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Phil Green
Phil Green
author, misLeading Indicators: How to Reliably Measure Your Business

Greenbridge Management Inc.
President

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

Posted almost 8 years ago

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.

Comments (4)

Juan S.
Juan S.
Indra Sistemas

I disagree. GDP per capita is not able to take into account how GDP is distributed among people. One country where everybody had the same wealth would shown the same GDP per capita than the same country where a 1% of people had 99 times wealth.

Please, consider to use the Human Development Index (HDI), an indicator maintained by United Nations which shows a good correlation with the GDP per capita, particularly for countries with low and medium figures.
http://en.wikipedia.org/wiki/Human_Development_Index

Posted almost 8 years ago | permalink
Juan S.
Juan S.
Indra Sistemas

Of course, … if you are real and deeply interested on how national wealth is distributed among people, you had better use the IHDI (inequality-adjusted HDI)
http://en.wikipedia.org/wiki/List_of_countries_by_inequality-adjusted_HDI

Posted almost 8 years ago | permalink
Phil Green
Phil Green
author, misLeading Indicators: How to Reliably Measure Your Business

You disagree with what? My post was the nature of wealth and how to measure it: with tangible assets or financial assets. It was not about the distribution of wealth within a country. You may also want to look at this post, which looks at measures of poverty in the same light.

http://misleadingindicators.com/?p=134

Posted almost 8 years ago | permalink
Juan S.
Juan S.
Indra Sistemas

OK, I understand … I beg your pardon …

The title of the post seems to be talking about people: “Are Americans getting wealthier or poorer?”

Indeed, to answer such a question HDI or IHDI are the proper indicators if wealth is closer to human development than to *tangible or financial assets". Anyway, please note, per-capita GDP is a significant factor of HDI or IHDI indicators.

Posted almost 8 years ago | permalink

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