8 ms·

US Wealth dropped $6 Trillion in Q2

43 points by superb-owl 4y ago

Ligma123 4y ago
mikece 4y ago
I hate headlines like this. Unless you cash out of your holdings you don't lose anything. Likewise, you also don't gain anything unless you cash out. The more scary part is that a large portion of the population doesn't understand the difference between paper wealth and liquid assets.
- superb-owl 4y ago
  The thing is, people make purchasing decisions based on their paper wealth. They use it to plan their retirement, or decide their price range for a new house. Shrinking household wealth destroys confidence in the economy, and can lead to a serious feedback loop.
  - the_arcadian 4y ago
    Exactly. It shows up the most in discretionary big ticket purchases. When the market's down you'll buy the same number of bags of doritos as you used to, but you're more reluctant to buy a new car or redo your kitchen.
  - pessimizer 4y ago
    Not for you, but for lurkers: https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect
- dickersnoodle 4y ago
  This is USAToday, the king of "out of context". Household wealth is "only" $143.8 trillion down from a record $150 trillion with most of what's in the article talking about the stock market. Get a grip.
  - jt2190 4y ago
    It’s a Reuters
    - jt2190 4y ago
      [Somehow clicked reply without posting my full comment. Here it is:] It’s a Reuters story [1] republished in U.S. News and World Report. [1] “U.S. household wealth suffers record drop in second quarter”, September 9, 2022. https://www.reuters.com/markets/us/us-household-wealth-falls-again-second-quarter-fed-says-2022-09-09/ https://www.reuters.com/markets/us/us-household-wealth-falls...
- MerelyMortal 4y ago
  If you're retired and planned on cashing out, what are you supposed to do? Not cash out and live on nothing, go back to work, or cash-out and just not buy everything you wanted?
  - CogitoCogito 4y ago
    > and just not buy everything you wanted? Isn't that how it always works?
  - s1artibartfast 4y ago
    Every reputable advisor will tell you to move into more stable assets the closer you get to retirement. Sell your bonds to fund your lifestyle. If you have stock, wait until it bounces back. If you were gambling with your lunch money, you may be taking a hit.
- dominotw 4y ago
  Then there is no way to measure wealth at all, its just all a mystery.
- water8 4y ago
  Human behavior changes based on that very real number. The lower it goes, the less people feel like funding ideas
roenxi 4y ago
As a little reminder in these difficult times ... this view of wealth is a practical but obtuse one. Wealthy is destroyed by war and disaster, or ground away slowly by consuming without creating. Unless I've not noticed something big and physical happening, the US has lost very little wealth in Q2. One of two things is happening: 1. Wealth the US thought it had, was never really created. 2. It has recognised that wasteful activity was mis-identified as productive and the records are now being corrected. Wealth is slow. If you think the $ values are wealth, you won't make good decisions. The dollars are to measure wealth. This wealth in all likelihood never existed, and people were deceived by very low interest rates driving poor book-keeping and planning.
- efficax 4y ago
  if the wealth never existed then how were some people able to cash out their equities on the basis of the valuation? it was real when it was real and now it’s gone. it isn’t that there is some core of real wealth and the markets are trending towards it but sometimes above or below it. wealth is just what the markets say it is at the moment that they say it, economies are wile coyote running past the edge of a cliff before they look down. that’s capitalism baby
  - roenxi 4y ago
    If I try and sell you the proverbial bridge, maybe I can con you out of a few thousand dollars. But the bridge is going to be less impressive than what I pitch to you. Because I don't actually own a bridge. That is basically what is happening in your scenario - although maybe there was some wealth, it was never as impressive as the parties buying it believed. > wealth is just what the markets say it is at the moment that they say it If you reflect on this carefully you may change your mind. The market makes mistakes too - we just can't tell very easily because in any given case it is much more likely that the market is right than the person disagreeing with it. But in this case, the market is admitting that it was wrong.
  - notinfuriated 4y ago
    If I knowingly create a pallet of fake gold bars and sell them to an unsuspecting idiot for far more than they're worth, then was that "real" wealth? I'm not sure what the distinction between real or fake wealth is here. If someone overvalues an asset, whether through lies or ignorance, does that make a difference? Or it's all real as long as someone else is fooled to purchase the asset? Either way, it's silly for people to talk about accumulated wealth of a nation in a way where trillions can be erased from one day to the next, typically when someone finally realizes that debt valued at X is not actually going to be repaid in full and is therefore only worth Y (less than X). I don't see how that's core to capitalism, and I don't believe the system we've been in has much to do with capitalism other than the relatively free exchange of goods. There should be another name for whatever this system is, which mixes elements of capitalism and socialism, but more finely controlled by spreadsheets handled by large banks. I believe it's been called "financialism" in the recent past. In this system, wealth is some cell in a bank's spreadsheet, and one day they realize they fucked up and it's all "gone. Meanwhile, there was a small minority of other people participating in the market who knew about the fuck-up ahead of time and were able to profit off of it by properly valuating the asset/liability.
warinukraine 4y ago
Headline should say household wealth. Isn't editorializing against HN rules?
refurb 4y ago
This $6T in lost wealth is mostly among middle and upper class. So this clearly would improve inequality in the US. The rich own a bit less wealth so now the Gini coefficient is better - wealth equality has improved! This is fantastic news! Why isn’t everyone who hates inequality not celebrating?
- advisedwang 4y ago
  If $6T was truly lost from the 1% only, I think you would see some people celebrating, or at least not caring so much. But how many 401ks will now leave a retiree indigent? How many people will be unemployed in a downturn, even if they never held any stock? How many people's savings will be destroyed by inflation?
  - pessimizer 4y ago
    > This $6T in lost wealth is mostly among middle and upper class. > If $6T was truly lost from the 1% only Do you think that "the 1% only" is a fair substitution for the "middle and upper class"?
    - advisedwang 4y ago
      No I don't, which is kind of my point. I was responding to a comment that was suggesting those in favour of equality would celebrate this. I was responding that in reality this hurts a lot of people and so no one is celebrating.
Ekaros 4y ago
When we are talking about wealth I always think of crypto market caps or tradable items or whatever... Reminds me that many times valuations are rather questionable. Just think of how we value tech companies not actually making money... Or what has fundamentally changed with houses, clearly not enough to justify the prices.
PeterStuer 4y ago
If the wealth was real, where did it go? Who has it now?

