The 'Destruction" of Wealth

OK, economics is not my thing. I am pretty good at seeing the big picture, the concrete, the forest that all the tree are in, whatever, but economics largely escapes me.

NPR was talking about the "great destruction of wealth" that is going on.

I don't understand the concrete reality of this. Wealth usually has to do with money, yes? So you have money or you don't. If you have money and put it in the bank, the bank presumably will give it back to you when you withdraw it. If you have money and you put it under your mattress it will stay there, but also serve no useful purpose in the meantime. If you put your money under your mattress, smoke in bed, catch your mattress on fire and burn up your money, you have destroyed it.

Now, if you put your money on a bet on a horse, you no longer have that money, you spent it. It is not destroyed, it has been spent. If you were clever and lucky, the horse wins and the track awards you money based on how much total money was bet on the horse out of the total money spent on that race, and taking their profit margin into account. Overall, all the people betting on that race put more money in than they get back with winnings, and the best horses win some money, and the track makes a profit off the bets, the horses entered, and the people who paid admission to watch as well as what they ate and drank. All together no wealth was destroyed, though it got moved around.

Now if you are a bank you have people pay money into a variety of banking services, the bank in turn pays money out in various ways that they hope to make money on. In recent years the banks foolishly sent money out to people who were buying houses that they couldn't really afford, and spent money on other things that were essentially bets. The banks were not clever or lucky and they lost a lot of bets. the money is not GONE it just got moved around.

Similarly, people bought houses by taking out loans and then bet on the idea that their houses were increasing in "value" and took out more loans etc.

Turns out that the housing market was overinflated. Real Americans just can't afford to pay that much for houses, so the bets were not good ones. Any perceived wealth that these people thought they had was just not there. Nothing was destroyed. The houses still exist. Unfortunately for the mortgage holders, they can't make their payments, the loans default and all the money that they HAD paid to the bank stays with the bank and the people are tossed out of the house. So the people spent a chunk of money and only got the time they lived in the house from it, kind of like paying rent. The bank got some but not all the money they loaned back, only the original seller should be still happy. nonetheless, the money used was not destroyed, rather it is all in the hands of the bank and the original seller.

I would chalk it all up to foolish betting. Investors were imagining big wins that they just didn't get.

Unfortunately, that left these bank's money spread in places where they couldn't get it back, so they are short on cash and won't lend money easily and we are way to used to doing too much on credit so the whole economy skids. But, no wealth was DESTROYED.

So, what am I missing?