My “Wealth Effect Monitor” for the Money-Printer Economy: Holy Moly, October Update

The bottom 50% need not apply. They just get to eat the soaring costs of housing. How the Fed totally blew out the already gigantic wealth disparity during the pandemic.

By Wolf Richter for WOLF STREET.

 On Friday, the Fed released the detailed data about the wealth of households by wealth category for the 1%, the 2% to 9%, the “next 40%” (the top 10% to 50%) and the “bottom 50%” for the second quarter, after having released less detailed figures on September 23. You read the stories at the time about how the Fed’s money-printing and interest-rate-repression has enriched American households.

But the detailed data, just now released, show whose wealth jumped the most, and who got left endlessly further behind. It wasn’t households in general that benefited, but only the richest households with the most assets. The more assets they had, the more they benefited.

My Wealth Effect Monitor divides the wealth (assets minus liabilities) for each wealth category by the number of households in that category, which produces average per-household wealth within each category. The wealth of the bottom 50% is reflected by the jagged green line on the bottom, essentially on top of the horizontal axis:

Not shown separately are the truly rich – the 0.01% – and the Billionaire Class.  The Fed wisely doesn’t provide any information on them separately, but includes them in the Top 1%.

But according to the Bloomberg Billionaires Index, the top 30 US billionaires are worth on average $69 billion per household currently, having gained on average $2.2 billion in wealth each over the quarter.

The bottom 50% of US households (green line above) – 63.2 million households – are worth on average $47,900 per household. But this includes $25,970 in “durable goods” (cars, phones, furniture, etc.), which for consumers are normally considered consumables, not assets, because their values are declining, and they don’t produce incomes.

The bottom 50% gained $7,900 per household over the quarter, and those gains included $2,085 from purchases of durable goods!

You can kill someone with reckless usage of percentages.

If I give a homeless person $5, and he already has $5 in his pocket, I increased his wealth by 100%. But he still is homeless and still doesn’t have any wealth. Percentage increases are touted as a way to show that the wealth at the bottom increased sharply, when in fact, it increased by only peanuts because the bottom 50% have so little.

But even a tiny percentage increase on $65 billion in wealth is a huge amount of money, and the wealth disparity continues to balloon.

The wealth disparity between the top 30 billionaires on average and the bottom 50% grew by yet another $2.2 billion per household, to $69.2 billion.

There were 126.34 million households in the US, according to the Census Bureau. The 1% by definition make up 1.26 million households. That’s a lot of households, from Musk on down to the regular multi-millionaire.

And the wealth disparity within the 1%, from the average top 30 billionaires to the least wealthy among the 1% also grew by around $2.2 billion to $69.2 billion. Because the bottom end of the 1% still own only peanuts compared to the Billionaire Class.

Since Q1 2020, when the Fed started its crazed money-printing and interest-rate repression scheme, according to the Fed’s data:

  • The wealth of the 1% jumped on average by $9.95 million per household to $34.3 million.
  • The wealth of the bottom 50% rose by less than a rounding error in terms of the 1%, by $18,600 per household since Q1 2020, to $47,900. Over half of their wealth is in durable goods (cars, phones, furniture, etc.).
  • The wealth disparity per household between the 1% and the 50% ballooned by $9.93 million, to a record wealth disparity of $34.2 million.

The reason is that the 1% hold most of the assets, and the 50% own practically no stocks, no bonds, and very little real estate.

For the Bottom 50%, real estate is their largest asset at $68,504 per household. This means that relatively few households own real estate. And they have on average $40,122 in mortgage debt, which leaves them with $23,382 in home equity.

They own practically no stocks and mutual funds ($4,122 on average). And inflating the stock market, as the Fed tries to do, just leaves them purposefully further behind.

But they own $25,970 in “durable goods,” which the Fed counts as assets, rather than consumables. If you don’t count these consumer goods as assets, the wealth of the bottom 50% shrinks to $21,948.

So when asset prices rise, they leave the bottom 50% behind.

This is all part of the Fed’s official doctrine of the “Wealth Effect,” which has been described in numerous Fed papers, including by then San Francisco Fed president Janet Yellen in 2005. “As part of its analysis of demand in the economy, central bank models have long incorporated the wealth effect of house prices and other assets on spending,” she wrote. In November 2010, Fed Chair Ben Bernanke explained the concept of the Wealth Effect to the American people via a Washington Post editorial.

The Fed, which has now embarked on creating a kinder-gentler facade, no longer calls it the “wealth effect.” But the policies haven’t changed: asset price inflation. And the costs are borne by the bottom 50% for whom life just gets more expensive – including housing costs.

The bottom 50% range from getting by OK to the down-trodden.  

Among the bottom 50%, there are also large differences. At the top end are households perhaps with a modest house weighed down by a big mortgage, a small 401k, plus cars and other durable goods, minus auto loans, student loans, and credit card debt. But that category also includes the poorest of the poor.

The bottom 50% face the soaring housing costs and other costs that are a result of the wealth effect. Many live from paycheck-to-paycheck and use their credit cards to tide them over. They have on average very little money left over to put aside and buy stocks with.

Fed blows out the Wealth Disparity during the Pandemic.

The Fed’s doctrine of the “Wealth Effect” is designed to enrich the top 10%, particularly the top 1%, particularly the top 0.01%, and particularly the Billionaire Class. The more they have, the more they benefit. This is official Federal Reserve policy.

But during the pandemic, the Fed went all-out: It printed $4.5 trillion in 18 months and repressed short-term interest rates to near-zero, in order to inflate asset prices to the extreme. And it succeeded.

This was the greatest economic injustice committed in recent US history. Congress could shut it down but doesn’t want to even debate it. Members of Congress mostly belong to the top 10%, or hope to soon belong to it (on their Congressional salaries, of course, hahahaha), and that’s why this continues.

The bottom 50% don’t understand what the Fed is doing to them, don’t even know what the Fed is and does, and they are too busy trying to survive in this economy that the Fed has so powerfully rigged against them.

My Wealth Effect Monitor tracks that economic injustice. Below, it shows the difference in wealth between the 1% and the bottom 50%. Asset price inflation is the cause. The more they have, the more they get. The bottom 50% don’t have anything and need not apply. But during the pandemic, the Fed went hog-wild and completely blew out this wealth disparity:

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  254 comments for “My “Wealth Effect Monitor” for the Money-Printer Economy: Holy Moly, October Update

  1. andy says:

    The 1%er chart would be more steep if they accounted for the Fed governors’ insider trading.

    • Mike says:

      Nice analysis. But as you point out nothing will change cause who in our largely wealthy congress, including those who say they are trying to help the less well off, will do anything that affects their wallets ?

      • fajensen says:

        Oh something will change: I am sure that measures will be enacted to keep the “small fry” out of trading options.

        Can’t let the wrong sort into The Club!

      • anon says:

        Exactly what I was thinking.

        Does anyone really expect faux-socialist Sen. Sanders to raise his OWN taxes? Of course not.

    • Tony says:

      Nothing to be ashamed of or worry about at all. Capitalism’s foundation/outcome is wealth disparity. Just make sure you try your best to take the advantage of capitalism, climb the social-economical ladder and become the lucky club of the top 1% or 5%. It is all that matters.

      • otishertz says:

        Make sure you were not born disabled or get sick before you get rich, and also be sure to go back in time and buy a POS crap shack in Phoenix in 1997.

        It’s your own damn fault and that of public education if you haven’t figured out time travel by now. Apply yourself, watch some youtubes.

        Sheesh!

        • Joe Saba says:

          exactly how I feel – NOT MY PROBLEM you are — fill in blank
          most of us with some assets have worked diligently for years
          I will continue to push up rents(ie due to devaluation of fiat $dollar)
          and if you can’t afford then bye bye

      • Winston says:

        You really have a simplistic view. What we have is crony capitalism, not free market capitalism. We also have a fully bought and paid for government owned by multinational corporations with no allegiance to any country or people, so the decisions made by that bought government will not reflect what is in the best interests of those who elected them.

        The top 0.1% also have many times the political influence of everyone else by virtue of their having what a bought government wants: money. Need science-based proof? (besides infamous recent snapshots like Pelosi holding a large outdoor dinner party for wealthy donors in CA where the only people wearing the required masks were the servants) Here:

        Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens [Princeton University, 2014]

        Excerpts:

        A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. We report on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues.

        Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.

        In the United States, our findings indicate, the majority does not rule—at least not in the causal sense of actually determining policy outcomes.

        When a majority of citizens disagrees with economic elites or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the U.S. political system, even when fairly large majorities of Americans favor policy change, they generally do not get it.

        To be sure, this does not mean that ordinary citizens always lose out; they fairly often get the policies they favor, but only because those policies happen also to be preferred by the economically-elite citizens who wield the actual influence.

        • wkevinw says:

          The academics and policy makers (typical of the hundreds of PhDs in the Fed, for example), believe that in a recession/crisis, the wealth effect is helpful in keeping the economy going. Which is true in a healthy real economy.

          The “asset holders” (rich), are supposed to do many things with the wealth they obtain: save, invest, spend. Any of those can be productive if they go to the real economy.

          “Investments” in today’s economy have nowhere to go. The real economy in the developed world has been off-shored.

          The bottom 50% doesn’t have enough to spend so there is a dysfunctional vicious cycle.

          Much of the wealth is used to purchase stocks, most of them being bought as buybacks by large corporations.

          Until the wealth has a place to go in the real economy, this will continue.

          From the below paper:

          “Since the 1980s, however, the apparently robust growth in manufacturing
          real output and productivity have been driven by a relatively small industry—computer and
          electronic products, whose extraordinary performance reflects the way statistical agencies
          account for rapid product improvements in the industry. Without the computer industry, there is
          no prima facie evidence that productivity caused manufacturing’s relative and absolute
          employment decline.”

          https://research.upjohn.org/cgi/viewcontent.cgi?article=1305&context=up_workingpapers

        • Winston says:

          “The academics and policy makers (typical of the hundreds of PhDs in the Fed, for example), believe that in a recession/crisis, the wealth effect is helpful in keeping the economy going.”

