US Wealth dropped $6 Trillion in Q2 | Hacker News Reader

US Wealth dropped $6 Trillion in Q2

money.usnews.com

43 pointssuperb-owl36 comments

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.

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

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.

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.

> 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 almost want to say this is an impossible question to answer. At the time it was, until it wasn't. Likewise, suppose I have an art collection. A bunch of Van Goghs. One of them is a forgery but nobody knows it's a forgery. Is it worth millions?

Deals made on the basis of the valuation of future wealth were always gambles by both sides. The folks who cashed out made a profitable bet on future information and could have just as easily lost out. Their experience has no influence on the real wealth (in goods, not money) of the nation.

>economies are wile coyote running past the edge of a cliff before they look down. that’s capitalism baby

Please say psyke before I join the communists.

> Wealthy is destroyed by war and disaster, or ground away slowly by consuming without creating.

Would the war in Ukraine not be a contributing factor to this? Essentially it is a proxy war between US/Europe and Russia. Yes no assets on US soil have been destroyed but the US has sent trillions of dollars of weapons to the Ukraine and that money has to come from somewhere.

It’s not a proxy war, because US and EU aren’t fighting at all - they are merely providing support. Compare with eg Syria, where US was actually taking part.

It's not a proxy war because the US and EU are using a proxy?

It's not a proxy war because Ukraine is not a proxy - they aren't defending because US or EU told them to, they are defending to survive.

I feel like your definition of proxy war must be stricter than mine. The west is supplying weapons, training, intelligence etc. There’s no American boots on the ground officially but I would be surprised if elite western units weren’t involved in covert operations disrupting Russian assets around the world in some capacity. My definition of a proxy war is that of a war fought between two sides in a third country that is not part of either’s territory. If Ukraine had not been supplied with western weapons, training and intelligence on an ongoing basis then this war would probably be looking very different right now so it meets my definition at least. I’d say this also aligns with the description on wiki:

https://en.m.wikipedia.org/wiki/Proxy_war

Wikipedia definition differs in one crucial detail: it's a "conflict between two states or non-state actors, one or both of which act at the instigation or on behalf of other parties that are not directly involved in the hostilities." In this case there was no "instigation" - Ukraine is defending, it hasn't been forced into conflict by the West.

I do see your point. The definition implies a lack of free agency in Ukraine's involvement. There must be some kind of word for it, but I have no idea where to find it. If not, one should be coined. "Symbiotic war" is about the best I can come up with.

A third possibility is that economic activity which was not previously wasteful (...?) is no longer feasible; that is, businesses which planned a future in shipping things that are made with wheat or eat wheat or use gasoline or are shipped with gasoline can no longer use those plans and have to cut output accordingly.

I'd just like to point out that (1) is the same thing as losing wealth since all the wealth is essentially made up anyway. If the majority believe that the economy is strong, it is, and vice-versa.

Only if you're measuring it in dollars. Wealth, fundamentally, are durable assets that provide benefit to a standard of living or efficiency (to you individually or to society)

Let's say you have a solar installation nominally worth $10k in year X. Due to a temporary rise in labor costs, someone comes along in year X+2 and says, "Golly gee, now your installation would cost $15k to install, so you have gained wealth!"

Then, as labor costs normalize again, in year X+4 you do a home appraisal, and your installation comes in at $10k again.

Have you lost wealth in this scenario? You still have the same installation that generates roughly the same amount of energy for you and lets you be less dependent on the grid.

The reason it's silly to measure large amounts of wealth in dollar values is that it generally doesn't get traded in cash in these amounts, ever. Even when companies are bought for billions, they are usually purchased with exchange of stock, and only partly with cash and financing.

What's made up is not wealth, but the dollar valuation of large amounts of wealth. In the real world where people need to eat food every day and run their HVAC on stable electricity, wealth is anything but made up.

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.

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.

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.

Not for you, but for lurkers: https://en.wikipedia.org/wiki/Wealth_effect

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.

It’s a Reuters

[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...

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?

> and just not buy everything you wanted?

Isn't that how it always works?

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.

Then there is no way to measure wealth at all, its just all a mystery.

Human behavior changes based on that very real number. The lower it goes, the less people feel like funding ideas

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.

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?

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?

> 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"?

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.

Headline should say household wealth.

Isn't editorializing against HN rules?

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

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