Median American net worth down 40% from 2007-2010

[The Real Bingo]

Americans saw wealth plummet 40*percent from 2007 to 2010, Federal Reserve says - The Washington Post

The Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were in 1992.

So the question is not "Are you better off than you were last year?"...it's "Are you better off than you were last the last millennium?"

[Epidemic]

Sadly the 126,400 net worth was a fake number. Houses were never worth as much as people claimed.

Cost of materials and labor did not increase, nor did wages or inflation so the houses should never have been rising at 15% per year. It was a market anomaly that caused housing to increase like it did.

this is not to say people did not get screwed if they bought high and are now upside down in their mortgage. But I had a discussion with my friend back in 2006-7, talking about this very subject. I could not find any logical reason for the increased value in housing and I considered it a high risk for him to buy, citing the apparent lack of logic in the value of housing. Sadly I was right.

I now understand a little better the market forces that caused the housing bubble. Speculation by builders expecting huge payouts building housing that people could only afford if it appreciated 15% annually. People buying houses on speculation hoping to roll it before the balloon mortgage came due. But it was a market built on speculation based on the faulty assumption that the insane prices would continue to grow.

All that said, I really think you kinda have to temper that loss with the simple fact that it was never real. A large fraction of that loss was fake money that the people really were never worth.

[MTAtech]

Americans saw wealth plummet 40*percent from 2007 to 2010, Federal Reserve says - The Washington Post



So the question is not "Are you better off than you were last year?"...it's "Are you better off than you were last the last millennium?"

The article doesn't answer that question. Perhaps you were better off in 2007, presuming that someone was willing to buy your house for that amount. But Epi is correct, we really didn't have that wealth because everyone couldn't sell their house at the same time.

Whether you are better of than last year is found in other metrics.



If national income is the metric, you are about 3% better off than last year on average.

[tony_j15]

The housing bubble's a big deal, but median income is the larger problem. Shrinking resources means people have to double down and it becomes that much harder to try and pay off debt or make ends meet. It's a deflation trap, Japan-style. We need an infusion of capital via jobs to get things humming. Unfortunately, Congress' big plan was to bail out the banks and GM then just twiddle their thumbs. More proof that trickle-down economics does not work.

[MTAtech]

The housing bubble's a big deal, but median income is the larger problem. Shrinking resources means people have to double down and it becomes that much harder to try and pay off debt or make ends meet. It's a deflation trap, Japan-style. We need an infusion of capital via jobs to get things humming. Unfortunately, Congress' big plan was to bail out the banks and GM then just twiddle their thumbs. More proof that trickle-down economics does not work.

[tony_j15]

Reagan preached one thing that his acolytes have followed, but he practiced another. Government grew under Reagan and the economy picked up thanks to his massive military expenditures that created manufacturing jobs (plus deregulation that caused corporate profits to explode, creating the illusion of things being better than they were). In short, he practiced a form of hidden Keynesian economics.

[The Real Bingo]

The housing bubble's a big deal, but median income is the larger problem. Shrinking resources means people have to double down and it becomes that much harder to try and pay off debt or make ends meet. It's a deflation trap, Japan-style. We need an infusion of capital via jobs to get things humming. Unfortunately, Congress' big plan was to bail out the banks and GM then just twiddle their thumbs. More proof that trickle-down economics does not work.

Trickle-down my ass. It was a union bailout. There was no intention to "save or create" actual blue-collar jobs. And it obviously didn't work. Stimulus packages and bailouts galore, and employment still hasn't markedly improved. We were sold a bag of lies...though some of us knew what was coming before it came. Now that Keynesian economics has proved its ineffectiveness, the common solution among the intellectually dull is to do more Keynesian economics. It's logical in the typical bureaucratic illogical manner...but not in the real world.

[tony_j15]

"Had General Motors and Chrysler gone down, it's reasonable to say that a good part of the supply chain would have collapsed. The manufacturers, the supply-chain folks like BorgWarner, Delphi, Visteon, and others, plus the dealerships employ 8 million people. That represents $500 billion a year in payroll and $70 billion in taxes that would have been at risk. And the social destruction - people losing their homes, children not being able to go to college - every once in a while you have to do something for your citizens. Two administrations had the courage and the leadership to stand up."

-- GM CEO Dan Akerson in Fortune Magazine, June 11, 2012, page 96.

I think I'll listen to Mr. Akerson on this one instead of bingo's data-less insistence that the whole thing was bunk and hasn't helped one bit.

[Epidemic]

What is the median income doing in France, England, Russia, Spain... are they subject to Reagonomics, Bush Tax cuts...?

[tony_j15]

Europe has been undergoing unforced austerity, has lacked interest rate cuts from their central banks, and is plunging into a continent wide depression of their own making. Several EU member states are at-risk of entering a "doom loop" which could be solved by capital infusion directed towards employment. So far, they continue to put band-aids on their banking problems.

And if you think our political mess is bad, multiply it by 17 and you get the EU. It's a complete hell-hole for politics.

