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Guest Post: US Household Net Worth Plunges

Tyler Durden's picture


Submitted by Michael Suede of Fascist Soup

US Household Net Worth Plunges

Since the beginning of the greatest depression, US household net worth has plunged nearly 11 trillion dollars.  All the while we continue to experience price inflation and expanded government spending.

In a normal economy that isn’t run by a bunch of criminals, we should expect to see price deflation as malinvestment is wiped out.  Since our money is based on debt, as debt is reduced though defaults and write-downs, the monetary base should contract, thereby leading to price deflation.

Of course, this is not what we are actually experiencing at the present moment since the criminal central bankers and politicians have decided to prevent the liquidation of malinvestment through a nearly endless series of bailouts, guarantees, and deficit spending.

Contrary to what the criminal Keynesians would have you believe, price deflation is a good thing.  It does not lead to economic collapse.  In a normal non-criminal monetary system, deflation will sink the paper money stock back down to the “real” money stock, which is a 1 to 1 ratio of paper issuance to the gold stock (or at least closer to this point).

There is some debate about how far the money stock would sink to in our current system of fraud and theft, but I personally think it would shrink until everything that can be considered waste is liquidated from the economy.  At the most, it would shrink back down to the existing money stock we had prior to the abolition of the gold system back in the 1960s since this is the existing stock of money that is not based on debt  (I highly doubt it would shrink this far though.)  It should be noted that it takes very little fiat money to have a functioning economy since prices will adjust back down meet the amount of currency in circulation.  As money becomes more scarce, prices will fall until a market balance is achieved between the demand for money and its supply.  Once all the bad investments are liquidated, the economy will once again begin experiencing a normal demand for credit and lending can resume in a much more sane fashion.

In a non-criminal currency (ie. gold), inflation is caused by banks lending out more money than they have in gold reserves or by an increase in the gold stock.  Business cycles are directly related to this fraudulent activity of excessive lending since the act of lending more paper money than the banks actually have in gold reserves artificially reduces interest rates, which leads to “booms” in the cycle.

These “booms” are when the malinvestment takes place due to excessively “cheap” money (credit) being available.  Since money is cheap, investors are willing to take more risk than they otherwise would.  The cheap cost of borrowing also sends a signal to investors that there is more capital goods available for future production than actually exists.  Producers see the cheap rates and assume people have lots of savings available to spend on future consumption so industry reorganizes itself into the production of long term goods.  Only later is it revealed that consumers are broke and the existing capital stock of goods that producers were relying on to finish their projects does not actually exist.

The “bust” is the market trying to correct this excessive lending and return itself to a proper ratio of gold to dollars.  The “proper” ratio can be considered a point where all bad debts (malinvestments) have been cleared through defaults and write-downs.

In a totally unregulated system of gold back currency, the normal behavior of the economy is to experience constant DEFLATION.  As the economy grows and becomes more productive, the value of the currency will INCREASE over time.  A piece of gold will buy more and more goods as productivity increases.  We should see constantly DECREASING prices, just as we see in the consumer electronics industry, due to technological innovation, competition, and increased efficiency.

The fact that we have not seen price deflation as household net worth has plumeted by nearly eleven trillion speaks volumes about the amount of fraud being conducted by the banks and criminal politicians.  A reduction in a nominal net worth of 11 trillion dollars is only a big deal if it is NOT accompanied by deflation.  Since we don’t have deflation – it’s a big deal.

Eventually, the market WILL win this fight.  It is only a matter of time.  The central bank and government will either wipe out the currency through the printing press, or they will allow the necessary deflation to occur and the debts to be cleared.  If they wipe out the currency through the printing press, people will once again be forced to return to real money – gold.


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Wed, 09/22/2010 - 18:55 | 598718 Xedus129
Xedus129's picture

I doubt they will really "cut back"  I'm still betting on "Printgate" 2010-2012

Wed, 09/22/2010 - 19:17 | 598756 Implicit simplicit
Implicit simplicit's picture

Whats the old saying' "Watch what politicians do, not what they say"; often very diferent

Wed, 09/22/2010 - 19:19 | 598760 Xedus129
Xedus129's picture

Yeah, just like the "Contract with America" circa 1994

Wed, 09/22/2010 - 20:21 | 598864 ColonelCooper
ColonelCooper's picture

Care to elaborate on that statement, Genius?   Let me help you out with a simple Wiki link you may want to read before you respond:


No junk from me by the way.

Wed, 09/22/2010 - 20:40 | 598899 DarkAgeAhead
DarkAgeAhead's picture

Ah but junked nonetheless.

