
Americans are 40% poorer than before the recession - saadmalik01
http://www.marketwatch.com/story/americans-are-40-poorer-than-before-the-recession-2014-12-12
======
hawkice
Calculating how poor people are based on comparing against a time known to
have unrealistically high and unsustainable housing prices, which made up a
very large portion of net worth, seems like clickbait. We haven't re-entered a
housing bubble massive enough to make every a paper millionaire. We shouldn't
sulk about that.

~~~
sillysaurus3
It doesn't seem like clickbait. It seems pretty important to think about,
actually.

Little story: In 2007, a member of my family landed a lot of signed contracts
to commission him to do a certain type of job. These were actually so
lucrative that he quit his dayjob.

Then 2008 happened. All of those signed contracts became meaningless. People
simply said no, we're not paying you anymore, sorry. Fast forward a month, and
he's contemplating ways to kill himself to make it look like an accident so
that his family will keep their house via life insurance payments.

Luckily, things didn't turn out that way. He was able to get his job back.
Somehow.

Might it be true that comparing the present to the lucrative year of 2007
isn't necessarily productive? Possibly. Probably. But it's an interesting
historical perspective, and it's also interesting to remember how much
people's faith in the economy matters. The type of work he was being
commissioned for wasn't anything related to tech or housing. The ripples are
profound, both in the upswing and the downswing.

~~~
branchless
Sorry to hear of his issues, but surely perpetuating high house prices means
his children would also be under huge stress as they stretch themselves to the
limit (and assume zero unemployment like this guy).

The "wealth" created by pulling forward demand through credit through housing
wasn't real. That's why living standards fell - we stopped creating wealth and
started adding zeros to numbers on a screen.

Reducing house prices means more disposable income for our children. And their
children. And theirs.

Yes there was a hit to the housing crash, but only because the loss in living
standards was a _result_ of the misallocation during the "boom". 2008 was just
Wile E Coyote looking down having already run off a cliff.

Want to avoid a fall? Don't run off the cliff. Not looking down isn't an
option long-term.

------
pvnick
"The recession is over" has always struck me a political double-speak. We
never left the recession; mainstream America just collectively forgot how it
felt to have enough money. We have become accustomed to the 60 hour work weeks
for folks fortunate enough to have jobs, chronic unemployment for those
unfortunate enough to work outside of tech, the cheaper processed food, the
increasing debt, and the lower standard of living. Being poor is the new norm,
and "the recession is over" translates to "get used to it buddy, it's not
getting any better."

Given that's the case, I wonder what the phrase "double dip recession" we hear
thrown around referring to impending repeat economic troubles actually
translates into?

~~~
pachydermic
"Recession" means that GDP is shrinking, not growing. That's the definition of
that word:

noun: recession; plural noun: recessions

1\. a period of temporary economic decline during which trade and industrial
activity are reduced, generally identified by a fall in GDP in two successive
quarters.

So technically, the recession _is_ over. There's not much room for
interpretation there unless you choose a different definition of "recession".

All of the bad stuff you listed are symptoms of an empire in decline as well
as a massive change in how the economy works. Industrialization changed the
world and so will computers and information related technology. We're right in
the thick of things. We don't _know_ how things will turn out in the long term
- that's for historians 200 years from now to figure out.

It looks like this period of drastic change will be a mixed bag. People being
put out of work by automation puts pressure on the labor market. Educational
systems set up in a bygone era are failing to adapt. People are having fewer
children and living longer which puts stress on everything from social
security to labor markets.

It will probably just take a while for society to sort all of this out. And it
may or may not suck in the meantime. I think most people reading this will be
just fine and probably live really nice lives. Also it'd be nice if the USA
and China could avoid a war/proxy wars while trying to figure out the new
world order.