          Then they’re delusional, dogmatic, ivory tower idiots, a common disorder.

          Go to YouTube and search for “Minsky Introduction Video” to see the simplistic garbage they use to run the world via the artificial manipulation of the price of money – interest rates.

          Then we’re back to my point about why such a fundamentally bankrupt and proved to be wrong in multiple bubble/bust cycles NON-science persists – the only factions in a position of power to change it benefit from NOT changing it.

          “It’s difficult to get a man to understand something when his salary depends on his not understanding it.” – Upton Sinclair

          “It doesn’t matter how beautiful your theory is. It doesn’t matter how smart you are. If it doesn’t agree with experiment, it’s wrong.” – Richard Feynman, Nobel Prize winning physicist

          “In his book, ‘Thinking Fast and Slow’, Princeton University Nobel Laureate, Daniel Kahneman, introduces us to the principle of ‘Theory Induced Blindness’ – the adherence to a vulnerable belief, even though a counterexample may exist, about how something works that prevents you from seeing how it REALLY works. So once you have accepted a theory, it is extraordinarily difficult to notice its flaws, trusting instead the community of experts who have already accepted it.”

        • Citizen says:

          Nice analysis…. it’s why to make any real changes we need term limits, an end to corporate lobbying/influence, and reforming our voting system to something that is just common sense fair so the percentage votes get the percentage seats/representation.

        • Mara says:

          Free market capitalism as described by Adam Smith, was predicated on a universal basic income, free college, and
          Free healthcare to keep poverty from being a cycle. And he advocatef for heavy taxes on the rich.

          Actually”free markets” don’t work. We can’t just get money out of politics because there’s always a way to bribe someone if you’re clever. The only way to fix this is to make it so nobody can be ultra wealthy. If nobody could get more than $20 million of wealth they wouldn’t be able to bribe politicians

      • Wolf Richter says:

        Tony,

        You totally missed everything I said in the article. This isn’t about someone starting a business and making it (that’s capitalism).

        This is about the Fed inflating asset prices to make the asset holders immensely rich, at the expense of the bottom 50%. That’s purposeful and planned economic injustice.

        So please DO READ the article.

        • Nacho Bigly Libre says:

          Thank you Wolf and Winston (from 1984?) for these comments.

        • Tony says:

          Thanks Wolf for your comments. I did read your article and well understood your concern over our unfair monetary policy and injsutice toward the bottom 50% of our fellow Americans. However, we have always been fooled to believe we can democratically elected our government/officials to represent our best interests but in actuality those elected ones have always been representing the bloody rich or super-powerful corporations. Has it unfortuantely been like this for generations? You presented a really painful reality to the readers but I from solution perspective simply suggested we try to ride the wave if we can’t change it. Social Darwinism!

        • Petunia says:

          Tony,

          Recently saw a commentary that claimed the Gov of Florida just raised $55M from private equity guys for his next election bid. Any suspicious person would wonder what they get in return.

        • Moosy says:

          can you distinguish between the 0.1 and 0.1-1%? Or even better, 0-0.001, 0.001-0.01, 0.01%-0.1%

          The line for the 1% is likely way too much pushed up by the inclusion of the 0.1%.

          If you do that it will become more clear what the problem is that you describe.

          The higher the amount in assets, the less percentage wise is spend things.

          Bezos most likely spend less than 1% of his wealth on consumables so 99% stays in assets of which most will never be taxed because no capital gains on stock that is never sold.

          At the other end, it is 99% on consumables and 1% in assets

          Above that, it is the savers who are totally f*ked by interest rates way below inflation so they will keep saving but never able to do that downpayment for that house.

          And above that are the tax payers. They have probably some investments but not enough to leave them and never sell. And when they sell, 25-60% depending on location and how long held is taxed.

          We are heading back to the feudal system. Only if the goverment starts giving assets = land, away can things go back to helping the masses.

        • Mara says:

          Businesses existed before capitalism, communists countries have businesses. Business and markets existed before the concept of . You don’t even know what capitalism is.

          It’s an ownership of capital being private that makes Capitalism what it is. In feudal times it was the king and nobility that could own capital with some owned by landed gentry if they were lucky. Communism has collective ownership by the people. Sometimes the people can be represented by government since it’s supposed to be democratic but that’s not always the case.

        • Nacho Bigly Libre says:

          @Mara,

          Nice attempt at gaslighting.

          Capital owned by private individuals and entities and free exchange of capital for goods and services is capitalism.

          A king or nobility owning capital and directing where and how it should be allocated is not.

      • c smith says:

        True capitalism involves an ever-present risk of loss from taking equity risk. This risk no longer exists – as it has been permanently papered over by the kleptocrats in Congress and the Fed. Nice gig if you can get it.

      • economicminor says:

        Tony, I hope that was sarcasm because climate change issues added to the poverty/disparity in the country can easily lead to anger and then violence. Capitalism may make some rich, it may be a great generator of innovation and progress of a kind but it has no ability to solve climate change or social inequality. It can’t even fix its own infrastructure problems. In fact it has created the problems we all now face. A new paradigm is upon us and how we move into the future is probably how mankind survives its own illnesses, if it does.

        • Dave says:

          I personally maintain all the riots, political deathmatch discourse, protests, and the general populations anger with the current system are driven by the horrible economic policies that benefit the rich (not even mentioning dismantling the social safety net).

          In a society that is functioning well, all boats rise with the tide and the general population buys in because their lives improve.

          In our current reality that is NOT the case. This leads to insecurity and struggle. Hatred, bigotry, envy and anger are much easier to cultivate in this scenario.

          The books I have read about the Great Depression all enumerate this. FDR was faced with rioting, extreme protests and a real risk of systemic failure. He enacted socialists policies to save capitalism from itself………

          I fear the future, as the very wealthy have completely captured our .gov

      • General Strike says:

        Not that it was needed, this comment and the article show the cruelty and archaic, to say nothing of the anachronistic nature of capitalism. It is a system that thrives on exploitation and war. Cooperation, not competition is the natural order of society. Compassion is instinctual, greed is a learned behavior. Socialism thrives. Would you get rid of the Veterans Administration, public roads, publicly owned utilities, Social Security benefits, police and fire departments, the Post Office, public libraries, State and Federal aid to areas struck by natural disasters, the National Weather Service, etc. ad infinitum. Spare me the “ argument “ the profit motivation will provide better services. Just compare utility bills between public and private utilities.

    • Bead says:

      Now Clarida. What could be more cynical? These jerks are convinced they deserve their advantages. I once considered Fed folk typical ivory tower space cadets but they are playing this game for their own enrichment.

      • historicus says:

        Dont forget all the people they “advise”….all the fund managers…and all the “speaking fees” to come

    • Wisdom Seeker says:

      Bernanke claimed that inflating asset prices would cause a “wealth effect” that would boost GDP for all.

      He was lying. Oh, there is a wealth effect alright, but it’s not what he said.

      Bernanke’s “Wealth Effect” is that the wealthy have their financial assets priced beyond rational bounds – but this come at the (relative) expense of everyone else! The already-wealthy are given unearned and undeserved economic power when their asset prices are inflated. When they can sell a single share at 2-3x its intrinsic value, that buys a lot of extra stuff in the tangible economy. Meanwhile, the workers struggle to make ends meet because their labor (wages) are depressed and undervalued.

      A more cynical person would say the Wealth Effect is the Fed board members lining their own pockets at our expense, by deliberately inflating the values of their own assets while devaluing our labor, pricing us out of our own homes, and making it far more challenging for the lower 80% to get ahead. There’s no helping-hand in the Wealth Effect.

      • Petunia says:

        Did you notice Benny said this while middle class families were losing everything they owned. I noticed because their gains came from my losses. Plus, I just assume everything they say is a lie.

      • Citizen says:

        Yeah they act like this wealth effect is the only way they can do things so we must accept this side effect of also enriching the wealthy the most …. while there are 100 different things they could do if employment and stable prices were their goals. They make all this out to be some phd magic only they can understand and most people buy it. If they understood it they would be out with pitchforks.

    • Dave says:

      My plan to combat this? Once I retire and am closer to dead I plan on going on a huge debt spending spree on all my credit cards and take out loans. I will then give all the assets I purchase to my daughters and stick the losses on the banks and creditors when I die. And yes, this is a serious plan.

      The wealthy, lobbyists, Wall S, elected reps and corporations created this slippery moral slope and I am going to go sledding on it when I die. F–K them.

      • Person X says:

        You could probably buy a ton of gold bars and then have them say they never saw them. Just tell anyone that asks that you probably used it to pay gambling debts or something, who knows.

    • RH says:

      Amen. Also, this is traceable wealth. If you assume that the billionaires and trillion a I r e families allow the governments or public to truly learn of the bulk of their wealth, you are being naive. (Tablet does not allow even typing this reference to our neo-feudal owners.) Hundreds of trillions of dollars in wealth are being hidden. For example, read the Pandora papers and prior Panama papers. Watch “Britains Second Empire: The Spider’s Web.”

  2. 2banana says:

    Those in the front of the government cheap and easy money line (wall street bankers, politicians and friends of politicians) get insanely wealthy for doing nothing.

    Those at the back of the line (middle class and working class) get $750,000 crack shacks, $70,000 per year communications degrees and hamburger helper.

    • red pill economics says:

      “Those in the front of the government cheap and easy money line (wall street bankers, politicians and friends of politicians) get insanely wealthy for doing nothing.”

      – Yes, the Cantillion Effect. See history does rhyme!

      • 2banana says:

        I call it the pantalones effect.

