Our chart of the day comes to us via Tom Keene’s blog, Econochat:

Two views of our national net worth assumed to be a proxy for households (although it also includes non-profits and believe it or not “domestic hedge funds”). The above chart is semi-log 1949 – 2010. It is sobering. You can see a little blip in 1974, and that’s a big blip upper right where we go flat in the early 2000s and then rollover in unprecedented fashion in recent years. It’s so 19th century.

I tweaked Tom’s chart, and came up with this 20 year chart of the national net wealth in the USA. It is essentially Housing Equity + Stock market Value:

The value of US stock and housing equity fell 25.7% from the pre-crash peak (June 07) to the recent low –  $65.8 trillion down to $48.8 trillion — a destruction of value of nearly $17 trillion dollars. Perhaps this explains some the negative sentiment . . .

>

Total Household Value

(Home Equity + Stock Value)

Bloomberg chart via Fusion Analytics Investment Partners, inspired by Econochat

Category: Economy, Investing, Psychology, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

27 Responses to “US National Net Worth Plummeted 26%”

  1. AGORACOM says:

    So Americans are sitting back in 2004 (-) the credit fuel, real estate growth and global prosperity.

    I predict this chart slides back to 2002 levels by this time next year.

    Choose Canada folks. We’re open for business and looking for good people.

    Regards,
    George

  2. ewmayer says:

    I dislike these kinds of metrics because they present “current paper valuations” as “real wealth”. The mainstream media do this all the time … blather about “The financial crisis of 2008 wiped out $X trillion in household wealth.” Was that real wealth of the “bought at historically fair valuation, and not tied to an increase in systemic debt” kind? Of course not. Bubble-pricing != Wealth.

    This is one of Greenspan’s most destructive delusions, that by inflating the above 2 “metrics” – and ignoring the accompanying increase in systemic debt and leverage – you actually did create real wealth. Complete horseshit.

    Fairly valued (relative to incomes, historical norms and actual productive economic activity) assets *minus* liabilities is the only real metric that matters in the long run.

  3. [...] No wonder everyone is so glum.  National net worth dropped by 26%.  (Big Picture) [...]

  4. Robespierre says:

    Any way to know the break down in the population? I get the feeling that the “wealth” of the top %1 as a percentage grew during the crisis.

  5. “…by inflating the above 2 “metrics” – and ignoring the accompanying increase in systemic debt and leverage – you actually did create real wealth. Complete horseshit.”–ewmayer, above

    sadly, ’twasn’t only Greenspen’s delusion, but, No Doubt!

  6. Chief Tomahawk says:

    Yes, but isn’t ‘the liquidity driven rally’ a one-trick pony? How much longer can corporations roll over debt at reduced interest rates and book the savings to juice their earnings??? Main St. still has the flu, yet I heard a talking head on Kudlow the other say coporate earnings were approaching pre-crisis levels. Obviously that’s not coming because of genuine demand on Main St.

    And to the above, Canada has many fine points, but I don’t believe the Canadian Central Bank is one of them. Rumor has it bad real estate loans are passed by member banks to the central bank and reside there.

  7. Petey Wheatstraw says:

    Lucky our streets are paved with gold.

  8. cfischer says:

    This kind of chart scares me, because to me it looks like we have a long way to fall still. Does anyone here think we’re 20 Trillion worth of growth since the late 1990′s?

  9. radioman says:

    A more accurate headline might be that American’s net worth wildly inflated by 26% from 2004-2008 and is now correcting, i.e., if correction can really mean anything with a fiat currency and out of control pseudo-Keynesian spending and lending policies.

  10. rootless cosmopolitan says:

    No, I don’t think that is the right interpretation of the chart. 17 trillion $US dollar of value have not been destructed. It’s fictitious value that has been destructed. If it had been real value, then a country could become rich just by trading assets in circles and putting a higher price tag at the assets at every transaction, using credit money created out of thin air by banks, w/o producing anything.

  11. DeDude says:

    A lot of artificial paper wealth was created in the stock bubble of 2000 and housing bubble of 2007. Those who got in and out of those bubbles at the right time harvested a big win in real wealth, from those who got in/out at the wrong time.

  12. rfullem says:

    38% of consumer assets is one’s residence, business equity is second at 19% with pooled investments (401K, stocks, bonds, etc) making up the bulk of the rest. 85% of consumer debt is property secured (eg mortgage). Home prices can go up and down; debt levels generally do not unless there are mass foreclosures. The problem is that home prices impact the cost of shelter which is the largest chunk of the CPI. 40% of core CPI (now 0.90%) is shelter. Note BLS CPI comments from Friday.
    “The shelter index, which rose 0.1 percent in each of the previous three months, was unchanged in
    August, as was the index for household furnishings and operations. Within the shelter component, the index for rent declined 0.1 percent, its first decline since November of last year. The index for
    owners’ equivalent rent was unchanged and the lodging away from home index fell 1.3 percent.”
    Now, one would think that with housing the largest past the consumer balance sheet and largest component of the CPI that the Fed, OCC, SEC, etc would have watched the mortgage market. can you say negligence?

