12 June 2012

People consumed instead of investing; wealth dropped. Shocking!

NY Times | Binyamin Applebaum | Family Net Worth Drops to Level of Early ’90s, Fed Says

The recent economic crisis left the median American family in 2010 with no more wealth than in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said Monday.
But the problem is that we did not actually accumulate that wealth. Income came in, and people consumed it. There was no accumulation. (It may look like there was some accumulation, but the single largest factor there was mis-marking the value of people's largest asset.)

If you get a season of heavy rainfall, but keep using it all on throwing lavish water balloon fights, you can't stare down into your dry cisterns at the beginning of the dry season and say "where did all our accumulated water go?"

PS The converse of this statement is a good summation of why I don't care much about income inequality:
The data does provide the latest indication, however, that the recession reduced income inequality in the United States, at least temporarily.

1 comment:

  1. Well, this is actually not shocking. I myself has been on this phase and still recovering, when in financial crisis..I get depressed or stressed that I pamper myself with materials things (which I really don't need). In the end, I had overspent my hard earned money and even my savings is screwed.

    So, I did some researching and read blog on how to manage my money well. So, what I did was taking notes of all the spending I had so I can monitor where did my money went.