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News & ArtsThursday, June 14, 2012
Economy That 40% Fall in American Wealth Nonsense
Posted by Charles Mudede on Thu, Jun 14, 2012 at 8:13 AM
Why is this even news? Why did WSJ tweet it just 17 minutes ago? Why is it making the rounds?
Families’ median net worth fell almost 40% between 2007 and 2010, down to levels last seen in 1992, the Federal Reserve said in a report Monday.As the U.S. economy roiled for three tumultuous years, families saw corresponding drops in their income and net wealth, according to the Fed’s Survey of Consumer Finances, a detailed snapshot of household finances conducted every three years.
Median net worth of families fell to $77,300 in 2010 from $126,400 in 2007, a drop of 38.8%–the largest drop since the current survey began in 1989, Fed economists said Monday. Net worth represents the difference between a family’s gross assets and its liabilities. Average net worth fell 14.7% during the same three-year period.
Much of that drop was driven by the housing market’s collapse.
Much of it? How about almost all of it. Anyone who owns a house easily lost $100,000 of fictitious value after the collapse of the housing market. The drop in fictitious (unproductive) wealth is only crushing because real wages have been flat for 30 years, and most middle-class types didn't notice or mind this stagnation because they were tricked into seeing themselves as "investors," "entrepreneurs," "movers and shakers." Capitalism was doing its magic for them, their homes laid golden eggs, and the living was so easy. But reality eventually bites. Now their homes have no value, their state (which was gutted by every president since Reagan) offers few or no safety nets, and their wages remain flat—if they are lucky ("...median family income fell to $45,800 from $49,600 in 2007"). How can you not know all of this? This is America today.
3
Charles, it's not "fictitious" value if you've plunked down your money, or commited to a loan that you're intending to repay, or lost off your home equity line of credit. That's real money.
Now, you may argue that money is fictitious, but that's a different argument.
As for why is this getting reported this week? Well, because the Fed produces that report every three years and Monday was the day it was released. As far as that Newscorp viper, the WSJ goes, I'm sure they retweeted it today as part of the Great Republican Propaganda Putsch's organized anti-Obama campaign.
Now, you may argue that money is fictitious, but that's a different argument.
As for why is this getting reported this week? Well, because the Fed produces that report every three years and Monday was the day it was released. As far as that Newscorp viper, the WSJ goes, I'm sure they retweeted it today as part of the Great Republican Propaganda Putsch's organized anti-Obama campaign.
5
And yet they want to raise our income and sales taxes.
The increases that did happen between 1992 and now seem even more egregious.
7
"Escape from the Nineteenth Century (and other essays)"
by Peter Lamborn Wilson
We're still failing to do that.
by Peter Lamborn Wilson
We're still failing to do that.
8
@3 Having a loan on a house that isn't worth the money of the loan isn't a loss, it's only a loss if the house isn't worth the money you paid plus interest after you paid off the loan. Also, you have to live somewhere, you could be paying rent, which can be equated to mortgage interest. All in all "a home you can afford" isn't a bad investment if you plan to live in that home. It's a risky investment if someone buys a home they "can't afford", a debt leveraged investment with an expectation of increase in value. @4, yes the market is off it's all time high in 2007, but it approaching those levels now, and if one had invested steadily in equities (even just index stock funds) during the downturn, one would have increased ones value a great deal. With a long term view things have improved greatly since the Bush years.
9
I watch from the sidelines. No investments. I see how people are drawn in by the promise of easy money. Housing prices keep climbing, invest in housing. Stock market keeps climbing, invest in stocks. Gold keeps climbing, invest in gold. Then the super rich pull out their money and everyone else loses. The only investment I ever see that really does keep climbing is art. Art seems the only stable quantity and it's mostly owned by the super rich.
11
Quite a bit of hyperbole in this screed.
middle-class types didn't notice or mind this stagnation because they were tricked into seeing themselves as "investors," "entrepreneurs," "movers and shakers.
Nonsense - nobody got "tricked" - anyone with an ounce of common sense knew that the overpriced houses and every-one-qualifies mortgages were a financial carnival and that Ash Wednesday and Lent would come.
All those oh-I-was-tricked folks were complicit as well and should just sit back and enjoy their hangovers.
middle-class types didn't notice or mind this stagnation because they were tricked into seeing themselves as "investors," "entrepreneurs," "movers and shakers.
Nonsense - nobody got "tricked" - anyone with an ounce of common sense knew that the overpriced houses and every-one-qualifies mortgages were a financial carnival and that Ash Wednesday and Lent would come.
All those oh-I-was-tricked folks were complicit as well and should just sit back and enjoy their hangovers.
13
@8,
If net worth is counting home value (which it must be), then that accounts for a huge part of the decline in Americans' net worth. Most people's homes are worth less now than before the recession.
And a lot of people are underwater (they owe more on the home than the home is worth), because they did some or all of the following: bought in a shit-hole market like Florida, Arizona, or Las Vegas; bought at the top of the market; cashed out all their equity. For those people, they will lose money in the long-term. Sucks to be them.
@11,
And how many people have any common sense?
If net worth is counting home value (which it must be), then that accounts for a huge part of the decline in Americans' net worth. Most people's homes are worth less now than before the recession.
