The Bezzle

By Ramesh Akkineni

Warren Buffett wrote this about effects of manias- Some time ago Ken Galbraith, in his witty and insightful The Great Crash, coined a new economic term: "the bezzle," defined as the current amount of undiscovered embezzlement. This financial creature has a magical quality: The embezzlers are richer by the amount of the bezzle, while the embezzlees do not yet feel poorer.
Professor Galbraith astutely pointed out that this sum should be added to the National Wealth so that we might know the Psychic National Wealth. Logically, a society that wanted to feel enormously prosperous would both encourage its citizens to embezzle and try not to detect the crime. By this means, "wealth" would balloon though not an erg of productive work had been done.

In the same way people think they have lost wealth when the market goes down. But no real damage has happened to the companies or the economy. When markets go down, Psychic National Wealth will decrease. it influences the spending and the view of people on economy. As George Soros says, in a way market prices which are used to measure the fundamentals can also influence the fundamentals. This is like thermometer instead of measuring the temperature is also changing the temperature.

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