Not by me either by the way, which ensures I shall too be junked.

Wed, 09/22/2010 - 20:43 | 598909 Turd Ferguson
Turd Ferguson's picture

From The Mossad to all ZHers on the Continent:

Thu, 09/23/2010 - 00:13 | 599190 RockyRacoon
RockyRacoon's picture

Try to stay on topic, Turd. 

I just love calling someone "Turd" and it's ok!

Thu, 09/23/2010 - 02:07 | 599266 Hephasteus
Hephasteus's picture

LOL. I always want to call him Mr. Ferguson. I read his posts but don't respond to them much.

Thu, 09/23/2010 - 05:00 | 599353 Dismal Scientist
Dismal Scientist's picture

Don't feed the animals please.

Wed, 09/22/2010 - 21:02 | 598944 Not For Reuse
Not For Reuse's picture

the ONLY part of CWA worth a fucking red cent was term limits; wiki me that

Thu, 09/23/2010 - 00:59 | 599228 sethstorm
sethstorm's picture

You mean Contract on America.

Wed, 09/22/2010 - 21:26 | 598981 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

Obama hated his mother because she could not live up to the purity of the Koran.

Thu, 09/23/2010 - 00:14 | 599191 RockyRacoon
RockyRacoon's picture

Has anyone ever called you an imbecile?  Just wondering.

Thu, 09/23/2010 - 13:30 | 600147 BlackChicken
BlackChicken's picture

WTF does this have to do with the article, not to mention the comments above?

I agree w/Rocky; we need a thumb up/down button.  Christmas season probably started already this year, how about it Tyler?

Wed, 09/22/2010 - 23:35 | 599141 colorfulbliss
colorfulbliss's picture

Perhaps one day in the future (hopefully not too distant), Jesus will return and take away his chosen ones back to his holy kingdom. Hopefully Mohammed Buddha Shiva ad nauseam will follow suit or even precede the One Of Miraculous Birth. And then maybe Gaia can swallow up a load of Her followers in some great cataclysm. By this time the great contrived debate between the liberals and conservatives will finally quiet down. Then, and only then, will those of us with more than five functioning brain cells get some fucking peace and quiet and rational discourse!

Thu, 09/23/2010 - 00:14 | 599193 RockyRacoon
RockyRacoon's picture

We definitely need a THUMBS UP button.

Thu, 09/23/2010 - 07:03 | 599401 old_turk
old_turk's picture


<sardonic commentary/>


Thu, 09/23/2010 - 10:32 | 599746 weinerdog43
weinerdog43's picture

The great and powerful Ba'al will smite thee for thy blasphemous statements! 

Thu, 09/23/2010 - 03:09 | 599304 StychoKiller
StychoKiller's picture

Better yet, the "Contract FROM America:"

Wed, 09/22/2010 - 19:01 | 598728 The Rock
The Rock's picture

What??  You mean my ever-increasing collection of Designed-in-California-but-made-in-a-sweat-shop-in-China gadgets doesn't count as net worth?

Wed, 09/22/2010 - 19:30 | 598777 Dixie Normous
Dixie Normous's picture

Very funny and so sadly true. 

Wed, 09/22/2010 - 19:02 | 598729 The Rock
The Rock's picture

D'OH!  dupe...

Wed, 09/22/2010 - 19:02 | 598731 Steve Dallas
Steve Dallas's picture

"...our current system of fraud and theft..." You know, the thing about these Malthusian economic collapse posts is that none ever seem to address the fact that the perpetrators of this grand con against us righteous regular folks will probably have ALL the gold when everything falls apart. So, basically, I'm anticipating a future life of toil in Bartertown run by Lloyd Blankfein (dressed like Tina Turner, ofc) with a Geithner-Bernanke version of Master-Blaster doing the strong arming.

Wed, 09/22/2010 - 19:16 | 598755 Xedus129
Xedus129's picture

2 men enter, 1 man leaves!

Wed, 09/22/2010 - 22:16 | 599039 hedgeless_horseman
hedgeless_horseman's picture

Pray it's not the lawyer that leaves.  I like small nosed sorority girls as much as the next guy, Steve, but fuck you all the same.

Wed, 09/22/2010 - 20:07 | 598838 Kayman
Kayman's picture

If you're planning to work near Lloyd it is best to get a Swiss or Israeli passport. Just like the Saudis on 9/11 these criminals long ago had their exits planned.