43 points by superb-owl 4y ago

I hate headlines like this. Unless you cash out of your holdings you don't lose anything. Likewise, you also don't gain anything unless you cash out. The more scary part is that a large portion of the population doesn't understand the difference between paper wealth and liquid assets.

superb-owl 4y ago
The thing is, people make purchasing decisions based on their paper wealth. They use it to plan their retirement, or decide their price range for a new house. Shrinking household wealth destroys confidence in the economy, and can lead to a serious feedback loop.
- the_arcadian 4y ago
  Exactly. It shows up the most in discretionary big ticket purchases. When the market's down you'll buy the same number of bags of doritos as you used to, but you're more reluctant to buy a new car or redo your kitchen.
- pessimizer 4y ago
  Not for you, but for lurkers: https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect
dickersnoodle 4y ago
This is USAToday, the king of "out of context". Household wealth is "only" $143.8 trillion down from a record $150 trillion with most of what's in the article talking about the stock market. Get a grip.
- jt2190 4y ago
  It’s a Reuters
  - jt2190 4y ago
    [Somehow clicked reply without posting my full comment. Here it is:] It’s a Reuters story [1] republished in U.S. News and World Report. [1] “U.S. household wealth suffers record drop in second quarter”, September 9, 2022. https://www.reuters.com/markets/us/us-household-wealth-falls-again-second-quarter-fed-says-2022-09-09/ https://www.reuters.com/markets/us/us-household-wealth-falls...
MerelyMortal 4y ago
If you're retired and planned on cashing out, what are you supposed to do? Not cash out and live on nothing, go back to work, or cash-out and just not buy everything you wanted?
- CogitoCogito 4y ago
  > and just not buy everything you wanted? Isn't that how it always works?
- s1artibartfast 4y ago
  Every reputable advisor will tell you to move into more stable assets the closer you get to retirement. Sell your bonds to fund your lifestyle. If you have stock, wait until it bounces back. If you were gambling with your lunch money, you may be taking a hit.
dominotw 4y ago
Then there is no way to measure wealth at all, its just all a mystery.
water8 4y ago
Human behavior changes based on that very real number. The lower it goes, the less people feel like funding ideas