[Epidemic]

Europe has been undergoing unforced austerity, has lacked interest rate cuts from their central banks, and is plunging into a continent wide depression of their own making. Several EU member states are at-risk of entering a "doom loop" which could be solved by capital infusion directed towards employment. So far, they continue to put band-aids on their banking problems.

And if you think our political mess is bad, multiply it by 17 and you get the EU. It's a complete hell-hole for politics.

When do you stop capital infusion?

isn't greece an example of a government that has grown too big for it's economy. Will capital infusion solve greece's problem. Or will they keep outspending resources and keep requiring mom to bail them out? is there a time when capital infusion becomes damaging to everyone. We currently are outspending our revenue by 42 cents of every dollar of government spending resulting in 5 trillion in debt over the past 3 + years.

If we keep spending like this will we reach a point when interest exceeds the entire budget.

If austerity is the problem with europe, why are Germany and Sweden not in collapse along with Europe?

perhaps Germany and Sweden will fall when Europe collapse but generally speaking without europe dying they are doing better.

countries with the largest cash infusions did not do better than those with out Capital infusions??? Perhaps the answer lies not in capital infusion but something else?

[tony_j15]

I doubt I can adequately explain it. I have trouble following it completely and can do little other than highlight things.

I'd start with reading the Wiki page and this NYT article.
There's a ton of stuff out there to read on the subject.

[Epidemic]

on the subject of why other countries using austerity are working fine.

or why we can keep spending deficit at or above 42 cents of every government dollar?

[Theophylact]

Notice (from MTAtech's graph) that Fox is measuring from 2007, the height of home prices, to 2010, the bottom of the crash in prices. Not to 2012, because there's been a considerable recovery since then. But after all that would make Obama look good.

The really sad story is that the net worth of US families has dropped to levels not seen since the early 90s. Except, of course, for the rich:

One basic reason for this disproportion is that the wealth of the middle class is mostly in housing, and the median amount of home equity dropped to $75,000 in 2010 from $110,000 in 2007. And while other forms of wealth have recovered much of the value lost in the crisis, housing prices have hardly budged.

Those middle-income families also lost a larger share of their income. The earnings of the median family in the bottom 20 percent of the income distribution actually increased from 2007 to 2010, in part because of the expansion of government aid programs during the recession. Wealthier families, which derive more income from investments, were also cushioned against the recession.

[The Real Bingo]

"Had General Motors and Chrysler gone down, it's reasonable to say that a good part of the supply chain would have collapsed. The manufacturers, the supply-chain folks like BorgWarner, Delphi, Visteon, and others, plus the dealerships employ 8 million people. That represents $500 billion a year in payroll and $70 billion in taxes that would have been at risk. And the social destruction - people losing their homes, children not being able to go to college - every once in a while you have to do something for your citizens. Two administrations had the courage and the leadership to stand up."

-- GM CEO Dan Akerson in Fortune Magazine, June 11, 2012, page 96.

I think I'll listen to Mr. Akerson on this one instead of bingo's data-less insistence that the whole thing was bunk and hasn't helped one bit.

He's making the assumption no one would have purchased GM. And $500bn is nothing in the grand scheme of things. $70bn in taxes? How much was the entire bailout? $80 billion. Spend $80 to get $70...that's some good maths right there.

Numbers aside, the fact that you're not upset about the gross misappropriation of government funds and favoritism/corporatism displayed means you're just drinking the Kool-Aid.

[tony_j15]

Spend $80 to get $70...that's some good maths right there.

No, silly. We spend 80 once to get 70 back every year. That's called a solid investment.

[The Real Bingo]

Is that like the multiplier effect theory where when the government spends $1, the economy produces something like $1.10? If that's the case, the economy is infinite so long as the government spends infinite amounts of money. There would be no end to economic growth, right?

Question: should the government be in the investment business? Should it pick winners and losers?

[pickel]

Is that like the multiplier effect theory where when the government spends $1, the economy produces something like $1.10? If that's the case, the economy is infinite so long as the government spends infinite amounts of money. There would be no end to economic growth, right?

Question: should the government be in the investment business? Should it pick winners and losers?

The Government sure picked a LOSER when we went to war(S). Just look at the human cost.The only one who came out on top was BIG BUSINESS. How many unfortunate dudes will NEVER join the workforce and be stuck with mediocre care from VA and other inept facilities. Just a gift that keeps on giving.
I've ,recently, found out that after five years, unless one is totally disabled, you'd better have good health insurance or you're on your own. Congress is your FRIEND.....Hardly

[The Real Bingo]

War is always good for the economy...

In other news, Congress is forcing the Army to buy 33 tanks it doesn't even need. The Military Industrial Complex has never been so blindingly apparent. Silly me, I didn't think the military was a jobs program for private contractors. But I guess that's just another thing our government has been transformed to do.

[pickel]

[QUOTE=The Real Bingo;334But I guess that's just another thing our government has been transformed to do.[/QUOTE]

You're way behind the times.