Business puzzles (me)

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A week ago I went to see my uncle; he’s in his 80s, and understands more of what happens today than many youngsters. He likes talking about economics from time to time. This time he has asked me a very good question related to the so-much discussed losses in all industries, from banking, car industry, and so on; I’ve been asking it myself but not in such simple terms: So where is the money? Indeed, where has money gone? I know that usually when someone looses, somebody else gains. Take for example the FX trading. When somebody gains, someone else looses. 
I have the feeling that before the wake of this crisis, much money was simply created out of thin air – take the derivative contracts, the re-packaged loans, and now what’s lost has greater impact simply because it was included in the real economy. Usually, at times of crisis money re-distributes. I believe it might be happening, but if it does, it stays within the same social layer more or less.  
I was curious to see what does google yield when searching “where is the money”. There’s a website about money missing from the US Treasury, you can check it out here.   Interesting, and scary at the same time. Companies, governments, people everywhere are talking about such large sums – all lost, such high amounts about which I’ve never heard when  profits were made.  Or maybe nobody bothered to put them toghether when all was rosy. I wish I’ve seen news in the past of US investment banks toghether posting X billion of dollars in profits for a quarter. Anyway,  today’s loss numbers on display everywhere in the media are so high (while investments are so low, I’ve started reporting about investments I would have never included in the issue a year ago) that it has crossed my mind that at some point we might as well start simplifying everything, go back to basics, even give up on money. It might sound absurd, but I think nothing’s impossible once we’ve started the trip downhill.
UPDATE: Wired published a story on how Wall Street went down – it’s about big numbers and a mathematical formula, enjoy reading it here.

I am amazed to see how much people need to have faith in something or in somebody. Take Obama, whose inauguration speech I’ve just listened to. He was like a preacher in a church. His speech was inspirational, and he didn’t look at his papers, not even once – I don’t know if he had any. I saw people in the audience crying, I almost couldn’t believe it – people need so much to believe that he will shape their future to the better. I hope he will be up to the expectations, because everybody expects so much of Obama. It is true, a man who knows how to inspire the people he runs has more chances of success, be him the president of the US or a CEO of a private company. I wish I saw more of these charismatic leaders. 
 Now I am looking forward to reading all the interpretations of Obama’s speech which will surely be published soon. While it may be too soon to find an online version of Obama’s speech, here is the speech; I also found a database of previous presidential speeches here. Later on, it would be interesting to see the difference in approach by Bush in his previous speech and by Obama – of course, reality changes taken into account.

I started the day with two things on my mind. One is some bankers’ idea – foreign bankers, that is, that the Romanian state should help them out survive during the tough times ahead. So on one hand the state is now expected to help out all the foreign investors which have made lots of money (sometimes after buying state assets at discount prices). The idea itself is ludacris. On the other, these bankers – I say “these” expecting others to follow suit in asking for help- have already received help from their home country states. Should they go on asking for help from any country they have branches in. What’s funny is that the banking system has screwed it all up to begin with. True, it happened in the US, but had it been peaceful and calm, I am sure European banks would have done quite the same, bending so much the lending rules, accumulating toxic assets, creating crazy banking products, and so on. So they’ve made the mess and now they’re asking the states to help them out. Well this puzzles me. 

The second thing today was the US Senate’s NO to the $14 billion bailout for the three US carmakers. I am sure this decision would trigger a wave of effects which maybe we’ll feel even here, in Romania, but I thinks it was a wise decision. I mean, how long can the US treasury or whatever other funding sources they have, keep supporting all these companies. I would assume the three carmakers had a backup plan, or have thought of options to restructure when they saw the country nearing recession. The beginning of this was more than one year ago. So when you see and understand people will have less money to spend on cars, on those huge American cars and on fuel, you realize you need to come with different products to cater for the new needs and more importantly possibilities.  I am very curious to see what happens next. It’s like an economy lesson tought live, with victims.