~~~
pvnick
Your narrow technical definition of the word "recession" is by no means
universally accepted [1] [2]. In addition, as another post adjacent to your's
points out, there is a common meaning used by everybody outside of economic-
savvy circles that refers to periods of general economic difficulty. It is
this definition which is more important because this is what the technical
definitions of recession attempt to formalize with math and economic
indicators, and the tendency to play semantics and say "since GDP hasn't
fallen for two successive quarters the recession is over" when the economy is
clearly still in shambles ignores the real struggle of millions of Americans
who are not seeing the benefits of our "recovery," other than hearing about it
on the news.

[1]
[http://www.nber.org/cycles/recessions_faq.html](http://www.nber.org/cycles/recessions_faq.html)

[2] [http://clubtroppo.com.au/2008/11/23/what-is-the-
difference-b...](http://clubtroppo.com.au/2008/11/23/what-is-the-difference-
between-a-recession-and-a-depression/)

~~~
hnnewguy
> _And the tendency to play semantics and say "since GDP hasn't fallen for two
> successive quarters the recession is over" when the economy is clearly still
> in shambles ignores the real struggle of millions of Americans who are not
> seeing the benefits of our "recovery," other than hearing about it on the
> news._

The formal definition of _recession_ as two quarters of falling GDP isn't
prone to semantic arguments, while your soft definition, talking about "real
struggle" and "what Americans see" is.

That's why we choose the former.

------
josefresco
Why are they using the height of the real-estate bubble (2007) as the measure
of previous net worth? If home prices were so out of whack in 2007, I would
think their values might be influenced considering they include "homes" in the
valuation.

------
nostromo
I'm really worried about our economic future.

I think job creation has been decoupled from economic growth. That's
terrifying for the lower class today, and will eventually be terrifying to
nearly everyone.

I also think central banking has lost its effectiveness. We've had 6 years of
0% interest and money printing -- the pedal is to the metal -- but labor
participation for working-aged citizens is stuck at a low not seen since the
mid-1980s.

[http://www.washingtonpost.com/blogs/wonkblog/files/2013/09/E...](http://www.washingtonpost.com/blogs/wonkblog/files/2013/09/EmployPop2554Aug.jpg)

Scary stuff...

~~~
thaumaturgy
I'm not so sure.

Most of what I read suggests that American workers are as productive as ever;
the generated wealth just seems to be getting concentrated into the hands of a
smaller number of people. It's not really employment or even industry that's
broken, it's the exploitation of workers (and not just in the U.S., although
it's pretty bad here right now), and since it is politically incorrect to
suggest anything that smells even a little like wealth redistribution, the
problem will continue for a while until there is sufficient public unrest.

The situation looks to me a lot like the one in the late 19th century (e.g.
[http://en.wikipedia.org/wiki/File:The_Bosses_of_the_Senate_b...](http://en.wikipedia.org/wiki/File:The_Bosses_of_the_Senate_by_Joseph_Keppler.jpg)),
except now the political fat cats and monopolists are in the news and
communications industries.

------
pcarolan
This study uses 2007 as it's baseline which is like saying that lake levels
are 40% lower than they were at the height of the last flood. Asset prices
were overinflated in 2007, so you'd probably want to baseline somewhere
between 2003 (the end of the early 2000s recession and 2007 to get a sense of
how much worse off people actual are.

------
lottin
It looks like they don't know the difference between nominal value and real
value. In a housing bubble, the nominal worth of your house increases, but its
real worth stays the same - unless, of course, you have a stock of houses that
you can sell, but that's not the case of most Americans.

~~~
api
The trouble is when nominal value shrinks, it shackles people to endless
cycles of debt slavery. Either that or people default, which causes follow-on
cascades of defaults.

If we had a low-debt cash-only economy this might not be the case, but our
economy is so far from that it's not even worth talking about. We are
absolutely a credit economy, and when the numbers get smaller in a credit
economy pretty much everything breaks.

 _Eventually_ the collapse of the middle class will drag down everything else,
including the rich.

