The consequences of vanishing wealth
You’ve probably seen the headline version: “U.S. families see prosperity plunge” is how this morning’s AJC front page puts it. And unfortunately, “plunge” is an accurate term.
The median American family — the mythical family at the dead center of the U.S. economy, with half of families being richer and half being poorer — saw its net worth plunge from $126,400 in September of 2007 to just $77,300 in September of 2010, a decline of $49,100 in perceived wealth in just three years’ time.
Again, “perceived” wealth is the accurate term. Much of that net worth came in the form of rapidly increasing home values, a rise that ended right about the time that the 2007 survey by the Federal Reserve was being conducted. And as we know, it wasn’t just homeowners or Fed survey-takers who perceived that home value as real wealth that could be counted upon and even spent. So did credit-card companies, banks, mortgage lenders, security brokers, Wall Street, purchasers of credit default obligations and federal regulators.
When the bubble burst, everybody who had counted upon that false wealth being real took a hit. But nobody took a harder hit than the homeowner. According to one recent study, almost a third of all homeowners with a mortgage now owe their lenders more than the home is worth, which means their property reduces rather than enhances their net worth.
It’s no secret what happens when millions of people suddenly discover that they are several tens of thousands of dollars more poor than they thought. They stop spending and buying. When they stop spending and buying, companies start laying people off. When companies start laying people off, net worth plummets even deeper, and a destructive cycle begins.
Some of the lost wealth reflected above has been recovered since the most recent Fed survey was taken in September 2010. By then, the Dow Jones average had recovered some but not all of its previous value and stood at roughly 10,500. Today it’s at roughly 12,400, depending on how the market takes the news out of Europe.
And as usual, the decline in net worth was not felt equally across all income groups, as the chart below indicates. Because of the scales involved, net worth of families in the bottom 20 percent of incomes don’t show up well, but they fell by roughly a third between 2001 and 2010. However, the biggest hit was experienced by those in the 60-to-90 percent income groups, essentially the upper middle class. They were most likely to have a lot of their wealth tied up in their homes, and because they make a good amount of money and spend most of what they make, they also tend to be the group that drives a consumer economy.
Or not.
– Jay Bookman
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719 comments Add your comment
"Information becomes a distraction, a diversion, a form of entertainment" - BHO, May 1, 2010
June 12th, 2012
4:58 pm
I took an AMTRAK train from Atlanta to Alexandria, VA (just outside DC) about a week ago.
The entire experience was miserable, nasty, dirty and way over-priced.
My last experience at the local Post Office wasn’t any better…
Guvmint Fail !!!
BTW – No you can’t have more of my hard earned money Mr. Guvmint Vampire !!!
Kamchak ~ Thug from the Steppes
June 12th, 2012
5:00 pm
Shorter pogo: I loves me some Ayn Rand!
Mick
June 12th, 2012
5:21 pm
pogo
You sure are full of yourself – no one else seems to be…keep on ranting into the wind, it’s good therapy…
"Information becomes a distraction, a diversion, a form of entertainment" - BHO, May 1, 2010
June 12th, 2012
5:27 pm
Even the boss of the postal system wants less guvmint but the senate has blocked him and ordered “another” study on pros v. cons of Saturday delivery.
I meant the Democrat Senate whores who feed off the AFL-CIO, The Teamsters and the SEIU
Chicago teachers have voted to go on strike unless they get a 30% raise.
Team Obama ??
"Information becomes a distraction, a diversion, a form of entertainment" - BHO, May 1, 2010
June 12th, 2012
5:30 pm
Here is more irritating information you can’t find on NBC, ABC, CBS and even Fox News
http://money.cnn.com/2012/06/12/news/economy/postal-service/
professional skeptic
June 12th, 2012
5:32 pm
“Trillions of taxpayer dollars out the door with nothing to show for it at all. NOTHING.”
SQUAWK SQWAWK SQWAWK goes the parrot.
That Black Guy
June 12th, 2012
5:44 pm
Adam
June 12th, 2012
1:33 pm
When did deceit become a virtue in this country?
That’s not it. It’s that winning has become more important than honesty.
I’m sure someone out there has a “both sides do that” argument, so how about some examples? I’ll start: Mitt Romney says Obama made the economy worse and last longer. That’s a lie. Your turn.
________________________________________________________________________
return serve:
“Right now the Obama campaign is pushing this line that while Romney was governor of Massachusetts job creation in that state “plummeted to 47th out of 50.” The truth?
How about the Bureau of Labor Statistics. When Romney took office in 2003 Massachusetts ranked 51st (including DC) in job growth. Romney left office in December of 2006. At that time Massachusetts ranked 30th.
That Black Guy
June 12th, 2012
5:46 pm
Adam
June 12th, 2012
1:33 pm
When did deceit become a virtue in this country?
That’s not it. It’s that winning has become more important than honesty.
I’m sure someone out there has a “both sides do that” argument, so how about some examples? I’ll start: Mitt Romney says Obama made the economy worse and last longer. That’s a lie. Your turn.
______________________
another:
Obama’s statement about his mother fighting with the insurance company about medical coverage when she was sick.
