have got worse, it is to do with other factors. So no change in overall wealth.
In the one time out of ten where the share price has fallen because the company's prospects have worsened, then that fall will be included as part of overall GDP changes, and it is enough to measure that. If you add on the fall in imaginary wealth (like share prices) then you are double counting.
Debate Magazine
