Puzzle - why is Wealth Disappearing?

Wealth increases when there is an increase in the output of goods and services that are demanded by consumers. Productivity is linked to wealth in that increases in productivity lead to increases in output for the same level of inputs. However, it must be output that is demanded by consumers - if new houses in the desert are built more quickly than before, due to some better process, but consumers do not demand those houses then the wealth is not created. In fact there is a loss on account of the capital that is consumed in the production of those houses. The good news on the productivity front is that if they are built more efficiently the loss is not as great as it would have been.

New technology very often increases productivity but it also can produce new products that are demanded by consumers. So once again there is an increase in wealth. So at least with the technology bubble there was some new wealth produced from the new products and increase in productivity due to connectivity. Sure it was massively overpriced by the sales people of Walls St but there was something behind it. The problem with the housing bubble, created from the cheap money efforts to prevent asset repricing in technology, is that unfortunately there were no contributions to productivity, no new products and it definitely destroyed more capital than it produced.

The final piece in the puzzle relates to consumer demand. Obviously with less wealth around consumers are demanding less of many things. Those things which once had a value no longer do if they are no longer demanded. On top of this recessionary behaviour cultural shifts away from full on consumerism (consumer fatigue, environmentalism, bling no longer being the thing, etc) should also be considered. Not only must the world face the repricing of assets/wealth that were overstated it must also watch wealth that once was there disappearing into thin air.