        Because the cheap and easy money spigot kicks you in your middle class cohones and leaves you on floor trying to breath.

      • otishertz says:

        It doesn’t rhyme. History is the same old rehashed false historical narrative repeated repeatedly with more fashionable characters transposed on the perpetually revived story line, kind of like netflix and marvel do with redux movies.

        Study Classics, it’s all superheroes, chimeras, transgenders, profligate rich demigod kids. Same thing in Wiemar.

        Religion and regimentation of education, utilize fanciful history books and mythological superhero archetypes, controlled by some old dudes who are your landlord and people gradually accept their toxic fish tank.

        Ask a fish in a tank; “what is the most obvious thing in your environment?” The fish will say (speaking for all fish here), the fish will say, it’s the pirate that pops out of that treasure chest on no particular schedule and blows smoke bubbles, driving me crazy, or that other jerk fish over there that is camping on my rock… that was my rock, I had it before they came here (singular they, not gonna misgender fish in Portland.)

        Ask another observer, looking at the fish tank from outside, and Them may say that frickin’ fish tank is filthy and rancid, the water is brown, and it smells like a pulled tooth from a dead pers-them.

        Don’t study history, it will make you crazy, depressed, unrelatable, and ultimately cancellable.

        • Beatrice Fitzpatrick says:

          Oops
          Yup
          Yup

        • VintageVNvet says:

          Love your comments in general oh, but dis agree re read/study his or herstory!
          What reading enough of that will tell you,,, certainly with the caveat of understanding who wrote what and when:
          Nothing has changed much in the last couple thousand years, overall, except for some ”blips” now and then when the oligarchy has rewarded the yeomen for their very clear results, e.g., USA for a while after WW2; cuz used to tell me he could and did buy a 3 and 2 house in the county of the angels in SoCal for $2500 in the 50s…and then bought in the hills above for $50K that was worth over $5MM just a few decades later.
          IMHO, the oligarchs who have owned the world, formerly including ALL of WE the Peons,,, still do.
          And will not let go until WE make them do so IMO.
          As a now ”elderly” person hoping my spouse who will clearly, (OK, statistically for sure ) outlive me by at least a couple of decades will be OK with the nest egg, NO DEBT at all, but continuing to face increases from guv mint taxes and monopoly on utilities, and similarly for off spring who seem, at least, to understand their challenges after hearing about that for decades now.
          Clearly, ”Clean House, Senate too.” as some of us used to spout and have on our bumper stickers as far back as the late ’80s, will continue!
          And I am very hopeful all the young boomers and subsequent ”generations” will keep on increasing the vast improvements in communications that will eventually inform each and every one of WE THE PEONS to be able to vote in our self and collective interests instead of the interests of the oligarchy, as is currently due to their ability to bring major, major brainwashing, AKA advertising to every election…
          And, yes, I will take that hope to my rapidly approaching demise,,, and would take it to the streets as I did in Berzerkeley after ron e ray gun tear gassed my home without cause in the spring of 69 if able,, and might even do so in my wheeled chair if this very badly out of balance nonsense continues — and I do…

    • MCH says:

      Is Wolf trying to pull a Santelli here? I have no idea how big his audience is, but would be kinda cool if he did.

    • Anthony A. says:

      It’s hard to believe a house can be a $750,000 crack shack. Boy, did I miss the boat, or maybe I didn’t choose my parents better.

  3. red pill economics says:

    Taxes are regressive. Inflation is regressive. 1% are the financial “honey badger.” Honey badger don’t care.

    Before the 2008-2009 GFC there was a growing wealth inequality problem. Wages were/are stagnant, while inflation has been eating the 99%s lunch.

    The Fed is the arsonist in the fire brigade. Congress allows this since a) the Fed funds deficit spending via debt monetization, and b) they’re lining their pockets trading stonks and RE. The Fed’s real dual mandate is to blow asset bubbles, esp. in stonks and housing. However, bubbles always burst. End the Fed and our self-enriching “representatives.” It’s taxation without representation all over again. History may not repeat, but it does rhyme.

    • Wisdom Seeker says:

      Honey Badger = Vampire Squid

      “… a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” – Matt Taibbi

    • Apple says:

      Taxes are not regressive. What is Jeff Bezos tax rate?

      • Kurtismayfield says:

        Like, one percent of his wealth.

        https://www.businessinsider.com/jeff-bezos-did-not-pay-income-taxes-2-years-report-2021-6?op=1

        “For the years he did pay federal income taxes between 2006 and 2018, Bezos paid a total of about $1.4 billion on a reported income of $6.5 billion, or a rate of about 21.5%. That reported income does not include the vast increase to his net worth during the same period — about $127 billion, according to Forbes — due to his stake in Amazon.”

        1.4 billion on 124 billion in investment wealth. That’s a nice gig to have.

      • Wisdom Seeker says:

        Congress, particularly the Democrats, love to conflate “earned income” with “wealth” in the tax context, so they when they “tax the rich” they have progressive tax rates only on people with earned (usually labor) income … but not truly rich people like Bezos.

        The elites skate by with minimal taxable income but lots of passive dividend income, muni bond interest, and then stock appreciation and other unrealized capital gains. Not to mention the ginormous untaxed 401K and IRA plans that they’ve goosed with special insider-trading tricks.

        Meanwhile, the hedge-fund managers also manage not to pay proper income taxes on their 1-2% annual fees (not to mention their 10-20% share of any growth in their funds).

    • RH says:

      Amen. The way to end the “Fed” while preserving the financial system given its roles now is to require that banksters, etc., who benefit from its bailouts or get below the rate of inflation interest , have to turn over in exchange bonds convertible to 9999% of the outstanding or authorized voting shares. Eventually, the Federal Reserve will own the banks and similarly parasitic entities. We can then tax it heavily and treat it as a sovereign wealth fund.

  4. Mike says:

    Nice analysis. But as you point out nothing will change cause who in our largely wealthy congress, including those who say they are trying to help the less well off, will do anything that affects their wallets ?

  5. andy says:

    All justified as long as Dr. Evil can send his penis-shaped rocket ‘into space’.

    • fajensen says:

      I am ok with that. Space travel is inherently risky: There is a 1% chance on every launch of the rocket blowing up on the launch pad and scratching Bezos or a few of his friends.

      IOW: We should be encouraging billionaires in rockets!

  6. MCH says:

    Wolf,

    Let me use my best virtue signaling/TED talk lecturing voice here.

    You must stop telling people they are uneducated… words like the “bottom 50% don’t understand” and “reckless use of percentages” are designed to demean and degrade. Everyone must be made to feel like they have an equal voice and empowered.

    And it is wrong to mock our congressional leaders (unless they are on the other side) because they are looking out for their constituents best interests, that’s the way things work in a free liberal society guided by fair and equitable elections.

    Your leaders are there for you, they fight for you everyday to make sure you have your share of the American Dream.

    As…

    Ok… enough, even my sarcastic and hypocritical voice can only go so far.

    • 2banana says:

      The WOLF STREET Extra Bold Stencil font: “Mind the Sarc”

      Is now flashing red.

    • Doctor Detroit says:

      The masses vote for whoever promises the most freebies. The fed is the reason we have a national credit card with low interest.

      Inflation is the result.

      It will get worse.

      Enjoy the ride.

      • Augustus Frost says:

        It isn’t just the elites who are to blame. The government is also reflective of the public who elects it.

        They want what they think they are voting for, they still just end up as losers in an unequal horse race.

        No reason to expect anything different, as if the elites are ever going to voluntarily allow themselves to be stripped of their political defenses so that they can be plundered by the masses. That’s never happened anywhere ever and it never will either.

    • Nick Kelly says:

      The anti- vaxers aren’t getting enough criticism. They SHOULD be familiar with the infectious agent reality of a bacteria or virus, but they are more like a stone- age tribe.

  7. DM says:

    I still don’t understand why progressives like AOC want more Fed intervention. Do they not understand these issues or are they knowingly complicit?

    • MonkeyBusiness says:

      MMT enthusiasts always blame the supply chain as if the later can quickly adjust to a sudden spurt of money. Printing money is never a problem. That can only be true if all resources are infinite.

      • historicus says:

        The MMTers havent thought the entire thing out…
        and “for every action there is an equal and opposite reaction”…
        and the MMTers are so sure they are right…..but they arent.
        The experiment is too large, and when it proves faulty, it will be fatal.

    • Jon says:

      I doubt AOC has the mental capacity to understand these issues
      But I can tell you for sure she is making lots of money

      After 5 years or so look at her net worth before entering politics and that time

      • Wolf Richter says:

        Jon,

        She has the mental capacity to understand this just fine. That’s why she wants the Fed to print money — because she understands that it would make her wealthier. That’s the problem. She’s probably worried about taper, balance sheet runoff, and higher rates, even as we speak, because they might make her less wealthy. These people are not dumb.

        • Yort says:

          CNBC just had a article Sept 30th titled “Lobbyists shielded carried interest from Biden’s tax hikes, top White House economist says”. Yes it turn out team blue has raked in 60% of the $600 million that hedge funds have used to bribe congress over the last 10 years (per CNBC stats). Turns out there are 4,108 lobbyists registered for “Taxes”…thus carried interest will not be taxed at this point, yet Roth IRA conversions go away for every income group to “save money”….seriously! Perhaps AOC should have wrote “Tax the Rich except for carried interest” on that $12,000 dress…or better yet “Hugs and Kisses for Hedge Funds”…HA

          You can’t make this stuff up, both sides are corrupt to the core due to human greed disease…and the people who float to the top of politics are a very “special breed” in order to win and maintain power (hint – they are not the best of humanity). Voters are not dumb, but when they herd up into “tribal voting” and trust their side unconditionally in order to belong, they are easily manipulated.

        • MCH says:

          Wolf,

          You just have to look at her questioning some of the people that comes before her in committee from her first term. You get the idea of how smart she is. Unless others are writing those questions up for her and anticipating the potential answers, you don’t get that kind of questioning.

