Real assets don’t evaporate. They merely change owners. The chicken little panic is generated by the current mismanagers in order to stampede the people into trying to prevent this change of ownership by giving tax dollars to the mismanagers so they can continue to reap ill-deserved rewards.
Failing businesses need to go through chapter 11 bankruptcy so the assets can be redeployed to creditors who will choose new managers. There will be write-downs of prices, but factories, stores, inventories, etc. will be shifted to new hands. Prices and wages will likely have to be cut to speed the readjustment.
The big danger is government interference that impedes readjustment—things like bailouts, card-check unions, tighter regulations will all act to prolong the pain just as similar measures did in the 1930s.
Real assets do not evaporate but wealth does. We have seen at least four trillion in stock market value evaporate in the last year half its value actually.
Since wealth is a variable in consumption functions it presages a huge drop in spending.
It should also be recalled that rarely do global economic disasters come from the real economy they almost always come from the financial side. I would have to think a while to come up with an exception.
The problem is that the “real assets” have been leveraged a hundredfold, and the result is $700 trillion dollars in derivatives.
The implosion will dwarf anything from the Great Depression. Nothing like this existed.