Thu, 09/23/2010 - 09:43 | 599608 realitybiter
realitybiter's picture

In a perfect world, one would be able to demonstrate to the likes of Blankenstein just exactly what "God's Work" looks like.  I like the mob-movie term "wet work".  Seriously.  Once the dots get connected, how long before some nut with some "skills" does something completely uncivilized?  

Wed, 09/22/2010 - 19:07 | 598739 Implicit simplicit
Implicit simplicit's picture

Thanks MS. I like the title-Fascists Soup. It's alphabet fascists soup with letters like cds, siv, repo, bonds etc... Bankers and gov. have a special elitist taste gland that allows them to eat as much as they want, get sick, puke and shit, and then everyone else has to clean it up.

Wed, 09/22/2010 - 19:11 | 598749 TheMonetaryRed
TheMonetaryRed's picture

 ...the existing money stock we had prior to the abolition of the gold system back in the the existing stock of money that is not based on debt


Not according to Milton Friedman, but okay. It's a theory, anyway.



Wed, 09/22/2010 - 19:35 | 598784 kathy.chamberli...'s picture

now your woman is sitting in/on what?

Wed, 09/22/2010 - 19:48 | 598798 Crime of the Century
Crime of the Century's picture


Wed, 09/22/2010 - 21:23 | 598978 kathy.chamberli...'s picture

yeah, velo dressed up in kathy's sheep clothing. how did this happen?

Wed, 09/22/2010 - 22:19 | 599042 tomdub_1024
tomdub_1024's picture

I knew it was you  (velobabe) all along, no one can fake diction...its like a fingerprint...:)

Wed, 09/22/2010 - 22:59 | 599088 kathy.chamberli...'s picture

im so damn lonely†

Wed, 09/22/2010 - 23:10 | 599109 doolittlegeorge
doolittlegeorge's picture


Wed, 09/22/2010 - 23:25 | 599130 tomdub_1024
tomdub_1024's picture

add an "at hotmail dot com" to my name and, just friends...always open to new friends

Thu, 09/23/2010 - 03:17 | 599310 StychoKiller
StychoKiller's picture

Find a church you're comfortable with and attend their functions, such as singles groups...

Thu, 09/23/2010 - 12:07 | 599683 kathy.chamberli...'s picture

just say N O to churches.


Thu, 09/23/2010 - 23:57 | 601569 tomdub_1024
tomdub_1024's picture


churches = made by man

spirituality = made by ???

Wed, 09/22/2010 - 19:11 | 598753 mynhair
mynhair's picture

This sux.  Goobermint forced me into 1031s I can't get out of.

Wed, 09/22/2010 - 19:18 | 598757 Sqworl
Sqworl's picture

Just wait till Inside Job premiers and shows the sheeple just wtf is going on!!!

Wed, 09/22/2010 - 19:25 | 598771 mynhair
mynhair's picture

Sheeple can't read the UE Welfare Report; that's what Erin is for, or LIESman.

Wed, 09/22/2010 - 19:44 | 598794 Sqworl
Wed, 09/22/2010 - 20:56 | 598935 Implicit simplicit
Implicit simplicit's picture

I haven't been to the movies in over two years, but I think I'd like to see that one.

Wed, 09/22/2010 - 19:50 | 598805 boomer
boomer's picture

I wonder what is really going on?  The lovely folks who run this charade are either idiots or crooks.  When every Joe and Jane Sixpack in this country knows whats wrong how is it that this government doesn't.  They do, they have to, its just inconceivable that they don't, so with that said, what are they really trying to accomplish.  If they blow up the currency and the country along with it, aren't they shooting themselves in the foot.  They'll be destitute at best or blown away by the riots that are sure to commence.  They don't win if this scenario unfolds.  They will be hunted down and shot or hung.   So whats the game?  Their up to something that nobody has put their finger on yet.  One thing you can bet on is this is not all stupidity and there is something else cooking, and when its all said and done this ruling class will not have destroyed the world, just made it a  little bit more unbearable and enriched themselves immensely.

Wed, 09/22/2010 - 20:15 | 598856 Kayman
Kayman's picture

As I said above Lloyd and the boys already have the escape route bought and paid for. They ain't sticking around.  All the bonuses are going into gold and foreign assets while the USD still has some purchasing power.

Does anyone really think the IRS disclosed all Swiss (and other foreign) bank accounts ? Are you telling me that NOT ONE American politician had a bulging Swiss bank account?

Wed, 09/22/2010 - 20:25 | 598876 Cruel Aid
Cruel Aid's picture

Pretty sure Lloyd can weather some local hyperinflation. I know how to live off the land like a

I prefer doing it part time.

