Posted on 12/08/2008 11:14:17 AM PST by JasonC
Does that mean there is $56 trillion in equity? Which is neither wealth or money.
This is the type of analysis that one would expect of someone with an actual understanding of the dynamics of finance.
My expertise is physics/math, but this work shows intellect.
Too bad that there are few (if any) journalists out there with sufficient education to trace this out.
Bookmarked! thanks.
For what it’s worth, I am SO tired of liberals talking about “the rich” as if they were some ethnic group - as if wealth were an inborn, and inalienable characteristic.
People move up and down the net worth ladder all the time.
Thanks for the breakdown. I will spend a lot of time on it later after work.
It is refreshing to see facts. I see so few of those in the media these days.
If we lack money we shall monetize things that haven’t been monetized as yet, or commoditize what hasn’t been commoditized such as a carbon debt. We can even monetize oil that hasn’t been produced and subdivisions that haven’t been built. This gives us flexibility in choice, which is happiness, and that is wealth. Money is not necessary to have flexibility in choice, and we can choose unwisely, but while we have flexibility of choice we have happiness.
Journalists can’t add.
That is why they become journalists.
The state financial reporting in this country is abysmally low and often displays a quasi-Marxist bias.
bump for later
We are probably in alignment WRT money and income. As for wealth, property can add to it. My interest is what happiness might be. Wealth has a dimension of wealth, and poperty and money might be dimensions of wealth but not he only dimensions.
As soon as one makes a decision, the choices are reduced, and the happiness with it. The only saving grace is that a decision can move one into a region where more and better choices are made available and happiness in the longer view thereby increased. Harvard or Podunk U? In the short term one reduces wealth considerably and the other moderately. In the longer term possibilities are enhanced considerably for one and the other leads to maybe a position as loan officer in a bank needing FDIC bailout.
However a major problem comes up when we talk about "value" AKA "worth".
Do we say the value of a piece of property is the latest bid price, the asking price, or the last transaction price? Worse yet is the case where some property produces an income of say, $10k per month, but the latest bid/ask/transaction prices were just $5k for the whole thing. I'd argue that with this kind of situation that market prices just don't make sense, but I'm stuck for a good alternative.
“the fall in the second half of 2008 will have given back part, but not all, of that prior increase.”
More specifically, net worth at the end of second Q 2008 was at the same level as first Q 2007. During that period, what went up came down. It is as if we are treading water, wealth-creation-wise.
If the government were really honest, they would provide a corresponding tally of the net present value of unfunded entitlements: that figure is $99.2 trillion, representing future obligations for Social Security and Medicare that are not covered by projected payroll taxes intended to finance them [http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm]. In other words, we will have to rely on either future borrowing or general taxes to cover these promises OR we will have to dramatically reduce the amounts promised to ourselves, our children and grandchildren.
“Money can’t buy happiness.”
I’m not sure science would support that statement:
“In the United States, about 90 percent of people in households making at least $250,000 a year called themselves “very happy” in a recent Gallup Poll. In households with income below $30,000, only 42 percent of people gave that answer.”
http://www.nytimes.com/2008/04/16/business/16leonhardt.html
Even cross-nationally, higher-income countries TEND to have greater levels of happiness than those with lower incomes.
http://www.nytimes.com/imagepages/2008/04/16/business/20080416_LEONHARDT_GRAPHIC.html
Market prices are *not* an adequate guide to the value of things. This is particularly true when interest rates are far from the level you expect to see over the lifetime of the asset. One of the problems in bubbles is you see people capitalizing at 4% interest rates, properties that will have to produce income for 25 or 30 years, when the actual interest rate on alternate investments will *not* stay that low for such an extended period.
Fair question.
It is absolute vital to avoid the media's ridiculous instances of *one entry accounting*, where they pretend something is *owed* without asking *who* it is owed *to*, or they pretend everyone is going to die because so-and-so doesn't repay a debt, without noticing that so-and-so doesn't mind not needing to repay it, so much.
There is no such thing as a net debt.
There *are* debts to foreign holders of financial claims, and they total about $13.5 trillion gross - but they are almost matched by our holdings of foreign financial claims running in our favor. The net is under $4 trillion, and dwarfed by household assets.
Excellent explanation! Thank you for taking the time to present it.
TYVM for this excellent article.
Now to my questions.
Let’s suppose that M1 is under-reported. Would real wealth then be higher or lower? How does the Treasury Department account for the difference between dollars issued and dollars destroyed when an old currency series is taken out of circulation? Are these differences published? What I’m trying to get at is the magnitude of cash being hoarded such that it is essentially uncirculated and what sort of risk this could pose for our financial system.
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