False Wealth

I have been struck during the last several weeks that our nation's total wealth will not reappear possibly in my lifetime. I am not questioning that there will be a return of much normalcy, but the amount of personal wealth as determined by individual's net worth will take much, much longer. One of the reasons that I saw was that much of the wealth was associated with the extraordinary inflation in home prices. Those prices were unrealistically high and it will take a long time to sell off the excess stock as well as work out the problems associated with people's problems with their mortgages, whether the threat of foreclosure or negative equity.

Paul Krugman has a most interesting insight into our economic plight. He focuses on the fact that much of our national wealth was not supported by value. He cites the problems that much of the nation's shareholder wealth was supported by financial instruments that carried little value in and of themselves. Making money from money without the infrastructure of manufactured goods is a problem cited by Kevin Phillips and others. In short, there is no easy way to make money. It has to be earned, as Barney Smith used to day.