Crash Course Chapter 14: Assets & Demographics

Our nation has a historic, never-before-seen level of debt and a historic failure to save. Along with debt and savings, one also has to consider assets. After all, does it really matter if you have no savings and a million dollars of debt, if you have assets worth 10 million? Great point, right?

An asset is an item of ownership that is convertible into cash. Assets comprise the total resources of a person or business, including such things as cash, notes, accounts receivable, securities, inventories, goodwill, fixtures, machinery, and/or real estate.

Debts are fixed, while assets are variable. When you take on a debt, there it placidly sits, growing larger until you make payments on it.  Assets, on the other hand, are variable, sometimes gaining and sometimes losing value.

n order to liberate the wealth from every one of these assets (except cash), you’d have to sell them first. So the guy with the 10 million in assets (no savings) and a million in debt (yikes!) is going to have a tough time if he can’t sell some of his assets to pay his debt. Sufficient buyers are essential, or the wealth is as good as stranded.

Things go UP in price when there are more buyers than sellers, and they go DOWN in price when there are more sellers than buyers. The boomers are the wealthiest generation ever, they hold nearly all of the assets, and they will need to dispose of those assets to fund their retirements. But to whom? It is a fact of our current population that there are soon going to be more sellers than buyers. This sort of demographic profile will be with us for decades and cannot be wished away or fixed by some clever policy. It is simply a fact of life and one that we would do well to recognize and plan for rather than ignore.