~~~
Amezarak
FWIW, the US is actually doing a great job of deleveraging its private debt,
especially relative to other countries.

[http://www.mckinsey.com/insights/global_capital_markets/unev...](http://www.mckinsey.com/insights/global_capital_markets/uneven_progress_on_the_path_to_growth)

~~~
api
As with most things, it could be worse. But the overall picture -- especially
of wages vs. asset prices -- is not exactly _good_.

------
tokenadult
It's really amazing to contrast this thread with the thread currently up about
the Gates Foundation report on good news in reducing disease in poor
countries. I live in the United States, I do NOT own a house (I never have),
I've had several career changes (bad planning on my part, no one else to
blame) but I still consider myself very well off. I have use of this amazing
device called the Internet to have intellectual conversations with friends any
hour of the day or not. That alone would have been unimaginable in my
childhood. There has been a lot of progress, and Americans are staggeringly
wealthy by any reasonable worldwide standard. Moreover, Americans are living
longer and healthier lives than ever before, and mostly don't even notice
that.[1] So, sure, many Americans don't have as many on-paper financial assets
as they appeared to have at the peak of the housing bubble, but so what?
Americans can still take care of their children, still enjoy leisure, and
still change where they live and what they do for a living with a freedom
unknown in much of the world. If this is what it's like to be poor in America,
I have no problem with being poor. (Disclosure: I have lived outside the
United States, and I have been to places with stark poverty. I have a point of
comparison as I type this.)

[1]
[http://www.slate.com/articles/health_and_science/science_of_...](http://www.slate.com/articles/health_and_science/science_of_longevity/2013/09/life_expectancy_history_public_health_and_medical_advances_that_lead_to.html)
[http://www.nature.com/scientificamerican/journal/v307/n3/box...](http://www.nature.com/scientificamerican/journal/v307/n3/box/scientificamerican0912-54_BX1.html)

------
russelluresti
So, everyone's already pointed out that it's dumb to compare the amount of
money you have now to the amount of money you had at the height of a bubble
(where that money was unsustainable and over-inflated).

One thing that's missing here, though, is the idea of amount of money to cost
ratio.

For example, say you had $1000 in 2007. Now say that, in 2007, a loaf of bread
cost $1000. In that year, you had enough money to buy 1 loaf of bread. Now, in
2014, you have $600 (40% less than 2007). But now, instead of $1000, a loaf of
bread is $100. Now you have enough money to buy 6 loaves of bread. You
technically have less money, but the value of each dollar you have is
significantly more. So, are you really "poorer" now?

The issue with just looking at a single number when analyzing economic health
is that it will never tell you the whole story. I can have a million dollars
and still be in poverty if a gallon of milk costs 2 million.

~~~
Negitivefrags
> One thing that's missing here, though, is the idea of amount of money to
> cost ratio.

That isn't missing at all. It's specifically accounted for. See how the graph
says "in 2013 dollars". That indicates that they are using inflation adjusted
values.

------
vondur
I'm guessing most Americans net worth is based on the value of their homes,
and property values for the most part have declined since 2007, this would
make sense.

------
dumbfounder
And that doesn't even take into account inflation. (at least the article makes
no mention of it, maybe the original report does)

------
pistle
Should have drawn a trend line to avoid a comparison that includes the bubble
in real-estate value... but then it wouldn't likely be such an ominous number.

------
patmcguire
Is this page violently broken for anyone else on desktop?

~~~
zo1
Broken for me, too. Running Firefox

------
eyeareque
This makes me want to ask: Where did all of the money go? It had to go
somewhere, right?

~~~
JoeAltmaier
Its actually imaginary points. It doesn't have to go anywhere.

~~~
eyeareque
Sure, but if someone lost their house and the bank took it, wouldn't that mean
the banks ate up all of the assets?

------
gaius
Man, I hate it when the rich get richer and the poor get poorer.... Ooh look,
new iPhone!

------
coldcode
40% of a random number is still a random number. People calculate stuff like
this all the time without any actual basis in fact. Unless you have a rigorous
knowledge of statistics and a careful process, most of these definitive
statements are basically pulling numbers out of your ass.

