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Read it--and weep
These numbers from Alicia Munnell, economist at Boston College, are unbelievable.
The stock market, as measured by the broad-based Wilshire 5000, declined by 42 percent between its peak in October 9, 2007 and October 9, 2008. Over that one-year period, the value of equities in pension plans and household portfolios fell by $7.4 trillion. Of that $7.4 trillion decline, $2.0 trillion occurred in 401(k)s and Individual Retirement Accounts (IRAs), $1.9 trillion in public and private defined benefit plans, and $3.6 trillion in household non-pension assets.
Yes, you read that right. The average American worker is exposed to too much risk when it comes to their retirement savings.
You can read the full report here.
We talk about the losses, and I believe when stock markets decline it is a net loss, i.e., wealth is being really destroyed, not just transferred.
I think this is because if there exist 100 widgets that you value at $2 == $200. Then someone on the open market sells a single widget at $1, all of a sudden *all* of my widgets are priced at $1, which means instantly my investment is worth only $100. POOF, $100 of wealth evaporated...
This is contrast to the CDS, where when someone must pay out the contract, there is someone receiving the money... so only a transfer of wealth.
