WSJ: 18% of American wealth is gone

Thanks for link Star. This from WSJ.

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.

11 Trillion. Now that’s frightening. That means 18% of America’s wealth is no longer taxable, folks.  If this continues, who exactly is going to pay for government to torture us?

I heard yesterday on Teee Veee that there are 24% fewer millionaires in the USA as opposed to pre-2008. While we all might say, “Oh Boo Hoo,” these were people with large taxable incomes. Now they have large nontaxable losses to write off.

The decline in Americans’ net worth, which was the first in six years, follows an extraordinary boom. Not accounting for inflation, household wealth more than doubled from 1990 to 2000, and then, after a pause, rose nearly 50% before the bust of 2008.

This is not just about millionaires either. It’s about all those people in the middle who are not buying goods, who are saving now, becoming more sensible out of fear.

While the value of their assets was falling, Americans’ total debt remained roughly flat. Total household debt increased by half a percentage point in 2008 as families faced tighter lending standards and many started trying harder to live within their means. After years of splurging with an eye on their rising assets, that phenomenon, known as the wealth effect, now cuts the other way, spurring frugality.

We all recognize this trend, right? We are all in on it. So, loosening up credit markets for ordinary people may not get the fish to bite the hook this time. Americans have no intention of being tempted by a re-run of the credit trap. They are suddenly older and wiser–and looking out for themselves with an eye toward their own futures.  Even people who have some money are not spending. They are living below their means, thinking twice, repairing the car instead of buying a new one. The lobster industry is truly hurting right now. People are finally saying, “Are you kidding? I’m not going to pay that for this!”. Even in the smaller things, people are pulling back.  Looking to Downsize their life. Thus, you see Starbucks hurting. People finally realize that 4 bucks for flavored coffee is over the top in times like these.

“I’d look at my 401(k) and we’d feel comfortable, happy…. I was never very cautious,” says Ms. Cortese, 40 years old, of Oakland, N.J. If her boys and their friends wanted burgers or pizza after a roller-hockey game, she obliged. A cleaning lady scrubbed her four-bedroom house and a landscaper mowed her lawn

I think we can pretty much relate to Ms. Cortes.  Now, we are becoming a more realistic society out of sheer self-survival. You cannot take the Self-Preservation instinct out of people’s DNA. I think Middle America believes at this point that, individually, nobody is going to save them except themselves. This, of course, will not help the economy or jobs, but the trust is gone and people just don’t feel very into the “I of We”. America seems to be in “every man for himself” mode in spite of the call for sharing. When it comes to self-preservation, sharing tends to go out the window.   There’s nothing like fear for your own survival to snap people into reality. And in some circles, there is actually a sigh of relief.  Impressing everybody else is hard work.  Now nobody has to do this.  It’s actually a relief not to be expected to live above your means, beholding to faceless credit predators in search of your money–and that is exactly what they are–predators. I think Middle America, which is not represented by our government, has finally figured that out.

At the same time, a sense of personal responsibility is setting in and that part is not so bad, is it?  We lost that good sense somewhere along the line and need to get it back.  We lost the healthy mix of charity and personal responsibility together. I think Americans individually are struggling on their own to regain that mix. They know that government won’t do it because our two major parties are both living in extremes we can’t relate to.

I think we’ve reached a turning point in Middle America, where the individual is beginning to take charge, saying, “Enough!”.  And when you add up all the individuals, you have the collective America.  All the mock tea parties in the world can’t match that.

……and mowing our own lawns might just help to get us all in shape.