During the present crisis I keep seeing numbers bandied about which talk about company x having assets of so many billion and I saw today how one company recently sold $31 billion worth of mortgage-backed derivatives for 22 cents on the dollar in late July and I remember my basics in economics that the idea of a monetary worth is at worst a fantasy and at best a narrative but sensible people treat it as a concrete thing on which to base very important decisions. The claim that they sold $31 billion in assets or that Lehmans has assets of x hundred billion dollars is not exactly a lie but something else. I was taught that monetary worth was what the market would pay at a particular point in time and that while there may exist some platonic concept of monetary worth it was impossible to say anything other that over time market forces should discover it by finding equilibrium. Price is dependent on the context of the market. Anyone who has ever conducted a stock take knows that the prices recorded for accountancy purposes are almost, but not quite, a complete fiction. You write down not an estimate of market value but a book price. I ran a shop and always conducted the stock take and the book price had no relation to fair market value. Apart from anything else how do you estimate fair market value. Should I have estimated the jewelry at firesale prices? At melt down value? Etc. My job for accountancy purposes was to provide numbers and give the values set by my employers based on the retail price they had set -- yet I was valuing unsold discontinued lines. So for accountancy purpose how do you value a junk bond, or the many, many different securities (sub-prime backed or otherwise).

I hear much talk of greater transparency in the markets which I think is fundamentally important and needed so people can make more rational decisions. But no market is wholly rational and the idea of transparency whilst taking much guesswork out of the market in that it would give traders a better idea of what a company thought its assets are worth is still based on the fiction that a particular company has a realistic estimate of its assets (edit. clearly also if you have more information about the precise breakdown of those assets ie how many are subprime securities and the value the company has put on them there is likely to be a more rational market). So we come back to confidence. So much of the markets is based on fictions and great mountains of fictions. And I am reminded of what FDR said "We have nothing to fear but fear itself". Until the markets start believing in the narrative of confidence rather than fear there will be trouble. Also, where pure capitalists are wrong I believe is that, regulating the market whilst yes it does stifle the market also provides security, stability and an underpinning of confidence. If you are regulated like Fannie Mae and too big to fold then you are backed by the taxpayer: there is a base line of confidence. This is a lesson from the thirties that the political right had forgotten.