[OPE] US National Wealth 2007-2008

According to the 2009 Analytical Perspectives document which is a standard
annex to the annual US Budget
http://www.whitehouse.gov/omb/budget/fy2010/assets/spec.pdf (p. 199, table
13-5) the national asset wealth of the USA, before foreign obligations,
declined for the first time in many decades, by $2.5 trillion net, from the
end of fiscal 2007 to the end of fical 2008 (the US fiscal year runs from
October 1, to September 30).

In fact, according to these data, the stock of publicly-owned physical
assets declined in value from $10.4 trillion to $10.2 trillion, and the
stock of privately-owned physical assets declined from $59 trillion to $54.2
trillion.

In the account, these declines are offset by increases in (1) "Education
capital" from $54.8 to $57.2 trillion and (2) "Research and Development
Capital" from $3.8 to $3.9 trillion, as well as a decrease in net claims of
foreigners on the US from $8.2 trillion to $7.2 trillion.

So, actually, the loss in the value of the total stock of US physical assets
2007-2008 is more like $5 trillion, according to these figures.

How is it possible to lose $5 trillion of value in buildings, equipment,
durables, land, and inventories, without a major war or a gigantic natural
disaster afflicting the country? The main answer must be that the assets are
valued lower, because their expected future values and yields are lower.

But actually, the largest single component in the visible drop of physical
asset values simply concerns "land values", it's a drop of $4.7 trillion;
whereas, according to these data, the stock of productive fixed capital
actually increased in value from $15.7 to $16.1 trillion, and the value of
inventories increased from $2.1 to $2.2 trilion. Circa $1 trillion was wiped
off the value of private and publicly owned residential buildings.

So really, according to these figures, the loss of US tangible capital
wealth is almost completely due to "the devaluation of real estate",
principally urban real estate, since average farmland values continued to
increase.
http://www.nass.usda.gov/Charts_and_Maps/Land_Values_and_Cash_Rents/farm_value_hist_chart.asp
Mathematically of course it is also possible, that marginal farmland drops
disproportionately in value, but economically speaking, that is unlikely.
The drop in the value of real estate, combined with the drop in the value of
financial assets, was sufficient to tip most of the world economy into
negative economic growth. Given stagnant or falling real wages for the
majority, and rather low industrial profitability in the Triad, economic
growth had been sustained financially by a credit expansion which at last
reached a limit.

This reality alone already enables us to understand why most American
Marxists fail to explain the economic crisis, and fail to explain the
recovery. They believe, that the only "capital" that exists is "production
capital", completely contrary to Marx's own views. If that was true, there
should not be any crisis, since the total value of production capital - at
least according to these data, and according to BEA data - has actually
increased in real net terms. A scientific Marxian analysis would at least
have to recognise various different types of capital: productively invested
capital; capital invested in products; capital invested in non-productive
physical assets; and capital invested in financial assets.

Jurriaan

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Received on Thu May 21 15:20:02 2009