You’ll hear lots of talk about how recessions are caused because people feel poorer or irrationally react to a flood of bad economic news. But the truth is that these depressed feelings are rooted in reality. Americans don’t just feel poorer, they are poorer:
- U.S. homeowners lost a cumulative $3.3 trillion in home equity during 2008, according to a report from Zillow. (MortgageWire.)
- One in six homeowners is now underwater on their mortgage.
- The stock market erased $6.9 trillion in shareholder wealth in 2008.
Add together the loss of housing equity of $3.3 trillion and the stock market loss of $6.9 trillion, and you’ve got a historic loss of wealth of $10.2 trillion.
To put that number in perspective, it’s almost one fifth of the GDP of the entire world. It’s about the size of the US Debt at the end 2008, meaning we could have paid off the entire debt of our government with the money we lost last year.
Thankfully, past performance may not indicate future results. Maybe now that we’ve finally lost $10 trillion we’re coming near the bottom. Fingers crossed, guys!