~~~
thaumaturgy
Here's the link to the original article from the Pew Research Center:
[http://www.pewresearch.org/fact-tank/2014/12/12/racial-
wealt...](http://www.pewresearch.org/fact-tank/2014/12/12/racial-wealth-gaps-
great-recession/)

You should consider contacting them to explain exactly what they did wrong.

------
forrestthewoods
Absolute trash analysis. Worse than garbage. I say worse because the analysis
is so catastrophically wrong that the complete inverse could be true.

It's using average. Average is a terrible data point. I think if you replace
'average' with 'median' you'll have something more useful >95% of the time.
Maybe more.

For example, it is widely circulated that the gains have all gone to the rich.
Well the losses also went to the rich. It's theoretically possible that the
median household, or even 90% of all households, have exhibited slow but
linear growth since just before 2007. Meanwhile the upper echelon could have
swung wildly down than up.

Now I'm not saying that's the case. What I'm saying is that could be the case.
The data presented provides insufficent information to make any type of
determination on how "Americans" are doing.

Bah hum bug!

Edit: Yup. I deserve that for failure in reading comprehension. Oops.

~~~
wavefunction
I downvoted you for your trash analysis. I will be back this evening (1:45PM
here at the moment) and I will cite sources until you scream for mercy. The
loss of wealth for the average American (note I didn't say MEDIAN lol) is
well-established at this point.

~~~
forrestthewoods
I failed reading comprehension 101 so I don't think this is required. But I'm
always interested in reading interesting links if you have anything you'd
still like to share.

~~~
wavefunction
Ok, well my comment about "screaming for mercy" was hopefully taken as tongue-
in-cheek. My conversational writing style is somewhat cold sometimes without
intention. Plus it's night here, so I must beg pardon for claiming that I
would get back here in the evening. I had a dog dependency I had to resolve.

I will definitely try to find the raw data for my main issue, which is that
through Quantitative Easing by the Fed (Rounds 1 and Two) the purchasing power
of the dollar was devastated, which makes dollar wealth comparisons pre- and
post-recession even worse than reported. If your wealth drops 20% from $100 to
$80 but each $1 of that $80 buys half of what it used to, then your wealth has
actually dropped by 60%: your eighty dollars has the purchasing power of forty
dollars when once you had one hundred dollars of purchasing power. These
hypothetical values don't exactly match the specific situation rendered by QE
but give you an illustration of the worst aspects of the austerity imposed in
America. I don't want to quote the exact drop in purchasing power of the
dollar pre- and post-recession but I have found the data before and calculated
that drop for a co-worker, and the drop was precipitous and un-reported by-
and-large. I'll be back with that data when I have it.

In addition, many corporations snuck further cost-savings for themselves in
terms of reducing volume of a product by unit but did not modify the unit
price respectively, so they are receiving marginal increases in revenue
despite the down-turn and all the weight being thrown directly on consumers.

Here are some general articles about the loss in wealth for most Americans
while the wealthiest experienced a gain in wealth for the wealthiest.

[http://www.pewsocialtrends.org/2013/04/23/a-rise-in-
wealth-f...](http://www.pewsocialtrends.org/2013/04/23/a-rise-in-wealth-for-
the-wealthydeclines-for-the-lower-93/)

In the UK, pensioners feel the bite of QE:

[http://www.sharingpensions.co.uk/quantitative-easing-
annuity...](http://www.sharingpensions.co.uk/quantitative-easing-annuity-
rates-lower.htm)

There are a ton of blogs out there with people talking about the issues
surrounding QE but I am trying to sift through the chaff for you. I should
have bookmarked the links I used with my coworker.

