Most Americans saw large portions of their wealth, savings, investments and retirement accounts disappear by the beginning of 2009. It all started with the collapse of housing market in early 2008. The housing market took the rest of the nation’s economy with it. Some individual 401K retirement accounts lost over 60% of their value. Thousands of Americans that were on the verge of retiring soon realized that they were going to have to continue to work for a number of years. Interest rates during that period fell so low that those seniors that were already retired and living on their interest income found themselves in a world of hurt financially.
Barack Obama and most of the Democrats all pointed the finger of blame at President George W. Bush, but it wasn’t his fault at all. President Bill Clinton forced the mortgage lending industry to offer a wide variety of creative mortgages along with lowering their qualifying requirements in order to get more families into homes. The creative nature of Clinton’s mortgage industry made a collapse of the system inevitable.
From the peak of the housing marketing in 2007 to the deep valley of the recession in early 2009, it was estimated that a total of $16 trillion of household wealth was lost.
Since 2009, parts of the economy have shown signs of recovery, but the government reports have been found to be extremely misleading. Earlier this year, they reported that Americans had regained 91% of their wealth that they lost in the recession.
However, a different report from Money Watch says that the 91% figure reported by the government fails to consider a number of realistic factors. They said the government’s figure is mostly based upon the aggregate household net worth data. The government figure failed to consider the nature of the wealth, population growth or the rate of inflation.
The report states:
“Clearly, the 91 percent recovery of wealth losses portrayed by the aggregate nominal measure paints a different picture than the 45 percent recovery of wealth losses indicated by the average inflation-adjusted household measure. Considering the uneven recovery of wealth across households, a conclusion that the financial damage of the crisis and recession largely has been repaired is not justified.”
They also pointed out that a large part of the recovery was due to the gains made in the stock market. About 80% of stocks are owned by the top 10% of wealthy Americans. On the flip side, most of the wealth for middle and lower income households is tied to the value of their homes. The federal government is quick to point out that home values have increased by about 11%, but they fail to tell you that they are still down 30% from their peak values in 2007.
Lower income families have suffered the most and have had the least amount of financial recovery. Families that are less educated, younger, black, Hispanic or any combination of these tend to have the lowest savings and higher debt. Their wealth is based more on their housing than any other group.
In the past year, there has been an increased trend for lower and middle income households to pay off more of their debt, but it’s a slow process, which is partially responsible for a slower economic recovery than what the stock market would indicate.
When all is said and done, most Americans are still facing a 55% reduction in their wealth since everything tanked in 2008-9. We haven’t seen a 91% recovery as Obama tries to convince us of. His figures on wealth recovery are just as misleading as his unemployment figures.
I also see the overall recovery slowing down considerably once the rest of Obamacare goes into effect and all of the costs and taxes go up even more. If the current version of the immigration reform bill is passed, it will also help slow the economic recovery. In fact, Obamacare combined with immigration reform could lead us back into another recession that we may not be able to recover from.