The wealth of American families plunged nearly 18% in 2008, erasing years of sharp gains on housing and stocks and marking the biggest loss since the Federal Reserve began keeping track after World War II.The Fed said Thursday that U.S. households' net worth tumbled by $11 trillion -- a decline in a single year that equals the combined annual output of Germany, Japan and the U.K. The data signal the end of an epoch defined by first and second homes, rising retirement funds and ever-fatter portfolios.
Past downturns have been mere blips compared with the losses Americans faced last year, which set them back to below 2004 levels. "In the postwar period, we've never had anything other than very modest declines. That life experience led many people to think that houses were a one-way bet," says Douglas Cliggott, the chief investment officer of Dover Management LLC.
This is a primary reason why I am not optimistic about the bump in retail spending. Simply put, people are poorer and when they are poorer they spend less.
1 comment:
I really wish the article writers would stop conflating wealth and money. The American people lost a lot of money (18%) but no real wealth.
All the means of production are intact.
All thats wrong is the method of acquiring goods (i.e wages and investments) are disrupted. The only exception here is infrastructure which does need a boost.
What makes this worse is that a fix is easy. All we need do is put more money in consumers pockets. we must not use indirect and socially manipulative means like the the BS stimulus concept but by cutting anyone making under 100k or so a check for 1k every month
After debts are paid down and savings are rebuilt --spending will return to a higher level.
If we don't do this and we keep relying on trying to "ease peoples fears" or "create recovery jobs" and the usual hokum that governments rely on the recession will drag on and people will start to regard cheapness and hording as the norm.
This is exactly what we are trying to avoid, generous wages (or redistribution) and generous spending are the life blood of civilization and I am afraid what we are going to get..
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