Skip to comments.Wealth implosion: It's not just housing
Posted on 06/21/2012 6:18:04 AM PDT by TigerLikesRooster
Wealth implosion: It's not just housing
By Tami Luhby @CNNMoney June 19, 2012: 2:32 PM ET
NEW YORK (CNNMoney) -- Americans' net worth collapsed in recent years, but don't blame the housing market for it all.
A CNNMoney analysis of new Census Bureau data shows that if you strip out the effects of the housing collapse, median household net worth still fell by 25% between 2005 and 2010. The decline was driven largely by the plummeting stock market, which devastated Americans' portfolios and retirement accounts.
Overall, median household net worth declined 35% to $66,740 in 2010.
The median worth of stock and mutual fund portfolios fell 33%, while the median home equity value dropped 28%.
"One of the significant factors is housing, of course, but it's not that alone" said Alfred Gottschalck, an economist with the Census Bureau. "It's how business conditions affect stock and retirement accounts."
(Excerpt) Read more at money.cnn.com ...
Oh no, no,no...just ask 0bama. It is not at all that pesky issue of wealth devaluation.
As any liberal in fact...they will tell you the rich are sitting on the sidelines with hoards of money & wealth they won’t invest.
Good find. Thanks for the perspective. REALITY - - - what a concept!
The article focuses on housing and financial assets. Other factors resulting in loss of household wealth in recent years include:
1) Decline in real household incomes. Middle class jobs are going away.
2) Inflation. The hidden tax eroding the purchasing power of money and the result of both government and Federal Reserve policies. Food and energy prices have accelerated and take an increasing share of household income, yet food and energy inflation is not included in the government inflation statistics.
3) Negative rate of return on savings. Savings accounts, CD’s, and bond interest rates have declined due to Federal Reserve low interest rate policy.
4) Total tax burden (federal, state, local) continues to rise.
The factors above will make it difficult for households to accumulate new wealth to offset the lost wealth.
To some considerable extent this decline is not a decline in real wealth, it’s a decline in an illusion.
Some significant percentage, my inexpert estimate around 50%, is the bursting of the bubble. Bubbles, by definition, do not represent actual wealth, they’re merely an illusion.
If you happened to sell out at the height of the bubble, then it was real. But there is, also by definition, no way everybody could sell out at the right time. Therefore most people are going to get caught when the bubble pops.
So we thought we were a lot richer than we were.
On the other hand, there is an opportunity for thrifty, responsible, industrious households to get great bargains in real assets. There are places in some areas near me where you can buy multi-family units for one half their 2006 sales prices.
It doesn’t look like there’s any consideration of savings accounts being slowly (or quickly) depleted by people who are either completely unemployed or working hand to mouth to make next month’s payments.
3) Negative rate of return on savings. Savings accounts, CDs, and bond interest rates have declined due to Federal Reserve low interest rate policy.
The FED will work to keep interest rates low indefinitely for this reason. Old people won’t riot, but young minorities will. This whole scheme is just one big Hail Mary, with out leaders hoping for some kind of economic miracle to grow us out of this unsustainable mess. But it ain’t gonna happen ‘cause there are no saviors left.
Or savings and retirement accounts being depleted by people whose children are hitting college age with devalued college investment accounts.
Even this situation goes hand in hand the "illusion". Real money went to the buyer, but the other side of that transaction turned out to be just bits shuffled from lender to Fannie Mae to a line in Stimulus (or "Porkulus") to their final resting place in the Federal Reserve's balance sheet, like the tortured souls captured by the Ghostbusters, fighting each other in the Containment Unit for eternity.
So how’s that shipping your entire consumer manufacturing sector off to China working for
“If you happened to sell out at the height of the bubble, then it was real.”
Yes, for the person selling it was real but what many people don’t understand is that even if you were lucky enough to sell at the top that may have increased YOUR real wealth but the total wealth of the nation did NOT increase. Your gain is offset by the loss of the buyer. I once stated on FR that the constantly increasing appraised value of housing that was happening at that time DID NOT represent an increase in total wealth in the real world. I was called several different kinds of a fool by certain FREEPERS for that statement but I still stick by it. Likewise the drop in housing prices did not represent a real loss in total wealth of the nation. The house is the real wealth and the house is still there. As long as a house is being sold AND PAID FOR any loss to the seller is offset by a gain to the buyer and vice versa. It is only when houses and commercial buildings sit empty and fall into disrepair that there is a REAL decline in total wealth, that is going on now. As I drive around my area I see more and more empty buildings and empty houses. A house can only sit empty and untouched for so long and it starts to fall down. A few leaks begin and in this humid climate the rot begins rapidly. The total real wealth in my community is dropping and dropping rapidly, of this I have no doubt.
In short, barring outside inputs from other nations such as when oil wealthy little nations are able to simply let oil companies from other nations come in and produce oil and pay royalties is there any increase in REAL wealth from any source other than the hard work of the citizens. This is so simple that many people cannot comprehend it. We have large numbers of Americans who imagine that somehow increasing numbers are real wealth. The same people seem to think that a job is a job is a job. They think that a government job that pays $100,000. a year is equal in value to two jobs for plumbers making $50,000. a year each. It ain’t so, never has been, never will be. The plumbers preserve and or produce real wealth, the government worker in all too many cases is tasked with preventing the production or preservation of real wealth.
Quite well, for the people that shipped them off.
Why do so many Freepers so miss millions of Americans working menial and mind numbing low paying jobs? I’ll never get it,
For many years the intentional inflation of the dollar has dropped our purchasing power by a large percentage.
The impact has been especially bad in the Obama era because of the housing collapse, the jobless rate due to Obama’s business killing policies, and the Fed flooding the world with watered down dllars to support humongous deficit spending.
Since 1990 the dollar has lost about 1/3 of its purchasing power.
When you lose the assembly jobs you lose the higher skilled one too. Besides, not all people were meant to be scientists.
Because we’d rather these millions of American’s be working - menial/mind numbing, or not - than sitting on their azzes and living entirely off of welfare. That’s why.
I have to keep reminding my kids, there is no such thing as a menial job.
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