And a lot of people are underwater (they owe more on the home than the home is worth), because they did some or all of the following: bought in a shit-hole market like Florida, Arizona, or Las Vegas; bought at the top of the market; cashed out all their equity. For those people, they will lose money in the long-term. Sucks to be them.
@11,
And how many people have any common sense?
14
Good Morning Charles,
You have a point. So do @8 & @11. Full disclosure. I don't own a home. I rent an apartment and am satisfied with the lease/rent. I sold my property in Wisconsin ages ago and now have the value/money from it in long term conservative investments. In short, I have a couple of "nest eggs". I also worked in the title insurance industry in the 90s. I'm no economist by any means.
That said, I contend that American real estate (RE) was WAY overvalued since at least the mid-90s. And, People wealthy (on paper or real) or poor (poor enough that they should never have purchased a home) borrowed enormously. I believe that combination led to the RE/money crash of 08'.
Roughly between the passage of the GI Bill (1944?) that generation and their children (baby boomers coming of age in the 60, 70s & 80s) were able to afford a home. My understanding is that prior to WWII most people rented their residence. Home ownership was possible (it created equity) for the masses. I do believe capitalism allowed for that.
However, I concede your point about "fictitious value". Working in title, I discovered mortgage company/banks/lenders somehow making money off of underwater mortgages. That, I found absurd. It was indeed capitalism runamok. I am for responsible capitalism.
You have a point. So do @8 & @11. Full disclosure. I don't own a home. I rent an apartment and am satisfied with the lease/rent. I sold my property in Wisconsin ages ago and now have the value/money from it in long term conservative investments. In short, I have a couple of "nest eggs". I also worked in the title insurance industry in the 90s. I'm no economist by any means.
That said, I contend that American real estate (RE) was WAY overvalued since at least the mid-90s. And, People wealthy (on paper or real) or poor (poor enough that they should never have purchased a home) borrowed enormously. I believe that combination led to the RE/money crash of 08'.
Roughly between the passage of the GI Bill (1944?) that generation and their children (baby boomers coming of age in the 60, 70s & 80s) were able to afford a home. My understanding is that prior to WWII most people rented their residence. Home ownership was possible (it created equity) for the masses. I do believe capitalism allowed for that.
However, I concede your point about "fictitious value". Working in title, I discovered mortgage company/banks/lenders somehow making money off of underwater mortgages. That, I found absurd. It was indeed capitalism runamok. I am for responsible capitalism.
15
@14,
Actually, there were a considerable number of homeowners in the U.S. prior to WWII in the early 20th century. The financial boom of the 1920's increased the number of homeowners. Of course, the Great Depression wiped that all out and home ownership plummeted until the economy got back on its feet under FDR.
So it may be that capitalism did allow for people to buy homes, both in the 1920's and the 1990's, but then capitalism also caused the crashes that lost people their homes too.
Actually, there were a considerable number of homeowners in the U.S. prior to WWII in the early 20th century. The financial boom of the 1920's increased the number of homeowners. Of course, the Great Depression wiped that all out and home ownership plummeted until the economy got back on its feet under FDR.
So it may be that capitalism did allow for people to buy homes, both in the 1920's and the 1990's, but then capitalism also caused the crashes that lost people their homes too.
16
"their state (which was gutted by every president since Reagan) offers few or no safety nets"
Yeah this is a frequent refrain of Marxists, but in fact we have many social welfare programs...regular Social Security, SSI, SSDI, TANF, workmen's comp, unemployment benefits, Medicare, Medicaid, food stamps, subsidized energy & phone service, nearly free transit passes, Section 8, public housing, earned income credits, etc. And near-univeral health care is coming soon.
As a "mere reformist" liberal I support all of the above programs and reject the false idea that we have no safety net. Remember that Marxists think they can engineer perfect happiness forever, and are quite willing to pursue unlimited, temporary evil in the pursuit of their (unattainable) utopia. They're rather like fascists that way.
I would also suggest that people attend a far-left political meeting or two. The last one I attended--about a local environmental issue--degraded into a discussion of how best to scam the disability system to enable full-time, unpaid activism.
(not that conservatives are any better--the last one I went to fully met my expectations of homophobia, misogyny, and racism)
Yeah this is a frequent refrain of Marxists, but in fact we have many social welfare programs...regular Social Security, SSI, SSDI, TANF, workmen's comp, unemployment benefits, Medicare, Medicaid, food stamps, subsidized energy & phone service, nearly free transit passes, Section 8, public housing, earned income credits, etc. And near-univeral health care is coming soon.
As a "mere reformist" liberal I support all of the above programs and reject the false idea that we have no safety net. Remember that Marxists think they can engineer perfect happiness forever, and are quite willing to pursue unlimited, temporary evil in the pursuit of their (unattainable) utopia. They're rather like fascists that way.
I would also suggest that people attend a far-left political meeting or two. The last one I attended--about a local environmental issue--degraded into a discussion of how best to scam the disability system to enable full-time, unpaid activism.
(not that conservatives are any better--the last one I went to fully met my expectations of homophobia, misogyny, and racism)
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