Reversal of Fortune: Americans Have Lost $14 Trillion in Net Worth
source: http://www.thinkglink.com/article/2009/06/16/reversal-of-fortune-americans-have-lost-14-tril...
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- IlyceGlink
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Americans have experienced a reversal of fortune - and lost $14 trillion in net worth over the past 18 months.
The housing crisis and credit crisis have taken a huge bite out of our net worth. In response, Americans are saving more - a move that won't help the economy recover, but may set up a more sustainable economic model.
The biggest hit to our net worth has come from falling stock prices and declining home values. Stocks and our homes account for 30 percent (stocks) and 13 percent home values) of household assets, said the Royal Bank of Scotland's McLaughlin. It wasn't too long ago that our home value represented the largest portion of our individual net worth. Today, a third of all homeowners find that the value of their homes are worth less than their mortgage balance.
The American consumer has called it quits. With a stunning $14 trillion loss of net worth (your net worth is how much you own versus how much you owe) over the past 18 months (and a $1.4 trillion loss in the first quarter of 2009 alone), no one is spending money anywhere, according to Andrew McLaughlin, chief economist of the Royal Bank of Scotland.
Retail stores and small businesses have felt the pinch. But since American consumers account for two-thirds of the spending in the general economy, the economy won't recover as fast if Americans aren't spending as much. But maybe, just maybe, that's a better and more sustainable economic model.
Economists are expecting the US to come out of the recession later in 2009 or early 2010, but don't forsee a healthy housing market in the near term. That means your net worth isn't going to recover that fast, unless you start saving even more money.
The housing crisis and credit crisis have taken a huge bite out of our net worth. In response, Americans are saving more - a move that won't help the economy recover, but may set up a more sustainable economic model.
The biggest hit to our net worth has come from falling stock prices and declining home values. Stocks and our homes account for 30 percent (stocks) and 13 percent home values) of household assets, said the Royal Bank of Scotland's McLaughlin. It wasn't too long ago that our home value represented the largest portion of our individual net worth. Today, a third of all homeowners find that the value of their homes are worth less than their mortgage balance.
The American consumer has called it quits. With a stunning $14 trillion loss of net worth (your net worth is how much you own versus how much you owe) over the past 18 months (and a $1.4 trillion loss in the first quarter of 2009 alone), no one is spending money anywhere, according to Andrew McLaughlin, chief economist of the Royal Bank of Scotland.
Retail stores and small businesses have felt the pinch. But since American consumers account for two-thirds of the spending in the general economy, the economy won't recover as fast if Americans aren't spending as much. But maybe, just maybe, that's a better and more sustainable economic model.
Economists are expecting the US to come out of the recession later in 2009 or early 2010, but don't forsee a healthy housing market in the near term. That means your net worth isn't going to recover that fast, unless you start saving even more money.
