Much of the commentary from the more liberal leaning media has continued to tout that the rise in asset markets over the last few years are clear evidence of economic prosperity in this country. However, is that really the case?
In order for rising asset prices to be reflective of overall economic prosperity, the“wealth” generated by those rising asset prices should impact a broad swath of the American populous. Let’s take a look to see if that is the case.
“Mo Money” Or No Money
In September of last year, I discussed the Federal Reserve’s 2013 Survey of household finances which showed a shocking decline in the median value of net worth of families across all age brackets.
While the mainstream media continues to tout that the economy is on the mend, real (inflation-adjusted) median net worth suggests that this is not the case overall.
However, Shane Ferro from Business Insider posted a stunning piece on what has happened to American families as asset prices have surged higher. To wit:
“Nearly half of American households don’t save any of their money.
If it isn’t obvious, this has a broad range of implications. People who don’t save won’t have any buffer should the economy turn, and they lose their jobs. Longer term, people who don’t save won’t have the capacity to retire. It’s not good.“
What is clear is that rising asset prices, which have been induced by the Federal Reserve’s monetary policy and suppression of interest rates, has indeed benefitted those that have assets to invest.
The findings are strikingly similar to the U.S. Federal Reserve survey from last year.
“‘Savings are depleted for many households after the recession,’ it found. Among those who had savings prior to 2008, 57% said they’d used up some or all of their savings in the Great Recession and its aftermath. What’s more, only 39% of respondents reported having a ‘rainy day’ fund adequate to cover three months of expenses and only 48% of respondents said that they could not completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.“