  13. rfullem says:

    As an aside, the downward pressure on home prices and, thus, CPI makes debt levels and Fed funds (now zero) rise in real terms with more foreclosures to follow. Nice cycle Mr. Greenspan.

  14. constantnormal says:

    So … predicting ahead where this is all likely to bottom out, after housing prices have finished their declines, and stocks and bonds are honestly valued once more, waddya think the final overall loss from the peak will be?

    Unless, of course, you believe that the worst is behind us, the banks are all solvent, and housing and employment have nowhere to go but up … the recovery is at hand (hallelejah!) !!

    I’m guessing that when the bottom is eventually reached — whether that occurs in the next month, year, decade, or after several decades of churning lower — it will be somewhere between a 40% and 50% overall loss in the national net worth.

    Gonna take a lotta GDP to fill that crack.

  15. Space_Cowboy_NW says:

    Attn: George

    “Choose Canada folks. We’re open for business and looking for good people.”

    Did you not read about Canada’s housing bubble a few days back?

    Your turn is upcoming……

    Btw ’02 levels already accomplished in FL/NV/ and interior CA

    http://www.marketwire.com/press-release/Coldwell-Banker-Real-Estate-Issues-Home-Listing-Report-Most-Expensive-Affordable-US-1322955.htm

    Replacement co$t$ still drive housing prices in the growth areas, ask any sub (contractor) if materials have dropped.

  16. constantnormal says:

    If I slap a ruler along the linear progression from the post WWII years through 1980 (when we began to go into full-throttle debt mode), I come up with a crossing point around 2015 (eyeball calibration only, could be +/- a few years) at around $40T.

    http://www.businessweek.com/the_thread/economicsunbound/ecochat092310networth.bmp

  17. bman says:

    You know what they say you are what you eat… Looks like we’ve been eating crap.

  18. constantnormal says:

    buurp!

  19. Sadly, my prediction came true. Oh well, I did my part :(

  20. Jimmy1920 says:

    Using “current paper valuations” as “real wealth” is the gold standard for valuing pension plans, thank to the short sighted perspective of the accounting profession. That’s partly why so many pension plans are in trouble.

  21. sjh says:

    It looks like this is in nominal dollars. If so, the picture in real dollars is even worse. On this measure too, we may have made almost no progress under the last administration.

  22. AHodge says:

    “perhaps.. explains.. negative sentiment?
    we geek economists call it a wealth effect, you can find it in zandi, global insight,s macro advisors, and all big models. its big and why we have 6% savings rate now not zero.

    while it boosts spending, it was never really there
    meaning in terms of wealth justified by earning power and cash flow.
    this “wealth” you cite more than doubled 1996 2007 above.
    show me the productive assets and the earning power and cash flow doubling? its all capital gains and funny money.

  23. ashpelham2 says:

    sjh: I think your final assumption of no progress under the last admin, is absolutely 100% spot on.

    We regressed during that administration. And that includes not just the President, who i contend has no real power, but plenty of apparent power. That includes all the buffoons who voted yes for wars in far away places against governments that had nothing to do with 9/11. That war was decided on by Junior for what was done to Senior. WMD’s or no WMD’s. Irrelevant. So, there’s a huge drain on financial resources that could pick up some slack. What about the march toward the sky for energy prices that began very soon after said administration took office? Oil went from $25.00bbl in early 2001, to crazy heights of $140.00bbl before we could sweep all of them out of office. Insanity. And a big drain on the resources of America’s families.

    Be clear: I’m not blaming all of our issues on one President or his cronies. But rather, a series of decisions and policies that were all too short-cited to do anything but crush us in the long run.

    It’s not all W’s fault, but the bubble is still deflating/deflated, and everyone feels that.

  24. Arequipa01 says:

    The real loss of wealth began much earlier- it began with a deterioration of ideas. And it has produced real poverty like this:

    “Boston Mayor Thomas Menino suggests torture for 3 suspects in pizza delivery robbery, killing

    Boston Mayor Thomas Menino has reacted angrily to the robbing and killing a pizza delivery driver, telling a group of college students he would “slowly torture” the three suspects.

    The Boston Globe reports that Menino was talking to Emerson College students last week when he was asked about the death penalty for the suspects in the Sept. 2 stabbing death of 58-year-old Richel Nova.

    According to a student recording, the Democratic mayor first explained why he thought the death penalty was unfair, before saying he would like to fight the suspects in a dark alley. He then said he would give them something “worse than the death penalty,” and torture them.”

  25. lelford says:

    I just wish you
    would have used the word “Plundered”, instead of “Plummeted”

    I personally think it would have been more accurate.

    cheers and best
    larry elford
    http://www.breachoftrust.ca The Unique Violence of White Collar Crime

  26. ray l love says:

    It seems that I heard somewhere that recognizing ‘bubbles’ in progress is impossible. This chart suggests otherwise? This suggests double digit growth over a 14 year period?

  27. lalaland says:

    basically we got 25% wealthier than we really were, and then lost it.

    I got it: the wealth was an illusion, but the debt is real!

    the bubble in a nutshell…