David Brooks has jumped on the Great Unwind downward slide. In January 2008, I suggested the gathering credit crisis should be called The Great Unwind. Since then, more and more people have caught on, including William Safire in this column on naming the plunge.
More evidence of the extent of the unwinding came today from Goldman Sachs. They report household net worth as a percentage of disposable income is now back where it was in 1992, unwinding all the gains made during the housing and tech bubbles. Illusory gains, I should say.
For perspective, the Federal Reserve reports household net worth fell $1.3 trillion dollars since the beginning of 2008 and now stands at $50.4 trillion. We are still very rich, but not as rich as we used to be.
The challenge for Power Town, as Brooks notes, is crafting policy in an environment where people are less rich. And I think it is fair to say we can't count on another consumer bubble, tech bubble, or any other bubble to magically restore the revenues destroyed in the last decade.
Comments
You are saying that our household wealth fell by 2.5145% over the last 1.5 years? Is that in constant value dollars or same greenback we used then? Dollars then would not buy as much common stock as now but such stock probably represented less book value of leveraged companies. But banks have gone deeper into leverage.
Does anyone really know what time it is
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Debt is good. NOT!
There are good and bad reasons for borrowing money. If purpose, such as an investment in education or a business, does not provide sufficient return to repay the loan and interest the result is a loss. To whatever extent all our debt exceeds benefit gained is now an overpayment on whatever the money was spent on. This is being transferred to the goverment to unwind and will likely be redistributed as a combination of higher taxes and devalued currency. So much for finding a way to cash in on all the wealth of the baby boom generation.