...what would happen to their wealth if they want to realize it. Your point was that (many) americans do not have to save money because they are richer... ....nobody believes or better should not believe that this can go on forever.....
What I'm getting from you is that household private assets have value on paper but everyone sells their home then home values will fall. They won't, but even if they did they'd only take a hit with about a third of private wealth ($21 trillion-- the break down came from page 102 of this fed report).
Same with bank deposits ($12 trillion). If everyone spent all their money all on the same day then the money wouldn't be worth as much.
Check out items 23 through 29 -- they're all based on stocks and they total more than homes and deposits combined.
Most companies with stocks are in the service sector. These companies make stuff like software, building designs, songs, invention patents, books, etc. The value of a stock depends on the ability of a company to create products.
So you're right --it can't go on forever. Everyone knows that in about 5 billion years the sun's going to explode and end all life on the planet.
-the article was about the current account deficit the port deal and the consequences for the US and it is or was a good one.
- My point is the question about future grwoth and consumption in the US because you can not only look at one site of the picture. Your argument of net wealth of american households is correct and a good one but also very tricky.
If you look at the numbers you will see that real estate showed the highest increasings with more than 50% within less than four years. The fast grwoing mortgages compared to other times in history indicates the same. Households in the US behaved as they did in the last years not because of their stocks. The increases of the value outperforms the increases of the mortgages. So everything is fine. by the way nearly 70% of the growing net value could be explained with growing real estate prices. To say that would not be fair because soemone must also take the growing liabilities into account.
In the last year the saving rate was negative that means americans already spent more than they earn (in general).
You say (or better i do not know if you say that) this can go on because the net wealth of american household is increasing but not their net wealth will pay for consumption or mortgages it is their income and here we are already negative (saving rate).
So in my opinion it does not need a housing bubble or fast growing rates to bring a lot of americans to a point where they simply can no longer increase their consumption at the same level as we saw it during the last years because that would mean additional growth .
I do not believe in a recession or something like that just slower growth.
Your net wealth will only play a part in this gáme when the debt burden is at a point where the income can no longer pay the mortgages and when a household has to sell their assets hopefully to this higher prices.
If this continue the future would have to be this
- always increasing asset prices
- so that amercians can effort to spent the way they do and have a negative saving rate. But this negative effect will be outperformed by the increasing of their wealth so they can spent more and more. So at some point in the future when their "normal" income can no longer pay for their consumption and growing mortgages it will be payed by their assets that they can always sell at these always increasing prices.