          The problem isn’t that she isn’t capable or smart… you know where I would take this next, so I won’t go there. But I’m disagree with your assessment that she is in it for the money, with AOC, the wealth would be a side benefit.

        • Ralph Hiesey says:

          OK to disagree with AOC. But the insults implying she’s in it for the money are: just that : cheap insults. so easy to throw those around when lots of other commenters are doing the same thing.

          Thought you would be above that.

        • Wolf Richter says:

          Ralph Hiesey,

          OK.

          The ENTIRE Congress is run by money. They have institutionalized corruption. They have given themselves immunity, for example for insider trading, for which other people have gone to jail. Money runs that show. AOC is no exception. If she were an exception, she would jump all over the Fed — she laments wealth inequality in various forms, as she should, but then she supports the Fed in creating it.

        • Nick Kelly says:

          I think of AOC as a bit of an airhead MMTer, but also think of her as sincerely thinking a raft of expensive social programs are a good thing. And it is possible to think what is good for others is also good for you.

          Whatever. However, she is not wealthy. A congressperson has to disclose their assets.

          ‘After that report, the Center for Responsive Politics’ OpenSecrets.org ranked Ocasio-Cortez as one of the poorest members of Congress, where more than half of members have a net worth of at least $1 million.

          ‘The congresswoman filed her next financial disclosure in September 2020. By then, she reported that the same three accounts held between $2,003 and $31,000 and that her student loan debt remained the same at between $15,001 and $50,000.’

          Moving on to SERIOUS, hidden, offshore wealth, check out the Guardian for the latest huge ‘Pandora’ hack. No doubt some Americans are named, but guess who is number one.

        • Maximus Minimus says:

          She can both suck on the FED’s teet and believe that printing will make everybody rich(er), just like her. It’s not a rational thing.

        • Jon says:

          I totally agree with you!

        • Ralph Hiesey says:

          Wolf

          Yes, I do agree with you about national politics –really depressing to see in such a chokehold from big money.

          But I would say despite that there are at least some who are at least really trying to be of service. If all were at least making effort as honestly as AOC and some others, I think it would be a much better place–and with decent and respectful deliberation I suspect her opinions would likely be more mature.

          Hard to maintain an atmosphere of sanity when everyone is yelling insults.

        • MonkeyBusiness says:

          If AOC is worried about the taper, then she should become the next Fed chairman or should I say chairwoman.

          The woke crowd will get bats*** insane and then she’ll trash them with even more widen the gap policies.

      • Augustus Frost says:

        I do believe many members of Congress are dumb enough to believe they can to tax the mostly fake paper wealth to spend it in the real economy on their progressive dreams. This is evident in the proposal for the wealth tax and taxing unrealized capital gains.

      • ru82 says:

        The thing with congress is you do not have to be smart or intelligent.

        You just have to be popular.

        In China, you pretty much have to have an advanced engineering or finance degree to be a top dog.

        Most of the U.S. top positions are lawyers. They are good at arguing but things light green energy, climate change, finance, balanced budgets is beyond their core compentancy. These things are like a foreign language to them.

        I wonder if AOC knows what an ROI or IRR means. Could she explain what GDP is or the CPI. What does it mean when you normalize a data series.

        Anybody remember when they put Kathleen Sebelius who was in charge of Obamacare. She has a political science degree. She pretty much bankrupted the Kansas Pension fund too.

    • drifterprof says:

      It might be sort of a mirror-policy, polar opposite to oligarch military-industrial complex.

      The right strategy has been to tolerate gross federal debt caused by gratuitous wars and war profiteering, unregulated capitalism, and tax-windfalls for filthy rich. That strategy accepts a freefall toward federal bankruptcy, which they would expect to reduce government, cut social safety net programs, etc.

      In the other corner, an analogous strategy. Accept freefall toward bankruptcy caused by poorly regulated entitlement programs, unproven green and other ideologies, wasteful nanny government, etc. With the hope and expectation that bankruptcy would push away the other side’s priorities.

      • David Hall says:

        The top three Federal expenditures in 2020 were Social Security, Medicare and the military.

        Payroll taxes support Social Security and Medicare.

    • MCH says:

      Ya know, AOC isn’t that dumb… she may act like a dope sometimes, but she isn’t one. You’ve seen acts like that once, you’ve seen it all. The virtue being signaled may be different , but it’s all the same basic variation, grab attention, get power or wealth or both.

      None of the people in Congress are that stupid. Behind all that mindless yapping, they are in it for themselves, not the benefit of others. Certainly not for the benefits of their constituency.

      The data Wolf pulled isn’t exactly hidden, it’s public domain, but it gets selectively used to push whatever agenda. And really, no one in charge gives a crap. These politicians are a bad as your corporate CEOs, short term focused on getting themselves re-elected.

      • ru92 says:

        You are giving them too much credit. Sure there are some smart people in congress there should be some type of aptitude test?

        You have to take the ACT or SAT to get into college. I think people running for congress should take a standardized test and publish the scores during the election.

        • MCH says:

          AOC came out of BU with an economics and an International Relations degree. BU is not necessarily an easy school to get into, and collegiate standard in the early 2010s hadn’t gotten as ridiculous as it is today. Her background suggests someone highly intelligent. Again, you have to watch her in action grilling people in Congressional committee meetings to appreciate what she can do. I think people don’t give her enough credit as far as her intellect is concerned.

          It’s easy to demean your opponents and cast them as *pick your pejoratives here*, but when that happens, those people get underestimated. History is replete with those types, some go on to do great things, others… well, you get the idea.

        • Jon says:

          It does not matter if aoc is intelligent or not
          She is in it for the money and fame aka ego

          Check her net worth after 5 years

      • MCH says:

        AOC isn’t out to get rich…. Any real attempt to do so herself is not only stupid but would derail her from her true objectives.

        Any increase in her net worth will only be happenstance. And seriously, she won’t need to daytrade her way to billions, she just have to follow Nancy’s example.

        • Nick Kelly says:

          These guys talking about AOC after Trump is something else. It began with the freaking Inaugural, a 100 million or so and never stopped. Every single time any excuse to book (and overbill) anyone into a property: the VEEP is flying back from Europe: why not drop in with all the gang and security at a Scottish golf course?
          But the most serious grift may be with a kid and I’m not talking about a dozen trademarks for crap in China.

          Enter 666 5th Avenue and the Saudi blockade of Qatar.
          Those are related? You wouldn’t think so, normally, would you? But in what normal admin does a son- in- law conduct foreign policy behind the back of the Sec of State? ( ‘I was angry’: R. Tillerson)

          Checking OAC’s bank account in 5 years?? How about we check out what HAS happened.

    • Joe says:

      I think they want helicopter money. That is the feds next move.

      • c smith says:

        Next move? If you hadn’t noticed, they’ve been at it since April of 2020…one “stimmie” package after another. The latest is cash child tax credits to just about every household with kids. The choppers have been flying for a while already.

      • sailorgirl says:

        You fo not think Trump’s tax cut was helicopter money? PLEASE….

        • c smith says:

          Nope…by definition, helicopter money can only be public spending. Cutting taxes is simply letting people keep more of their OWN money.

    • Petunia says:

      AOC comes from a generation of NYC minorities that grew up being told the govt had a “program” for any problems they had. I am in her parent’s generation, a NYer, a minority like her, and saw this take fruition with Johnson’s War on Poverty programs. AOC just drank all the kool aid.

  8. drifterprof says:

    One thing that stuck in my mind watching a Netflix documentary about the federal reserve:

    A federal reserve guy trickle-splaining how Fed policies resulting in a windfall for the filthy rich were an unintended side effect of policies designed to increase employment. Shameless rationalization.

    Leaders in American culture seem to be, for the most part, professional liars and connivers.

    • MiTurn says:

      “Leaders in American culture seem to be, for the most part, professional liars and connivers.”

      Don’t forget inside traders, too.

    • Andy says:

      Wolf-
      Can u post a link to the fed article please?

      Avg household net worth of top 1% at 34Million is how i am reading this, which seems high- maybe bc that is avg and has bezos, gates etc i it.

      What is median household top 1% net worth?

      Thankas

      • Wolf Richter says:

        You can download the data from there (spreadsheet format):

        https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/

        The Fed gives only totals per wealth category. For example, total wealth of the 1% = $43 trillion. I get the average per household by dividing the $43 trillion by 1% of households: $43 trillion / 1.26 million households = $34 billion per household average, as total US households = 126 million, per Census Bureau. These are averages, not medians. The Fed does not provide medians or group limits. Without a complete list of all these households individually and their wealth individually, it’s impossible to figure the median wealth per household.

        • Yort says:

          There are “wealth calculators” on the internet that break down median wealth by age. Not surprising, it takes much less to be in the top 1% at age 26 than at age 66.

          Per NerdWallet:

          The average net worth for U.S. families is $748,800. The median — a more representative measure — is $121,700.

          Age Range/Median/Average at NerdWallet:

          Less than 35

          $13,900

          $76,300

          35-44

          $91,300

          $436,200

          45-54

          $168,600

          $833,200

          55-64

          $212,500

          $1,175,900

          65-74

          $266,400

          $1,217,700

          75+

          $254,800

          $977,600

        • Wolf Richter says:

          Yort,

          This doesn’t tell me anything in terms of the wealth disparity between the big asset holders (the top 1% or the top 10%) and the bottom 50%, which is the only thing I’m interested in because that is what the Fed is responsible for.

          The NerdWallet stuff is total wealth for the total population split into age groups. There is a logical curve for wealth by age — same with income. But that’s beside the point here.

        • MCH says:

          Curious, how did you manage to find this data in the first place… Let me rephrase the question, how did you even know to look?

