Who's counting…

One Trillion dollars. That’s a big number. That’s a one followed by 12 zeros - $1,000,000,000,000. If you laid one dollar bills end to end, you could make a chain that stretches from earth to the moon and back again 200 times before you ran out of dollar bills! One trillion dollars would stretch nearly from the earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills. Yet, if you read the news about the real estate market and the loss of value in homes across America, we’ve somehow lost about $4-7 Trillion in home value over the last couple of years.

I base my estimate on reports that Fannie Mae and Freddie Mac together accounted for about $5.4 Trillion in home loans (either guaranteed or owned), which is described in those same articles as representing about half of the U.S. $13 Trillion in mortgages. Since many homes are paid off and don’t have a mortgage that would be reported in those numbers, I added another $7 Trillion to account for them. That totals about $20 Trillion as the total value of U.S. homes, prior to the current meltdown. It’s probably bigger than that, but we’re already at a number that’s hard to get our minds around anyway, so let’s just go with $20 Trillion.

Various estimates from the gloom and doom doctor himself – Robert Shiller – to economists for various banks and interested parties – Lawrence Yun, economist for the National Association of Realtors, for instance – have put the loss of value for U.S. homes from15 – 25%. At the lower number we lost $3 Trillion in value and at the higher number fully $5 Trillion. There is an interesting article by Daniel Amerman that explains how this value has been lost. You may read it by clicking here. He makes the case for $6 Trillion in losses, based upon multiple factors, which include declining U.S. pay and the depreciating impact of inflation.

I guess, whether its $3 or 5 or 6 Trillion, those are big numbers and we’re all going to have to work a lot of overtime to make that up. My grandson Cole had his second birthday last Sunday and we gave him a savings bond. I suspect that somewhere in the fine print on that bond is the bill for his portion of the debt that is piling up to pay for all of this mess. Happy birthday, Cole, you owe $100,000 for the messes that Granddaddy's generation left for you.