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...wealth we never really possessed.

fennecfoxen 14y ago
I don't know how much economic sense that statement makes exactly; it's a little simplistic. Consider: Some people bought new homes for the first time at the top of the bubble, trading real dollars and real future liabilities for a house. The fact that the house can no longer be sold for nearly as much materially impacts what they will be able to do with their future: they have lost wealth. And at any time, many individuals could have sold their home to another person, in exchange for real tangible wealth which could have been put in a lasting form. That's an opportunity cost and represents a tangible loss as well. It's true that not every individual could have done this, though, yes. It's a complicated picture, really, and we oughtn't simplify it too far in either direction.
- tomp 14y ago
  they haven't really lost anything - they still own the same house, and no money, just as before(at the height at the bubble)
  - fdr 14y ago
    They haven't lost anything, in the sense that savings appreciating slower than inflation is not losing anything, although few would suggest that this is not "losing" something. What has been lost is choice and opportunity for an easily identified class people (homeowners in areas that could not sustain the demand for homes) on a relatively large scale. I, on the other hand, a renter who has most of his wealth in securities am not so much impacted: I only lost some liquidity in the few years it took for the stock market to bounce back.
  - SwellJoe 14y ago
    A house that was purchased with $250k of debt, that is now only worth $150k, has cost the buyer $100k, for nothing. That is $100k of lost wealth to the buyer. The buyer purchased $250k worth of house, using future earnings, and now only owns $150k worth of house (but still owes $250k of future earnings). That is a devastating economic blow to a middle class family, and to dismiss it as "they haven't really lost anything" is simplistic and cruel.
_delirium 14y ago
In modern economics, there isn't really any distinction between "real" and "nominal" wealth. Value is value, measured by current market prices. There are heterodox economic systems that do make a distinction; for example, Marxian economics distinguishes between "exchange value" (current market price) and other kinds of value, such as "use value" (e.g. the usefulness of your copper pan for cooking does not decrease even if the price of copper crashes). But those aren't too popular among modern economists.
tgrass 14y ago
If you have all your wealth in cash and there's inflation...did you ever really possess it?

I don't know how much economic sense that statement makes exactly; it's a little simplistic. Consider: Some people bought new homes for the first time at the top of the bubble, trading real dollars and real future liabilities for a house. The fact that the house can no longer be sold for nearly as much materially impacts what they will be able to do with their future: they have lost wealth. And at any time, many individuals could have sold their home to another person, in exchange for real tangible wealth which could have been put in a lasting form. That's an opportunity cost and represents a tangible loss as well. It's true that not every individual could have done this, though, yes. It's a complicated picture, really, and we oughtn't simplify it too far in either direction.

tomp 14y ago
they haven't really lost anything - they still own the same house, and no money, just as before(at the height at the bubble)
- fdr 14y ago
  They haven't lost anything, in the sense that savings appreciating slower than inflation is not losing anything, although few would suggest that this is not "losing" something. What has been lost is choice and opportunity for an easily identified class people (homeowners in areas that could not sustain the demand for homes) on a relatively large scale. I, on the other hand, a renter who has most of his wealth in securities am not so much impacted: I only lost some liquidity in the few years it took for the stock market to bounce back.
- SwellJoe 14y ago
  A house that was purchased with $250k of debt, that is now only worth $150k, has cost the buyer $100k, for nothing. That is $100k of lost wealth to the buyer. The buyer purchased $250k worth of house, using future earnings, and now only owns $150k worth of house (but still owes $250k of future earnings). That is a devastating economic blow to a middle class family, and to dismiss it as "they haven't really lost anything" is simplistic and cruel.

_delirium 14y ago

In modern economics, there isn't really any distinction between "real" and "nominal" wealth. Value is value, measured by current market prices. There are heterodox economic systems that do make a distinction; for example, Marxian economics distinguishes between "exchange value" (current market price) and other kinds of value, such as "use value" (e.g. the usefulness of your copper pan for cooking does not decrease even if the price of copper crashes). But those aren't too popular among modern economists.

tgrass 14y ago

If you have all your wealth in cash and there's inflation...did you ever really possess it?