        • Wolf Richter says:

          To find this kind of stuff is my job :-]

          I started covering this nearly a year ago. But it took me a while to fine-tune it. The data comes in a shitty hard-to-deal-with format, like they did that on purpose, and you have to know your way around the sorting functions of Excel to get it into a format that you can use. This is not something the average journalism major knows how to do, and so it doesn’t get any kind of coverage. The Fed doesn’t promote it either. It promotes the earlier release (this time Sept 23) and comes up with handy stuff and charts that journalism majors can just use as is.

        • VintageVNvet says:

          THANK you Wolf, once again, for your clear dedication to helping WE (the PEONS) at least try to understand what is the ”reality” on the ground these days…
          Came on here to at least try to figure out if We, the family WE could begin to ”invest” in SM and possibly commodities mkt we had done well in before early 1980s, when WE realized how corrupt both of those mkts had become due to SO much ”financial assets” exceeding ”real assets”…
          Thanks again, and, ”checks in the mail.” LOL
          To support your wonderful efforts with CASH…

        • Yort says:

          Wolf – I found some more information on the median new worth breakdowns, perhaps more relevant to your article.

          Per the most recent Federal Reserve 2019 Survey of Consumer Finances (SCF):

          Median Net Worth

          Top 1% $10,700,000
          Top 80th to 99th = $746,950

          Note the median net worth numbers are obviously higher in 2021 than 2019, but unfortunately the Fed only conducts the SCF every few years…

          Also note that the top 1% median net worth in 1995 $3,734,607, so using a compound calculator, growing at 4.5% per year for 24 years results in the 2019 median net worth of $10,700,000. The stock market compounds close to this amount (around 5.5% annually until recently), which would make sense as most top 1% have gotten wealthy almost entirely by owning stocks. The middle class not only own very little stocks, but they also got scared out of stocks, looking at the ownership charts, after the 2008/2009 stock market crash. Personally I think the data proves beyond a reasonable doubt that the stock market “IS” the wealth inequality mechanism, and the Fed has admitted at this point the third mandate is to keep the stock market inflated, and thus their role inequality is indisputable.

          Also it is probably not just “coincidence” that the Estate Tax Exemption was raised to $11.58 million for 2020, as that would allow the median top 1%ers to give every penny to the next generation and still avoid the estate tax. For reference, the estate tax exemption was only $1,000,000 back in 2003…it has been increased 11 fold in 18 years by both team blue and team red, in order to keep up with the Federal Reserve “wealth effect” that the bottom 50% have had absolutely no chance to participate…

        • MCH says:

          Wolf,

          You aren’t kidding about shitty formatting. I downloaded the csv and it took me a while to make heads or tails of it to chart it in any meaningful way.

          You can get a lot more from this set than just income disparity, especially given the historical going back so many years. But you can come up with some interesting broad interpretations on a macro level.

          Having a few paragraph doesn’t do justice to what the data provide, don’t mean your paragraphs since you had a well defined topic using the data.

          Yeah, journalism majors aren’t going to be able to make great use of this unless they had some training and regular usage of excel.

        • Wolf Richter says:

          Yes, there is a lot of stuff in it. I got all kinds of charts on the bottom 50%, for example, and my earlier articles on this covered some of it. But I now want to focus on this one element of it.

        • Ralph Hiesey says:

          Really hard to negotiate the Fred wealth data. Here’s where I’ve found most useful information:

          https://fred.stlouisfed.org/release?rid=453

          Then click on “Levels of Wealth by Wealth Percentile Groups”
          or “Shares of Wealth by Wealth Percentile Groups”

        • Wolf Richter says:

          Ralph Hiesey,

          Good lordy. This is exactly the same data from the Fed that I used. Look at the source. And it came out on the same day. Except it FAILS to divide the totals by the number of households in that group to get the per-household data that I showed you. Looking at the totals alone is DECEPTIVE in terms of the Wealth Disparity. You have to look at it on a per-household basis; and the only place you get that is on WOLF STREET.

        • MCH says:

          Cause Wolf knows how to do division. :)

          The per household metric is kind of tricky to get… and Wolf has to put that into an excel spreadsheet and make changes to a few cells. heh heh.

  9. Gomp says:

    “This was the greatest economic injustice committed in recent US history.”
    Brilliant, except for the word recent.

    • Wisdom Seeker says:

      I think “recent” is correct here, because the 2007-2010 financial rape of the middle class was a greater injustice and it’s still within memory of most of us.

      I’m starting to think (based on a more careful look at history) that it’s actually pretty normal for a huge financial upheaval to destroy a lot people’s lives about every 10-20 years. Consider:

      2007-2010 Great Recession / Housing Bubble / Financial Fraud crash.
      1999 dot-com crash
      mid-late 1980s Oil Bust and Savings-and-Loan crisis; 1987 market crash.
      1970s…
      The 1950s and 1960s were a calm period, financially, but there was a lot of other social turmoil, plus drafts for wars in Korea and Vietnam.
      1940s: WW2
      1930s: Great Depression
      1914-1920: WW1, Influenza Pandemic, major postwar recession.
      And so on.

      Bottom line is that you have to keep your wits about you, don’t trust too much in keeping your job when borrowing money, and be prepared with exit plans for any major investments (unless you’re in the 1% and can afford to lose a few times).

      • VintageVNvet says:

        Agree mostly WsSK, except for your comment that 1950-60s were calm:
        Our family lost our family farm and once other residential property when dad, on strictly ”commission” income had NO work at all for six months in ’56-57, my first awareness of the swings and round a bouts of every USA ”economy” since, and continuing.
        While there is no doubt in what’s left of my mind that the era after WW2 was a great, very great ”boon” to WE the Peons to compensate us for the sacrifices made to ensure the continuing wealth and, more importantly, the ”control” of the world by the presiding oligarchy of that era,,,
        there is also little or no doubt that they, the oligarchs, did not actually have as much control of the world as they thought while they were bashing FDR, etc.,
        This was very clearly shown by the rise of the various totalitarian regimes of that era between WWs 1 and 2, and continuing thereafter for many years in Soviet and later RU and many other fascists states,, even, apparently, today.

  10. Michael Gorback says:

    “The bottom 50% need not apply. They just get to eat the soaring costs of housing.”

    Golly I was wondering where all those middle class people got the money to outbid Blackrock. Turns out they didn’t.

    Can someone please give me an example of how QE transfers wealth to the have-nots? I don’t understand the plumbing of the Fed like Wolf does but I can clearly see that after over a decade there is no transmission mechanism from QE to the debt serfs.

    • COWG says:

      Mike,

      Was QE ever designed to transfer wealth?

      I always thought it was to bailout the financial class who bet wrong in 08/09… can’t let these losers, lose…

      Then it morphed into “ gotta keep it going “ for employment numbers so our wealthy will invest in jobs…

      Then it was keep the stock market high…

      And on and on…

      The only wealth transfer I’ve seen have been the stimulus…

    • Auldyin says:

      @MG
      QE was designed for benign reasons as a means (as usual) to get demand into a flagging economy (Japan).
      The theory was that by buying underperforming old assets from banks and giving them fresh money they would be able to invest in, and support new growing SME’s. With many small competing local banks like say Germany, it could have worked and maybe Germany’s strong industrial position is evidence of that.
      But, But But. In USA and UK in particular the huge banks dominate the landscape and there is no way they will risk their money on small businesses they cannot get to know. In short , they used the QE money to lend into purchases of existing assets and thereby created a one way price track which enriched everybody who already had safe collateral to be lent to. The rest is 12 year history. Whether the Fed is responsible, or the Banks are responsible for the failure is a moot point. Getting the money back is unlikely to be on the cards any time soon so dumping QE once and for all is the best that can be hoped for, but I won’t hold my breath.

  11. Peter says:

    Thanks Wolf an interesting article, so what are the solutions to improving this inequality in wealth. I think a consumption tax may help and improved social security systems and laws to ensure people are paid a living wage.

    Its a western society phenomenon, and we have a similar problem in Australia to.

    Cheers be interested to hear other peoples perspectives on this, thanks again for sharing your views Pete

    • 2banana says:

      So what are the solutions…

      We need more taxes!

      And more laws!

      And maybe more free money…

      Cause bigger and bigger government can solve the problems caused by bigger and bigger government.

      • two beers says:

        Wealth is power- power to control national economic policy. The quickest, easiest, and surest way to reduce the power of the .01% is to tax the living krap out of them. High marginal axes help level the playing field, exactly as the high marginal taxes of the post-WW2 period did, a period which “coincidentally” saw the fastest and largest increase in middle class wealth in US history.

        People who express antipathy to taxes on our masters and elite ubermenschen are often fallen under the spell of the spurious “Austrian school” of economics promoted in the US by European carpetbaggers (Hayek, Rand) who were literally on the payroll of the .01%ers in need of a line of propaganda to help convince immiserated working classes that the source of their misery was other poor people (who happened to have brown skin), and deflect their attention away from the wealthy industrialists and financiers who were waging merciless class war against them.

        High marginal taxes aren’t the whole story, but until you can chip away at the power/wealth of the .01%, you’ll never be able to enact genuinely equitable and fair policies. The .01% thank you for your support in maintaining and augmenting their wealth!

        • Jos Oskam says:

          @two beers

          I may have been reading the wrong books by Ayn Rand and Austrian economists, but I never got the impression that they advocated things like central banks, money printing, interest rate suppression, bailouts, unlimited debts, Wall Street frontrunning and what not.

          Blaming them for all today’s wrongs seems a bit farfetched to me.

        • 2banana says:

          1. No one paid those high marginal tax rates as there were massive deductions (even for the uber rich) that have all been eliminated.

          2. Government, as a percentage of GDP, was ONE THIRD as it is today.

          3. The Federal Government Budget, right after WWII and through the 50s was nearly 50% for defense (vs about 17% for today).

