What Was Lost in the Crash Wasn't Real

In his Dec. 27 letter, Jeremy Stone argues that the $500-million drop in stock market prices on Oct. 19 was not "lost forever." He points to the accounting dogma that money "never vanishes, it just changes hands."

His comments tell us more about the accounting mentality than about what happened on Oct. 19. To fully comprehend this event, we must look not to the accountants but to the metaphysicians. What was lost on Oct. 19, what vanished utterly, was not money, but value. Money is a representation of abstractions. The value existing in the stock market prior to Oct. 19 was lost in the same way that it came into existence, in the minds and emotions of many individuals. Whether it will be restored or further diminished remains to be seen, but for now, it does not exist.

There is implicit in Stone's letter the assumption that for every winner in the stock market there is a loser, that it is a "zero sum game." This is not correct, as a simple example will show. Suppose I buy 100 shares of IBM at 1/8 above the last trade. In that moment, I create additional value. Everyone who then owns IBM (except myself) is thus a winner and there are no losers (including the seller). This is not true for the futures and options markets; because of the way they are organized, there is a loser for every winner.

The important thing to remember in all this is that we are dealing with intangibles, with noumenons, not phenomenons.

CHARLES G. GANT

Santa Ana

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