Almost 90 years ago we did not have a year that was so complicated in financial matters.
Perhaps we thought that the difficult year was 2020 since the biggest drop in economic activity in almost a century occurred in it.
And, indeed, in the productive field, the first year of the pandemic was a real disaster.
According to the IMF, the setback meant a global loss of 2.2 trillion dollars in the generation of value in the world.
As a mere reference, Mexico’s GDP in that year was equivalent to 1.1. billion US dollars, so the global fall was equivalent to twice the total value of the Mexican economy.
We haven’t seen a loss of this magnitude in decades. The drop in the economy in that tragic year was 2.9 percent, something never seen since the end of World War II.
But if we talk about the value of the assets of the stock markets, the fall of this year 2022, has been much greater so far, since estimates point to a loss in the capitalization value of the stock markets of almost 20 billion US dollars.
There are only a few figures to measure the depth of the fall.
The Standard & Poors 500 index, which includes some of the world’s largest traditional companies, is down 18 percent so far this year.
The Nasdaq, which includes most technology companies, is down 29 percent, with spectacular losses for the largest companies.
Just to give an example, Apple, which is the company with the highest value on the list, has lost 400 billion US dollars in its market value.
Google, another of the giants, fell back 661 billion dollars. And Facebook, today known as “Meta”, came back with a loss in the value of the company of 655 billion US dollars.
Perhaps it could be thought that this erosion of value is merely symbolic.
Since the 19th century, many economists have pointed out that financial crises derive from periods in which financial assets are excessively valued, speculatively.
Karl Marx, the inspirer of communism, spoke of this process as the generation of “fictitious capital”, that is, the value that exists on paper but has no correspondence in the real world.
Like others, he identified that capitalism moved through financial crises, in which, at certain moments, there was a destruction of financial capital due to the fall in the value of securities.
Time has shown that reality is somewhat more complex than the models described.
But there are elements that continue to appear since the nineteenth century.
The economist Charles Kindleberger, in his text, Manias, Panics, and Crashes: A History of Financial Crises, gave a detailed account of the history of these events since the so-called “Tulip Crisis” in 1637.
Human psychology largely explains this cyclical process that inflates the value of assets followed by a crash that sometimes occurs for reasons that have little to do with economics.
When faced with an optimistic environment, we are prone to euphoria. We lose the parameters of reality. But, the same happens when the environment is pessimistic and everything looks completely black without really being.
In both cases, emotions overcome rationality and generate manias in the first case and panic in the second.
This 2022 we have seen a complex adjustment in the financial system that has brought losses in almost all markets and that anticipates an economic recession.
However, unlike in 2008 and 2009, it is not perceived as bringing financial disaster.
In fact, as described above, the financial problems rather preceded a probable recession, which could be rather mild and not very long-lasting.
Source: Column by Enrique Quintana on El Financiero