          4. There were almost zero entitlements in the Federal Budget and Social Security was off Budget in an entirely separate budget. Entitlement spending today is nearly 70% of the Federal Budget.

          5. Insane, out of control massive government gives us more and wealth equity.

          Raising taxes, even to 100%, won’t change that.

      • Winston says:

        “So what are the solutions…”

        There aren’t any since those who greatly benefit from the status quo control what can and cannot happen. PERIOD.

        If you still have the delusion that voting with fix anything, read the 2014 Princeton study excerpts I posted above and also realize that even if those findings weren’t true that we’d need an engaged, attentive, intelligent majority voter base capable of critical thought and analysis instead of the willfully ignorant idiocracy we do have.

        • CJH says:

          Public assets were historically about 25-30% of GDP. And then the libertarian point of view came to the fore, primarily thanks to Milton Friedman and the Chicago School. It was adopted by most western economies. Today Public Assets are net zero or negative. They’ve all been sold for pennies on the dollar to private capitalists, who run the entire country. The game has been over for almost 4 decades.

      • Auldyin says:

        @2bn
        Theoretically the economic solution would be for the Fed to run down it’s balance sheet by re-absorbing all the cash it printed during QE.
        This would mean that all the mega-rich beneficiaries would have to repay their cheap loans, which would mean they would have to liquidate all their inflated assets.
        There’s the rub, they can’t liquidate their assets at these prices unless there is more easy money for somebody to buy them. No QE the rich are suddenly stuffed.
        Will it happen? Ha Ha Ha.

    • drifterprof says:

      U.S. has been in political gridlock and culture war for decades. Pragmatism and non-partisan rational compromise was it’s great strength. But that is gone, zilch. Nothing is done without the other side screaming “over my dead body.”

      Is that also a big problem for Australia?

    • Wolf Richter says:

      Peter,

      The issues discussed here were caused by the Fed. So in terms of the Fed, the solution would be for the Fed to start shedding assets at a pace of $120 billion a month, and raise interest rates above the rate of annual core CPI inflation. That would reduce the wealth inequality from the top down.

      And yes, as you pointed out, the government too could do a lot of things too in terms of the tax code, plus breaking up monopolies and oligopolies, plus, plus, plus… But the wealth effect is a Fed deal.

      • Duke says:

        Thanks for connecting the dots. I had no idea the Wealth Effect was a stated policy. I read the linked past stories and their linked stories as well. It’s very depressing that this is all stated policy out in the open that is not widely talked about or understood. The cost of trickle down economics is the divergence of the top percenters from the rest. As the hourly minimum wage goes up in California I’m wondering if it’s purchasing power is dropping at a faster rate.

      • David Hall says:

        If they attack U.S. big business, Chinese big business might take over. Huawei stole Nortel technology and competes with Apple. Alibaba competes with Amazon. Baidu and TikTok takes market share from Google and Facebook. Are these Chinese monopolies or competitors?

        The Fed bought too much MBS. Home values soared during a housing affordability crisis. Washington is approving sky high deficit spending and taking on debts. My car is worth more than before, but already six years old. The M2 money chart shows what is happening.

        • Wolf Richter says:

          The government can stop Chinese companies from buying ANY US companies, including startups. Who is against that? The billionaire class because they make huge amounts of money on these deals (this is when they cash out).

          The gov could also try a little harder to prevent IP theft, which is a crime in the US.

          So these are additional shortcomings of the government. But the solution is NOT to allow monopolies in the US to fight off Chinese companies.

        • David Hall says:

          The Chinese bought Smithfield (hams) in 2013. They have minority interests in a number of US listed companies.

    • Petunia says:

      Consumption taxes hurt the poor who spend all their income. Consumption taxes don’t affect the rich because they spend a tiny amount of their money and can easily afford the tax too.

    • Old School says:

      Peter Schiff had interesting story on cost to go to Harvard since the data goes way back. Before the Civil War the cost to go to Harvard was $33 if I remember correctly. There was no inflation and price stayed the same for 41 years.

      All the advances in technology should have reduced cost. It costs 18 times more in real terms to go to Harvard today. Isn’t fiat wonderful.

    • Nick Kelly says:

      The US the only G7 without a VAT aka GST

  12. BuySome says:

    The future of tech probably hinges on some kid currently sitting in a basement trying to figure out how to send a 100K volt feedback loop to 1.26 million smart phones. And we’ll never see it coming as usual. Wonder how the Fed will try to explain that away.

  13. Paulo says:

    Wolf, that was an awesome grab attention article. Thank you.

    It is exactly like Trickle Down economics; same crap, same results, different era with the same gullible electorate.

    I get it that people here hate politicians, but AOC is far from dumb and it is just wrong to imply she is on the ‘take’ because she is an activist.

    Biography:
    Born to a working-class Puerto Rican family in the Bronx, New York, Ocasio-Cortez graduated from Boston University, majoring in economics and international relations, and worked for Senator Ted Kennedy’s office where she focused on immigration issues while in college.

    After graduation, she returned home and became a community organizer. However, with the recession taking hold, along with the financial issues her family faced after her father’s death in 2008 from cancer, Ocasio-Cortez took multiple low-wage restaurant jobs to help keep them afloat.

    • Phil m says:

      Paulo, fleshing out the AOC bio a little more. Her dad was an architect. Yes born in the Bronx ( Trump was born in Queens for what it’s worth). When she was 5 or so the dad bought a house and moved the family to Yorktown Heights — Westchester County. Not sure how familiar you are with the NY metro area. Westchester County is pretty exclusive. Working class not so much. Good on them for being able to make that move but it this info sheds a little different ligbt on the AOC hagiography.

      • Nicko2 says:

        That’s firmly middle class (edging on upper middle class).

        I think the bigger issue, which you’re alluding too….as the middle class shrinks inextricably, it becomes more difficult to recognize.

      • Nick Kelly says:

        She’s worked for a living in a taco joint.

        Trump: ‘born in Queens for what it’s worth’

        Not much. Inherited 500 million. In the form of the Strarret Apt complex which would be worth more today if he’d never done anything. Almost went TU in 90’s, saved by Apprentice, whose producer owes a BIG debt to society.

        Working class ‘not so much’ ??
        How about at all?

        Seriously. I am no fan of OAC but you need to pull your head of our your ass.

    • Trailer Trash says:

      Democrats well understand that if they stray too far from the party line the party will replace them at the next primary. See: Dennis Kucinich.

      I assume it is similar for the Republicans.

  14. Seneca’s Cliff says:

    I graduated from high school in 1979, just before the US switched from being an honest industrial economy Flo a financialized racket economy like we have now. Back the. The the range of incomes of the kids families in my class was fairly narrow, with the bottom being the kid who’s dad was the school janitor and the top being the kid who’s dad owned a successful pancake house. The poorest kids family came to the Friday night football game in a VW bug or a pinto and the richest in a Mercury. Once we started down the path of becoming a nation of financial advisors, stock speculators and real estate agents it was inevitable that the fed would keep the party going by printing money until we arrive at where we are today.

    • Nick Kelly says:

      A lot like my school but baby we weren’t in THOSE schools. Who do you think had the richest dad in Dan Quale’s school? Not to speak ill of Quale!
      You know what happened around that time? The WWII bonus finally got used up. The glorious 50s when the US had no competitors were gone.
      The losers were back. The VW Bug began it for Germany, maybe the Datsun 510 for Japan. Detroit spawned the Pinto and Vega to compete.

      The Bug and 510 are collectables.

      • Datson says:

        Hey! Not true. Datsun was well made. I had a very old Datsun 510 station wagon that ran for 3 years on basically 3 cylinders and then finally the transmission died.

        We called it the safari wagon. Had no carpeting, no ceiling, no seat padding left, no paint on the roof, all the inside parts of the doors were gone. Looked like hell but was made to last. I would take it 30 miles down 4WD rutted dirt tracks! The thing just would not die.

        Nissan is when it became crap.

        Agree with you on separate private schools though.

  15. two beers says:

    Careful, Wolfe, you’ll be accused of “class warfare,” and class war is only acceptable when it’s waged from the top down, in which case it isn’t called “class war,” but instead known as “the just result of free markets,” “the fault of the losers for not getting Harvard MBAs,” or simply, “the American Way.”

  16. Eastern Bunny says:

    The problem with the Fed is that 90% of population have no clue what the Fed does or how it manipulates the economy and enrich their cronies.
    Just check comments on mainstream media articles regarding inflation, they all blame the greedy corporations and landlords for price increases, Fed policies are never mentioned.
    Also, all people I know have no clue what the Fed is or does or some very vague idea.
    And those are educated people.
    And if they bring down the economy and trash the dollar, nothing will happen to them.
    What happened to central bankers in Weimar Germany? Nothing.
    Powell will get away with a “nobody could have foreseen it” and retire to enjoy his inflation indexed pension.
    The elite is so disconnected from the plebs that one has to go back to before the French Revolution to find a comparable situation.

  17. cd says:

    its a crime what the fed is doing now..
    In 2008. 300 folks at most, protested the fed, wall street rescue and walked from SF fed to Union Sq.
    Some gold bugs and dollar helicopter folks but mostly smart older folks who saw what was coming…..

    Potter won, he got the houses in bulk and built investments out of them…..

    I’m astounded they carried this far……

  18. Bobber says:

    The Fed pulled a fast one on people. They assured the public they were going to normalize rates, so prudent people waited to buy homes.until the time was right. Then, after 10 years of 10% increases, housing got out of reach.

    Thanks Fed. You still plan to normalize rates? Yeah right. Your lying does tremendous damage.

    • historicus says:

      Bobber…
      Yep.
      People can read markets, but who can read, who can detect that the Fed will ignore their duties?
      5%+ inflation……and near zero Fed Funds…never happened before.
      IF you were told the Fed would flood the economy with money and not address the coming inflation, one might have heavily bought equities and real estate.
      But who could imagine a 27% jump in M2 in less than a year decided by an unelected unaccountable cabal? Who could have imagined the Fed would intentionally PUNISH SAVINGS to fluff markets? Who could have imagined the Fed would lend money (buy MBSs) 3% below inflation?
      This is a tragic era…..
      The Fed has made water run uphill, for a while….