Wed, 09/22/2010 - 20:22 | 598871 HarryWanger
HarryWanger's picture

Well, "Joe and Jane Sixpack" don't really know "what's wrong". You ask them, they'll say we need more jobs. Great. From where? Do they want to work for $10/hr. picking produce, working on the assembly line, etc.? No, they don't.

That's the real problem now. We've priced ourselves out of the competition. Until everyone realizes you can't pay $150,000.00 for someone to write press releases for a Fortune 500 company and pay the farm guys $20,000.00 it ain't gonna work.

Until then, kick it further down the road until sometime, somewhere, somebody will realize they can't spend all day watching reality tv bitching about not having a job when others are doing the jobs they don't want.

Wed, 09/22/2010 - 20:29 | 598882 Cruel Aid
Cruel Aid's picture

And who did that? What we?

Wed, 09/22/2010 - 21:27 | 598986 kathy.chamberli...'s picture

i don't thank enough credit is given to all the poster's names. absolutely hilarious, if you take the time to pronounce them or try to pronounce. yours for example, Cruel Aid   is so fucking funny. cruel or kool  ¿

Wed, 09/22/2010 - 22:20 | 599044 hedgeless_horseman
hedgeless_horseman's picture

When every Joe and Jane Sixpack in this country knows whats wrong how is it that this government doesn't.  They do, they have to, its just inconceivable that they don't...

Expand your conceptions, Boomer.

Wed, 09/22/2010 - 19:51 | 598810 Fahrenheit451
Fahrenheit451's picture

Thats some good shit right there boy.

Wed, 09/22/2010 - 20:30 | 598885 Maniac Researcher
Maniac Researcher's picture

I love the term "non-criminal currency." Where and under what conditions, pray tell, does the writer think this gold was mined?

Wed, 09/22/2010 - 20:40 | 598903 DarkAgeAhead
DarkAgeAhead's picture

Corporate feudalism, get used to it. 

Wed, 09/22/2010 - 21:07 | 598952 Not For Reuse
Not For Reuse's picture

> "At the most, it would shrink back down to the existing money stock we had prior to the abolition of the gold system back in the 1960s since this is the existing stock of money that is not based on debt"

whaa?? 1. been based on debt since 1913, 2. pls expound on native energy since the 60's

Wed, 09/22/2010 - 21:09 | 598955 buzzsaw99
buzzsaw99's picture

The kleptocrats will never give up their ill-gotten gains even if the have to steal it all over again in broad daylight.

Wed, 09/22/2010 - 21:13 | 598963 Atomizer
Atomizer's picture

National Infrastructure Bank: Another Trilateral Ripoff?

Obama’s slick 2010 Labor Day speech that promised an additional Federal stimulus for a sick economy, was a ringer. Here's why -- buried in the $50 bil­lion infra­struc­ture stimulus promise is the fol­lowing statement:

It sets up an Infra­struc­ture Bank to leverage fed­eral dol­lars and focus on the smartest invest­ments.”

Wed, 09/22/2010 - 22:22 | 599049 hedgeless_horseman
hedgeless_horseman's picture

Moral hazard, or mal-investment?  The choice is the government's.

Thu, 09/23/2010 - 00:18 | 599198 RockyRacoon
RockyRacoon's picture

... focus on the smartest invest­ments.

So, that excludes anything related to banking?

Wed, 09/22/2010 - 21:22 | 598976 tony bonn
tony bonn's picture

god bless you michael - you have a rare understanding of economics and money....the first predicate of modern economics is that the banksters are criminals. the second predicate is that the people exist to serve them.

the final predicate is fuck the fed.

Wed, 09/22/2010 - 22:04 | 599030 cheapy
cheapy's picture

I do think this is a depression, and agree that bad debt and malinvestments need to be purged to reset things back to where there can be trust and intelligent investment again, but that wasn't the way the cards have been played.


I think we end up like Japan for the next 20 or 30 years, printing, borrowing, and malinvesting.  I guess we'll know by then where it eventually takes Japan, but I think it eventually takes us to loss of reserve currency status, and then currency collapse.

Thu, 09/23/2010 - 12:08 | 600021 kathy.chamberli...'s picture


great name!

Wed, 09/22/2010 - 22:16 | 599040 AUD
AUD's picture

"Since our money is based on debt, as debt is reduced though defaults and write-downs, the monetary base should contract, thereby leading to price deflation"

This statement is the quantity theory of money, which is erroneous.

The money base may contract but that doesn't mean the debt becomes more valuable.

A dud cheque is a dud cheque, no matter how many are issued.

