Paper wealth

Paper wealth means

For example, if one owns a house and its assessed value increases (relative to the general price level, i.e., assuming no inflation) then one's paper wealth has increased – the asset has increased in value, meaning it could in principle be sold in exchange for a larger quantity of money, but one's real wealth is unchanged – the real asset is still the same house. It is said that one has "gotten richer on paper," meaning "as an accounting matter": numbers on a balance sheet have changed, but the physical world has not.

The term "paper wealth" is frequently used in popular discussions of wealth, and in some critiques of

In some cases different measures may differ significantly – for example, one may purchase a stock for $1, and the market value may increase to $100, so the book value is $1 and the market value is $100. Conversely, one may purchase a house for $100,000, and then the housing market may fall, with the identical house next door selling for $80,000. In both these cases, book value and market value (to the extent that there is a market) differ, and which is more accurate may be debatable – one may argue that liquidation value (price obtained if sold immediately) would be a distressed sale and not reflect the potential value in a more orderly sale.

Paper wealth is attributed as being a factor in

The most commonly discussed effect of paper wealth is the

Less commonly, increases in overall paper wealth are seen as signs of

In debt deflation (most associated with Post-Keynesian economics, but with some mainstream interest), price bubbles are particularly associated with excess private credit growth, especially extension of credit by commercial banks. While the price bubble itself is neutral, people then borrow against these inflated asset prices (as via a home equity line of credit), which increases the credit bubble, and it is the elevated level of debt that is the underlying cause of the ensuing depression.

Assets can be distinguished as real (physical) assets, notably

At the level of a household, real assets are most commonly a home (both the land and the building), personal belongings (notably cars or other vehicles), and some commodities (such as gold) or collectibles (art). Financial assets most commonly include stocks and bonds (both corporate and government). The status of cash is more debatable – fiat money is formally a financial asset backed by a government, while a bank deposit is a financial asset backed by a commercial bank, which today is generally backed by a government (via deposit insurance such as the U.S. Federal Deposit Insurance Corporation). As such, the value of cash may inflate away – it is a form of paper wealth – but it is generally distinguished from stocks and bonds.

A related technical issue in economics is the aggregation problem, as debated in the Cambridge capital controversy – to what extent is it permissible and useful to aggregate different measures? Aggregating different physical and financial assets is, in some views, illegitimate or misleading, though the market value of assets can simply be aggregated by adding. This aggregation is generally accepted practice in economic theory, with disaggregation reserved for accounting or detailed analysis.

In accounting,

Beyond real assets and financial assets, other valuable intangible assets, which are popularly referred to as "wealth", are formally referred to as forms of "capital". At the individual level these are referred to as human capital, including education and social connections, while at the social level these are referred to as social capital, and include communities, social norms, and institutions; more traditionally these were referred to as "civilization", but this usage is now considered pejorative. There is also what Pierre Bourdieu calls cultural capital, the asset of knowledge and connections that university-educated people have.

• Fictitious capital
• Real prices and ideal prices