Bloomberg's 'Net Worth' Report Doesn't Even Tell Us What It Is

http://newsbusters.org/blogs/tom-blumer/2008/03/07/bloombergs-net-worth-report-doesnt-even-tell-us-what-it ^ | 3/8/08 | Tom Blumer

[HD1200]

Incredibly, Chandra never told us what total US household net worth is, only supplying the amount of the decrease. Of course, many readers will see the $532.9 billion decline, a very big number, and think the worst -- that our portfolios are disappearing, that our homes are becoming worthless, and that the economy is irretrievably going into the tank (Was that the point, Ms. Chandra?).

Additionally, Chandra never told us what has happened to household net worth between the third quarter of 2002, the last time it declined, and the most recently reported quarter.

Here are the key numbers Chandra failed to report, including what has happened to household net worth in the past five years:

Household net worth at the end of 2007 was $57.7 trillion. The $532.9 billion decline during the fourth quarter was a "whopping" 0.91% drop from the third-quarter peak of $58.25 trillion. It's a little difficult to make the case for a "threatened recession" based on such a small decline.

[HD1200]

Household net worth has increased over 47% since 2002 (about 27% after inflation during those years) -- and we're supposed to be breaking into a cold sweat because of a one-quarter decline of less than 1%?

Omitting the three items just noted borders on journalistic malpractice -- on the wrong side of the border.

I should also note that when household net worth grew by leaps and bounds during 2003-2006, coverage in the business press ranged from muted to non-existent. This December 2005 BizzyBlog post noted that third quarter 2005 household net worth went up 2.6%; that it had increased over $10 trillion since the Bush tax cuts of 2003 ("a 24% increase in roughly 2-1/2 years"); and that Old Media, to the limited extent it covered the story at all, focused on the increase in debt levels and not the more important net worth figure. A March 2007 post (at NewsBusters; at BizzyBlog) caught the Associated Press's Jeannine Aversa claiming that the 7.4% rise in household net worth in 2006 was "slower" than the 7.9% in 2005 -- even though, after inflation, 2006 was clearly better.

By contrast, I heard reports about the decline in home equity yesterday on a couple of the top-of-hour network radio broadcasts. So it's clear that the story of declining household net worth this year has gained more Old Media traction than did its spectacular growth in previous years.

[Don Corleone]

Tie this slowdown to the election “for change” of a Democratic Congress in 2006 and it makes a little more sense. What will 2008 and beyond be like?

[Content Provider]

Do those numbers take into account the drop in the dollar index from 115 in 2002 to 72 today, as well as the M3 rate of inflation?

[HD1200]

All I know is Europe is scambling trying to cut costs in an effort to compete with America now that are dollar is lower. BMW, VW, as just two examples, have to cut the cost of their cars somehow by thousands or risk losing the US Market to the America car makers. A dropping dollar value is good for the USA at this time when we have been priced out of the market by high taxes and a high wage & benefit cost for workers.

[swmobuffalo]

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