That was a sick lie.
Kamchak ~ Thug from the Steppes
June 12th, 2012
5:56 pm
That was a sick lie.
Another: The smoking gun is the mushroom cloud.
Tundra Dude
June 12th, 2012
5:57 pm
B. Shockley — “Right…it’s a ponzi scheme, just like I said.”
No, it’s an insurance plan.
Duped by Congressional Lies by Walter E. Williams
The Social Security pamphlet of 1936 read, “Beginning November 24, 1936, the United States Government will set up a Social Security account for you. … The checks will come to you as a right.”
Americans were led to believe that Social Security was like a retirement account and that money placed in it was, in fact, their property.
Shortly after the Social Security Act’s passage, it was challenged in the U.S. Supreme Court, in Helvering v. Davis (1937).
The court held that Social Security was not an insurance program, saying, “The proceeds of both employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.”
Kamchak ~ Thug from the Steppes
June 12th, 2012
6:06 pm
That was a sick lie.
Another: We will be greeted as liberators.
Kamchak ~ Thug from the Steppes
June 12th, 2012
6:09 pm
That was a sick lie.
Another lie: We know where they [Iraq's WMD] are. They’re in the area around Tikrit and Baghdad and east, west, south, and north somewhat….
Ken Stepp
June 12th, 2012
7:15 pm
It does seem that when the middle class gets hit the entire economy follows. Since I’m not a Republican or Democrat, left, right, etc I can say without an agenda that the problems we face today have been brewing for several presidencies. Of course the president can only do so much (good or bad). I believe the endless wars, bailing out financially insolvent companies, and growing the federal government have more to do with what we are going through today more than anything. Let’s also throw in “the war on drugs”. The phrase “your not doing it right” explains it better than I can. Address the lobbyist influence in Washington, term limits, and more oversight of the House & Senate and our problems might just get better. It certainly couldn’t hurt.
Billybob
June 13th, 2012
1:57 am
provide for the common defense, promote the general welfare…..libs and jay, provide means to actively do and promote means to help or encourage to exist……it’s time that words mean something and these words have no other definition than what they are……provide and promote are two totally different things and its time people realize this……what part of these words do liberals not understand……today is the last day that liberal falsely parse words and billybob is the start……show me any difference than what i state jay……your ilk is toast after this day……and you will remember this moment in time from billybod on…enjoy
Billybob
June 13th, 2012
2:06 am
provide and promote……there is no liberal re-definition of these accurate words…..promote the general welfare does not mean pass an unconstitutional healthcare law…..your ilk can promote that people accept responsibility for their own healthcare, but private citizens providing for the healthcare of others is nowhere is that definition…..jay this moment is where you lose the battle with common sense and truth in the constitution……from this point on you will have to admit what you stand for out in the open and people will judge you on the truth of your ideas, not on what the media falsely states what is the current ideas……welcome to the new world of accountability…..maybe your paper can use a guy like me……without doubt
Joe Hussein Mama
June 13th, 2012
10:00 am
Distraction — “I took an AMTRAK train from Atlanta to Alexandria, VA (just outside DC) about a week ago. The entire experience was miserable, nasty, dirty and way over-priced.”
Your mistakes:
1) Didn’t buy First Class (sleeper). It’s much more plush than either Second Class (roomette) or Coach (standard seating). If you thought it was miserable, nasty and dirty, then you shouldn’t have bought Coach.
2) As far as overpriced goes, a sleeper for three usually costs about the same as First Class by air for *one,* particularly on overnight trips.
3) I already know that you overnighted on the train because you gave us an itinerary. And I’m familiar enough with Amtrak schedules to know when you would have departed ATL and arrived at ALX. Anyone overnighting on an Amtrak train in coash *deserves* to have a crappy experience.
My last experience at the local Post Office wasn’t any better…Guvmint Fail !!!
Customer FAIL. Why don’t you tell us some details about this USPS experience that I seriously doubt actually happened?
“BTW – No you can’t have more of my hard earned money Mr. Guvmint Vampire !!!”
All yr wallet are belong to US.
Joe Hussein Mama
June 13th, 2012
10:04 am
Tundra Dude — “Americans were led to believe that Social Security was like a retirement account and that money placed in it was, in fact, their property.
Shortly after the Social Security Act’s passage, it was challenged in the U.S. Supreme Court, in Helvering v. Davis (1937). ”
You lie about what Helvering v Davis actually says.
http://en.wikipedia.org/wiki/Helvering_v._Davis
“The Opinion of the Supreme Court in the case was written by Justice Benjamin N. Cardozo. This decision supported the right of the Congress to interpret the “general welfare” clause in the U.S. Constitution. Excerpts from the opinion include:”
“Congress may spend money in aid of the ‘general welfare’…There have been great statesmen in our history who have stood for other views…The line must still be drawn between one welfare and another, between particular and general. Where this shall be placed cannot be known through a formula in advance of the event…The discretion belongs to Congress, unless the choice is clearly wrong, a display of arbitrary power, not an exercise of judgment. This is now familiar law.”
Helvering v Davis makes it QUITE CLEAR that SSI was intended as income insurance for the retired.
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