Thu, 09/23/2010 - 02:17 | 599273 subqtaneous
subqtaneous's picture

The money base may contract but that doesn't mean the debt becomes more valuable.


How you extrapolate that from what was written is odd, to say the least.  Debt that defaults, as he says, is gone -- its value: a black hole, drawing in any other debt leveraged against it.

Thu, 09/23/2010 - 02:28 | 599281 AUD
AUD's picture

No, your conclusion is odd.

Prices measured in dollars don't have to fall because the 'money base' is contracting. You are assuming the dollar is a standard of measure of value. It's not.


Thu, 09/23/2010 - 03:26 | 599311 subqtaneous
subqtaneous's picture

 You are assuming the dollar is a standard of measure of value. It's not.


Am I?  Well, odd conclusions all'round, then. ;-)  Of course I'm not assuming that, I would've missed the whole point of the writer's post.  How could it be a standard of measure of anything when its value is constantly in flux?  Point is, there is a lot of it disappearing now, as he says, and if it weren't for a lot of future unfulfilled obligations being printed to fill the void, as we speak, the current value of things ultimately meet their true value.

If you disagree with that, please enlighten.


Thu, 09/23/2010 - 05:08 | 599354 AUD
AUD's picture

"the monetary base should contract, thereby leading to price deflation"

That's the quote. Your 'true value' does not have to be price deflation in $ terms if the $ itself is deflating, which it is because its not a standard of measure of value but rather a cheque drawn by the Fed on itself, which is to say the government's bad credit.

Which is inflationary...

Wed, 09/22/2010 - 22:46 | 599076 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

Speaking of plunging household net worth, I heard on the radio this evening to the effect that flopped Gubmint mortgage assistance programs to be reworked this fall to focus more on loan principal reduction.  It'll be interesting to see how THAT doesn't work out, either.  I foresee neighbors feeling some resentment toward each other.

Wed, 09/22/2010 - 23:18 | 599122 doolittlegeorge
doolittlegeorge's picture

i still think your assuming to much competency among "the elite" but as Bugs Bunny said, "you're gettin' warmer, Jack."  so much of this is "shots in the dark" (or "shooting blanks" according to Chamberlin up there) the only real reference is the resignation list.  what a list it is tho!  there is an air of "flight" to it all all of a sudden--like people who see the crisis of their making and "prefer to leave early."  kudos to Summers for at least sticking it out till after the election.  the admin may need an emergency economic policy team within a few weeks or so if events suddenly spiral out of control.

Thu, 09/23/2010 - 05:15 | 599357 Dismal Scientist
Dismal Scientist's picture

This must be the first post where the words 'deflation', 'gold', and 'criminal Keynesians' are mentioned ... which hasn't garnered intense debate about the inevitable outcome for the economy. Maybe because the post is clear and presents a logical conclusion, or because the debate was done to death already between Lira and Mish.

Seems to me that the Fed is clear on its approach, and the government's increasing sabre rattling re protectionism is what you can expect from politicians going into a mid term election. Since we already have biflation (with QE2 primed on top), then the deflation that should follow naturally from government getting out of the way of failing malinvestment is unlikely to occur in the near term.

That can only mean continued debasement of the $ vs PMs (hooray) and a bubble in stocks (boo). The only thing I don't get is why ZHers don't want to participate in both possibilities for gain. Own gold, and rent equities (long or short, depending on conditions). Whats all the fuss about ?



Thu, 09/23/2010 - 12:02 | 600001 kaiserhoff
kaiserhoff's picture

Had similar thoughts for some time.  Try this out.  ZH is the best financial site, but none of the gurus does a good job of distinguishing between what works for professional traders vs. retail accounts.

Most individuals don't have the time, deep pockets, hedge account, etc. required to cash in on what they know.  Also the volatility scares the crap out of us, even the arbs.  It really helps to know your way around commodities and options, but that's a long apprenticeship.  There may, in fact, be no royal road to mathematics.  What's your take?

Thu, 09/23/2010 - 12:50 | 600127 Yophat
Yophat's picture

Every one is trying to coin their own phrase to describe it....the latest being Stranguflation -!+Mail

Thu, 09/23/2010 - 05:27 | 599360 hooligan2009
hooligan2009's picture

I still dont see how gold is better than an anchoring mechanism on an arbitrary measure..why anchor a whole economy on a commodity? may as well pick truffles!

What is needed is capital constraints beyond which activity must be "irrational" or criminal.

The article tho is terrific!

Thu, 09/23/2010 - 08:30 | 599468 Grand Supercycle
Grand Supercycle's picture

Short signals detected yesterday have now increased.

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CL1's picture

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