roenxi 4y ago

As a little reminder in these difficult times ... this view of wealth is a practical but obtuse one. Wealthy is destroyed by war and disaster, or ground away slowly by consuming without creating. Unless I've not noticed something big and physical happening, the US has lost very little wealth in Q2. One of two things is happening: 1. Wealth the US thought it had, was never really created. 2. It has recognised that wasteful activity was mis-identified as productive and the records are now being corrected. Wealth is slow. If you think the $ values are wealth, you won't make good decisions. The dollars are to measure wealth. This wealth in all likelihood never existed, and people were deceived by very low interest rates driving poor book-keeping and planning.

efficax 4y ago
if the wealth never existed then how were some people able to cash out their equities on the basis of the valuation? it was real when it was real and now it’s gone. it isn’t that there is some core of real wealth and the markets are trending towards it but sometimes above or below it. wealth is just what the markets say it is at the moment that they say it, economies are wile coyote running past the edge of a cliff before they look down. that’s capitalism baby
- roenxi 4y ago
  If I try and sell you the proverbial bridge, maybe I can con you out of a few thousand dollars. But the bridge is going to be less impressive than what I pitch to you. Because I don't actually own a bridge. That is basically what is happening in your scenario - although maybe there was some wealth, it was never as impressive as the parties buying it believed. > wealth is just what the markets say it is at the moment that they say it If you reflect on this carefully you may change your mind. The market makes mistakes too - we just can't tell very easily because in any given case it is much more likely that the market is right than the person disagreeing with it. But in this case, the market is admitting that it was wrong.
- notinfuriated 4y ago
  If I knowingly create a pallet of fake gold bars and sell them to an unsuspecting idiot for far more than they're worth, then was that "real" wealth? I'm not sure what the distinction between real or fake wealth is here. If someone overvalues an asset, whether through lies or ignorance, does that make a difference? Or it's all real as long as someone else is fooled to purchase the asset? Either way, it's silly for people to talk about accumulated wealth of a nation in a way where trillions can be erased from one day to the next, typically when someone finally realizes that debt valued at X is not actually going to be repaid in full and is therefore only worth Y (less than X). I don't see how that's core to capitalism, and I don't believe the system we've been in has much to do with capitalism other than the relatively free exchange of goods. There should be another name for whatever this system is, which mixes elements of capitalism and socialism, but more finely controlled by spreadsheets handled by large banks. I believe it's been called "financialism" in the recent past. In this system, wealth is some cell in a bank's spreadsheet, and one day they realize they fucked up and it's all "gone. Meanwhile, there was a small minority of other people participating in the market who knew about the fuck-up ahead of time and were able to profit off of it by properly valuating the asset/liability.

warinukraine 4y ago

Headline should say household wealth. Isn't editorializing against HN rules?

refurb 4y ago

This $6T in lost wealth is mostly among middle and upper class. So this clearly would improve inequality in the US. The rich own a bit less wealth so now the Gini coefficient is better - wealth equality has improved! This is fantastic news! Why isn’t everyone who hates inequality not celebrating?

advisedwang 4y ago
If $6T was truly lost from the 1% only, I think you would see some people celebrating, or at least not caring so much. But how many 401ks will now leave a retiree indigent? How many people will be unemployed in a downturn, even if they never held any stock? How many people's savings will be destroyed by inflation?
- pessimizer 4y ago
  > This $6T in lost wealth is mostly among middle and upper class. > If $6T was truly lost from the 1% only Do you think that "the 1% only" is a fair substitution for the "middle and upper class"?
  - advisedwang 4y ago
    No I don't, which is kind of my point. I was responding to a comment that was suggesting those in favour of equality would celebrate this. I was responding that in reality this hurts a lot of people and so no one is celebrating.

Ekaros 4y ago

When we are talking about wealth I always think of crypto market caps or tradable items or whatever... Reminds me that many times valuations are rather questionable. Just think of how we value tech companies not actually making money... Or what has fundamentally changed with houses, clearly not enough to justify the prices.

PeterStuer 4y ago

If the wealth was real, where did it go? Who has it now?