      • Bobber says:

        What value is a government sponsored agency that does the opposite of what it says? I hate to call it lying, but it is. At some point the Fed determined they couldnt pull the economy off life support. They told Goldman. They told Wall Street. The farmer in Illinois didn’t get the message, nor did the nurse in Nevada.

    • PNWGUY says:

      Totally agree. This is the elephant in the room that mainstream media ignores. They lied. And this will have long lasting repurcussions.

      The chosen wealth effect stimulus policies from global CBs have made a few rich, and the global masses poor. This will accelerate demographic decline in the developed world. By preventing young people / wage earners from achieving economic security, they are literally reducing future demand via lower family formation and child birth.

      We are now well beyond the demographic deflationary event horizon. And they just push us faster toward the black hole. Mind boggling.

      Part of me thinks it is all by design… Maybe to prevent climate change?? All I know is, I’m checked out. Not worth trying to get ahead if you know the game is unfair.

      At this point, I’m just waiting for social unrest to really get going. Global energy and food prices this winter could heat things up.

  19. Depth Charge says:

    Given the state of affairs, and this headline I just read, I have absolutely zero hope for mankind:

    “The value of cryptocurrencies is erupting after El Salvador announced it is now using volcanic energy to mine Bitcoin.

    El Salvador’s President Nayib Bukele tweeted on Friday at about 1 a.m. local time that his country had minted the first volcano-powered Bitcoin. He referred to the mining operation as the “volcanode” after posting a video earlier this week of what appeared to be rigs at a geothermal Bitcoin mining operation.”

    Volcano powered electronic tulips. How cute.

    • Wolf Richter says:

      Depth Charge,

      The amount of fake BS that crypto promoters are getting into the media is astonishing. This has been the same thing for years. That country needs every bit of power it can generate to keep the lights on in households and companies. But it’s one of the most corrupt countries on earth, and nothing the top guys say surprises me.

      Geothermal energy production has been around for a long time. Iceland relies heavily on it. There are some geothermal plants in the US too.

      But there is no “harvesting” of volcanic power. You have to build a power plant that uses the heat from the earth to create high-pressure steam that then powers a steam turbine that then drives a generator. And there are all kinds of technical issues to overcome in this setup.

      If that country builds one of these powerplants to mine bitcoin instead of supplying that power to industry and households so that the country can develop its economy, that president needs to be thrown into the hoosegow and rot there for the rest of his life.

      • p coyle says:

        i bet the plant already existed, and previously did things like supplying power to industry and households. it’s just been, ah, repurposed.

        somebody has to waste the electricity to back the bitcoins, otherwise they’re backed by nothing.

  20. Depth Charge says:

    The wealthy are arguing over the last few morsels – all that’s left from the once middle class. Sickening. They can steal every last penny while impoverishing the masses, but if I so much as utter anything about French Revolution type stuff, it’s deleted and I’m the bad guy. Tell me how anything short of that will change ANYTHING.

    • drifterprof says:

      Things will change of their own accord. Especially with the rate of cultural change in modern times.

      Referring to head-chopping strategies (e.g., French Revolution) for change as the only way in the current context is dangerous, because a lot of stupid people start believing it. And although not always, revolutions consistently produce something worse than before.

      If parts of what you assert are censored, it doesn’t imply you are a bad guy. Your other insights and experience can be valuable input to a discussion of macroeconomics.

      • Depth Charge says:

        With history as our guide, only revolutions effect change. The problem is they need to reach critical mass. If a few people try to “take things into their own hands,” so to speak, they are labeled deranged, murderous thugs by the PTB and will meet a swift trial resulting in a guilty verdict and a death sentence.

        However, when the majority of people rise up and start butchering the real thugs who have stolen everything, suddenly said thugs have a change of heart and start bleating “you’re right, you’re right!” and begging for their lives and promising change. Only fearing for their lives will mitigate their rapacious greed.

        • 91B20 1stCav (AUS) says:

          Depth-i respect your sentiments, but your blood on the barricades, first. And, (to repeat) most of the instigators of la revolution met their end on the scaffold courtesy of their fellow revolutionaries occupying the Committees of Public Safety. Napoleon dealt harshly with most of the remainder. (But, perhaps you envision a Napoleonic ‘Republic’ as a preferable alternative…).

          I have no knowledge of your actual combat experience, but i would counsel moderation in your calls for it if it’s minimal. Having your fellow combatants (and ‘collateral-damage’ innocents) die in your arms (presumably without even the chance of a dustoff arriving in the interim) may play well on the big screen-in the reality, not so much.

          may we all find a better day.

        • drifterprof says:

          Hitler, Pol Pot, Stalin, Mao’s Cultural Revolution …

          just sayin’

        • drifterprof says:

          French revolution:

          “While about 17,000 people got guillotined in the ten months of the Terror, all this bloodshed was just a drop in the ocean compared to the other crazy stuff that was going on at the same time.”

        • Depth Charge says:

          My or your personal experiences are irrelevant, 91B20. Like I said, “with history as our guide.” NOTHING is going to change without a revolution. Repeat after me: “N O T H I N G.”

        • 91B20 1stCav (AUS) says:

          Depth-i agree with history as our guide, but your own blood, first, especially if it’s your first rodeo…

          may we all find a better day.

        • VintageVNvet says:

          Have to agree with ”91B20 1stCav (AUS) ” on this sub category DC, though usually with you totally:
          NO ONE,,, repeat, NO ONE really and truly ”wins” in the eventual end of any irrational violence,,,
          And in the opinion of most serious students of his and her story, ALL violence has become irrational and counter productive these last few dozen decades.
          OTOH, Certainly and certifiably, peaceful ”mass” demonstrations, following the very clear personal leaderships of Gandhi and MLK, have produced wonderful and continuing beneficial results.

        • Nick Kelly says:

          You can make the case that there have been very few successful revolutions. I won’t make the case against the US one, but serious American historians have argued it. But it was revolt against another power not an internal one, which are the ones I will mention.

          France never recovered from its revolution. The Great Terror, by the way, is not a commenter’s ‘personal experience’. But that was just the beginning. When a mob was chasing the new govt thru Paris, the govt sent an SOS to the army. A Captain of artillery called Bonaparte responded and administered ‘the whiff of grapeshot’ The grateful revolutionaries promoted him to general. Then came what has been called the actual first world war, ending 20 yrs later in the defeat of France. Then the Restoration, more turmoil, defeat by Prussia in 1870 then back to Republic.

          At the end of all this it was a country with less social
          mobility than the UK, where the influence of the monarch and the nobility (Lords) was reduced by evolution. The first Labor govt in the UK was elected in the 1920s.

          But nothing compares to the Bolshevik disaster in Russia and the Maoist in China. Both produced famines, the famines in Russia its first true Asiatic types. Both produced tyrants worse than the monarchs. (Russia was slowly evolving, creating a prototype parliament the Duma, until the catastrophe of WWI.)

          Not a very good record.

        • 91B20 1stCav (AUS) says:

          Nick Kelly-very well-stated.

          may we all find a better day.

  21. James c Allnutt says:

    Part of the problem is the middle class has been robbed of earning interest on their savings since 2008. Prior you got 5% average and on one million $ that was $50,000 a year income. Now at .25% it is only $2,500 a year income. The Fed has forced many to go into the stock and RE casinos to try to earn money on their savings. I can not remember in over 50 years where you could borrow 30 year fixed money for mortgage at 3% with inflation running min of 5%. This is total insanity. When interest rates go up many companies who are loaded with debt will file bankruptcy and real estate will take a min 25% hit from today’s insane prices. When the next bust happens and these 2 asset classes take a severe hit, it will be the very wealthy most effected since the lower 50% have min exposure to these two asset classes.

    • Yort says:

      So which will the Fed fight when they finally get the memo that the entire planet is moving toward StagFlation, via stupidity by the American Fed in which the global Feds have been forced to follow? Will the Fed fight the “Stag” or the “Flation”…place your bets in the market casino accordingly…

      I’d guess they continue to actually fight the “Stag” via actions, and they will fight the “Flation” via jawboning.
      Note there are really are no know proven tools to fight both at the same time, and thus why so many very smart people have been warning the Fed for many months to dial back already the $120M/month that is now creating global stagflation (4.1% inflation in Germany of all places)

      We already know the govt main tool is give out free money and punish productivity. But even weirder, the rumor is that on Monday at 10am EST, the China tariffs might be reduced by 1/3. If this is the plan to decrease prices on China goods, how does this work if China has supply, energy, and shipping issues?

      At some point it becomes obvious to the majority that the “Something for Nothing” fantasy was just a silly dream not rooted in the constraints of our limited resource reality.

    • historicus says:

      James….
      Entirely agree.
      Saving is the avenue that was always open to people as a means of getting on their financial feet.
      Now punished…and INTENTIONALLY SO…by a decision from unelected people. This is a TAX, and only Congress can tax, not people who are unelected and unaccountable. Shame!
      This is part of why this article points to a large segment of the population can not get ahead.
      It seems one segment of the economy can get their hands on extremely low interest rates….and the other pays credit card companies 15%.

    • Swamp Creature says:

      When interest rates go up, all these low mortgages will be on properties that are underwater. The low mortgage rates will not do them any good. When the borrower loses their job and has to move they won’t be able to get their original equity back if they sell , so they will be in the same shape as those in 2007/2008 who lost their equity and their credit rating.

  22. otishertz says:

    “But they own $25,970 in “durable goods,” which the Fed counts as assets, rather than consumables. If you don’t count these consumer goods as assets, the wealth of the bottom 50% shrinks to $21,948.”

