Are Americans getting wealthier or poorer? It depends on how you measure “wealth.”

Posted on | December 23, 2011 | No Comments

The standard measure of wealth is GDP per capita. The chart below shows that Americans have been getting continually wealthier for decades, with a few blips here and there (source of data). The measure of wealth—Gross Domestic Product, is based on the dollar value of economic transactions.

Such a measure depends crucially on the definition of wealth.  People have a bad habit of confusing financial assets with real ones because they are confused about the nature of wealth.

This striking newsletter from Stansberry’s Investment Advisory claims Americans have been getting poorer since 1965. The problem with using the dollar as a measure of wealth is that “we don’t have a sound currency with which to measure GDP through time.” Instead of using dollars, Stansberry’s used a basket of commodities. They used real assets instead of financial ones.

Their trend line goes in exactly the opposite direction from the one in the chart above.  Stansberry’s says Americans are “faking” wealth by going deeply into debt.

© 2011 Greenbridge Management Inc.

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