Tyler Cowen uses this as evidence for his view that “We are not as wealthy as we thought we were” (which I often agree with):
From Ylan Q. Mui at The Washington Post:
American households have rebuilt less than half of the wealth lost during the recession, according to a new analysis from the Federal Reserve, hampering the country’s economic recovery.
The research from the St. Louis Fed shows that households had accumulated net worth totaling $66 trillion at the end of last year. After adjusting for inflation and population growth, the bank found that meant families on average have only made up 45 percent of the decline in their net worth since the peak of the boom in 2007.
In addition, most of the improvement was due to gains in the stock market, according to the report, primarily benefiting wealthy families. That means the recovery for most households was even weaker.
“A conclusion that the financial damage of the crisis and recession largely has been repaired is not justified,” the report stated.
But I have a hard time accepting this as a sign of our poverty, at least on an individual level. Isn’t the population aging? Over time, we would expect an aging population, especially if it is not growing with an influx of children, to be drawing down on their wealth. If I am 70 years old and in retirement and the Great Crash happens and causes me to lose half my wealth, do I suddenly go back to my old job so that I can “rebuild my household balance sheet?”I think I figure out a way to live with half the retirement income, or do a little part-time work to supplement my wealth. I see this as very likely going on right now, so I would not expect on average all household balance sheets to be improving. That does not mean, however, that for folks in my demographic that we are not seeing improvements.
The Federal Reserve Flow of Funds data is pretty awesome, but it would be fantastically awesome if it were disaggregated.
Ever since the onset of quantitative easing, especially QEForever, all retired savers have seen their income decline. This is what happens when the government favors debtors over creditors.
“American households have rebuilt less than half of the wealth lost during the recession,”
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Did the “recession” include devastating fires, floods, straight line winds, and an earthquake or two? If a “recession” can cause the immense loss of wealth, was it actually wealth to begin with? If a rancher owns 2000 head of Brangus stock cows and the price of beef drops 10%, is that the same as 200 head of his black bovines rolling over dead?