Ezra Klein leads us through it. "Before the crisis, American households were worth $67.4 trillion. At the end of 2012, they were worth $66.1 trillion."
Hey! Pretty damn good. But hold on a moment. That's not the bottom line. Are we ready for hard facts?
After adjusting for inflation and population growth, the average household has only recovered 45 percent of the wealth lost in the recession. ...Klein,WaPo
And that's not all.
And then there’s the inequality adjustment. The St. Louis Fed estimates that 62 percent of the wealth we’ve recovered has come in the form of higher stock prices. But about 80 percent of stock wealth is owned by families in the top 10 percent of the income distribution. The families that lost homes are not the families making money off stocks.
The bottom line, according to the Fed? “Most families have recovered much less than the average amount.” So let’s back it up. We’ve recovered 91 percent of the wealth lost since 2007. After adjusting for inflation and population growth, that falls to 45 percent. And after adjusting for the unequal nature of the recovery, that falls even lower for the average household. ...Klein,WaPo
All along the myth has been that debt is dragging down the economy. But not if you listen to economists whose predictions have been accurate. Like Paul Krugman and Brad Delong.
There is a mild negative correlation between debt and growth. Even if this is interpreted as a causal relationship, however, it is not a strong enough correlation to justify the debt panic of recent years. Brad DeLong’s version:
as best as I can tell we are talking that an increase in debt from 50% of a year’s GDP to 150% is associated with a reduction in growth rates of 0.1%/year over the subsequent five years…
There is pretty good evidence that the relationship is not, in fact, causal, that low growth mainly causes high debt rather than the other way around.
We’ve spent three years letting policy be dominated by unwarranted fears. ...Paul Krugman