The $10 trillion is not lost, as it has been paid already to the former owners.
I beg to differ.
At the time the home is sold, it is simply a transfer of wealth, not a dissipation (agree with you here). However, when the house value drops, it is actually a real economic loss. Although the seller still has their 200K in the bank, the buyer has 200K fewer assets. Lenders on the loans have fewer assets to back their paper. That’s why a housing decline will bring on real economic consequences.
Unlike a ponzi scheme, when the price declines by another 200K, the value does not go into anyone elses pocket. It is a true loss.
If the $10 trillion is not lost, why would you and others worry about the ensuing housing-led recession ?