    That ought to provide for a sumptuous expat retirement, in central africa.

    Around 2007 I did some research on the “wealth” of the “Me Generation” (for those who remember that term.) It consisted of 2/3 home equity.

    Deflation would kill them, inflation would kill their progeny (the selfie generation.)

    Maybe everyone will be eating from Soylent Green vending machines at the portable automated 7/11 kiosk parked next to Logan’s Run honey bucket tent camp and snacking on crickets and snails in between basic income checks needed to fund free personal shart phones while the rich and famous vending machine owners and socialist influencers caterwaul about stonks on reddit and have groceries delivered while wearing sumptuous bathrobes with no panties. . I don’t know.

    • Nicko2 says:

      I love your comment. More of this please.

    • K-Agri says:

      Idiocracy style vending machines. A prophetic movie masterpiece.

    • COWG says:

      “and have groceries delivered while wearing sumptuous bathrobes with no panties”

      Dude, it was one time….ONE TIME…. Jeez…

    • Anthony A. says:

      Otis, I can easily visualize all this actually happening in the near future. Maybe I’m reading too much WS?

    • Fat Chewer says:

      Whenever and wherever capitalism descends into farce, socialism will be there. It is the responsibility of capitalists to ensure that doesn’t happen. They are unable to do so once farce becomes the order of the day. That is where we are at.

  23. Dave says:

    Fixing this will tank the value of
    Assets which WILL tank the economy. Neither the fed nor our politicians have the will to do so even if they think it is in our long term interest.

    Fed will continue this until it breaks.

    • Wolf Richter says:

      Dave,

      No, it won’t tank the economy. That’s a red herring that is constantly being trotted out and is part and parcel of the doctrine of the Wealth Effect. But it would put the economy on more solid footing and wring out some of the excess risks and leverage.

      But yes, if you’re a big asset holder, you’re likely to have fewer billions/millions. But you’ll spend just the same. What drives the economy is spending by the vast majority of the people, not by the 1% of the people.

  24. historicus says:

    One for you, a thousand for me and my friends.
    Take it and like it..

    Notice the fluffing of markets with ultra cheap money is occurring concurrently with massive doling out for social programs, stay at home money, higher food stamp and SNAP, child credits….
    This is an eventual disaster for the society.

    Democracies (and perhaps Representative Republics) can not last once it is discovered the people can vote themselves money from the Treasury. (DeToqueville)
    But it was never imagined that this central banking/Fed gimmickry would
    facilitate this draining of national wealth.

  25. Crush The Peasants! says:

    MEOP!

  26. Helmut Beintner says:

    You come in this World with Nothing AND you leave this World with NOTHING !

  27. phleep says:

    I have held myself to a willingness to go without, in order to have; to keep my eye on my balance sheet; to patiently build wealth; to look at my own choices and failings first; and to have a lack of hysteria toward certain flaws (and sometimes sudden panics and eruptions) in human nature, crowds and the system (while not being a sucker). This, over decades, has put me pretty well above that 50 percent line, with a high everyday quality of life. Failure of various forms is always a possibility, any day. Ultimately it is inevitable. We all have to “migrate” in a sense, but recent life has made this financial and reflective for me, not taking to a cart with starving refugees. Yes, much in this society scaled beyond our direct reach, for better and worse. That someone sits atop that is to be expected. What society hasn’t had elites? Whatever I think, how today am I building my balance sheet? (And yes, I worry about the ability to instantly pickpocket at scale! So figure a hedge!) Then, there is well-earned and plentiful leisure to consider the postings here!
    I try to help youths see a path ahead. I went without kids myself, to have this freedom and lightness. Everything costs something. Twas ever thus. Great to be in a system somewhat built around that.

  28. Old School says:

    There has to be enough crumbs left over for people to get out of bed and want to do honest work in the economic system. If not you just choose to consume as little as possible and drop out of labor pool.

    I think that is one reason border has been wide open for cheap labor last 20 years which has only made the problem worse.

  29. Nicko2 says:

    It’s very simple; America has transformed into Brazil.

    • Petunia says:

      A few years back I thought we would become Japan. Last year I thought we would become Argentina. Now I think we are heading for South African territory.

  30. Janna says:

    I just read an article about Saule Omarova…

    Anyway, the Wealth Effect has hit home recently. My MIL works as an assistant at a nursing home and does more work than people half her age. She lives very simple, spends very very little. She just found out that her entire apartment complex was sold. She has lived there for 17 years! She did find another place but it is $200 more per month. This is a perfect example of how someone can try their best, yet never get ahead. People on here warned me about apartments being sold and they were right. I’m starting to rethink renting, but not when houses are selling in 3 days and at grossly inflated prices. The problem is, when can we really expect them to drop in price? Will they ever? And, if they do, will lower housing prices be off-set by high interest rates? How the heck does anyone navigate this rigged system?

    • Mendocino Coast says:

      Definitely a shake up Saule Omarova basically a end of Banks control / inneraction as we know it today and has the support of Senator Warren as I understand things : https://www.nbcnews.com/think/opinion/saving-economy-saule-omarova-podcast-transcript-ncna1201991
      But I don’t think she will get much support on this Blog to turn control over to the the Fed ?
      Just who is going to fix the Fed ? and should that not be done first ? .
      Seems that Saule Omarova is an interesting prospect perhaps Wolf can share his insight toward the economy under such a person and the Fed in control under Her Plan .
      Will the Fed remain independent then ? beyond reach
      I wonder if to nomate her may be a step in the wrong direction
      rather a plan toward taking control of the Fed as it stands today . Clearly the economy under the Fed has turned away from the country’s standards and needs .
      Should not the country take control of the Problems first before considering giving the Fed more control ?
      To continue the freeway in reverse seems dangerous but look at us now ?

  31. AverageCommenter says:

    Eventually the Bottom 50% will implement more methods in order to fix the wealth disparities themselves. These methods will range from genius to brutal. The .01% will basically be immune or untouchable somewhere on a private island or with their own little militias, but the .99% – 10% are gonna have hell to pay. That percentage can easily be tracked down by zip code, at the grocery store, gas pump, or even a soccer game etc. When you let the super-rich run away with everything, the ‘barely’ rich will ultimately receive the heaviest punishment for it

  32. Anton says:

    Let’s say the Fed never did what it did. What could have happened? To me worst case scenario would have been that companies starved of capital would have gone belly up, start ups starved of capital would never have gone on to expand or go public. The Fed mission is full employment and controlling inflation. If they had not gone on to QE massively, millions of jobs that now exist may not have existed. It’s easy to point to the negative results of FEd policy and much harder to think the things that could have but did not happen. From the Feds perspective, I am sure it made more sense to enrich the wealthy but also save millions of jobs and worry about the negative consequences later. Which I agree are there. Something has to be done about the completely lopsided results of QE. I just think the Fed is not as evil as some here think

    • Wolf Richter says:

      Anton,

      “To me worst case scenario would have been that companies starved of capital would have gone belly up, start ups starved of capital would never have gone on to expand or go public…”

      Nonsense. That didn’t happen before QE. Good companies can always get funding, they’ll just have to pay a little more; good startups will always get funded. The economic system worked a lot better before QE and before 0% interest rates because there was a price for risk, and capital allocations worked better, and zombie companies were weeded out by the market place.

      • wkevinw says:

        “That didn’t happen before QE. Good companies can always get funding, they’ll just have to pay a little more; good startups will always get funded. The economic system worked a lot better before QE and before 0% interest rates because there was a price for risk”

        I think this started before QE. It started in ~1995 during the irrational exuberance. Financial/paper assets appreciated and funded the .com startups. The 1995-2000 .com bubble is the mother of all of this.

        There were two ~50% stock bear markets because of the ridiculous bail-out mentality that the government/Fed uses.

        We need, and will get another bad bear market. I don’t know when.

      • Auldyin says:

        @W
        Absolutely spot flipping on!

    • Bobber says:

      You think jobs would have been lost and never recovered?. Look at history. After a crash, bad businesses fail, new investment occurs, new people take over, the economy then creates super fast growth. It’s necessary. It’s fair. If it didn’t occur, the busboy would be stuck in his job forever.

    • Eastern Bunny says:

      This kind of blackmail thinking is destroying our country. It has been going on for the last three decades with the climax moment reached by Bernank and Paulson when they said to congress if we dont give 600 billions to the banks , the western civilization will end as we know it.
      How did we fall for such BS?
      Since, we bail out every one, nobody goes bankrupt anymore but the working people getting poorer every day as they cant get their hands on this freshly printed money.
      When you think about the insanity going on, The Fed prints trillions , gives it to their cronies that use this 0% money to bid up prices for rentals and RE all over the nation as that is the only place where some more yield could be squeezed in this bloated economy.
      Meanwhile if you take a student loan , you have to pay 6% interest and cant discharge it in bankruptcy.

      • Trailer Trash says:

        “Meanwhile if you take a student loan , you have to pay 6% interest and cant discharge it in bankruptcy.”

        Just watched a “60 minutes” expose on how public service employees who were promised student loan forgiveness after ten years, almost never get it.

        The interviews included a number of military lawyers – obviously people who are competent at reading and writing the fine print.

        This is another huge fraud perpetrated by student loan servicers who apparently profit by not forgiving any loan balances.

  33. Jack says:

    Margin debt article please Wolf, new record high….

  34. Swamp Creature says:

    Another Fed Reserve crook getting ready to retire:

    “Fed Vice Chair Richard Clarida may be the next to “retire” following the revelation that he was trading in and out of millions in securities on February 27, 2020 just one day before Fed Chair Powell issued an (extremely bullish) emergency statement hinting at possible policy action as the pandemic worsened.”

    • Xavier Caveat says:

      I hear he wants to spend more time with his money…

    • Anthony A. says:

      These quick departures remind me of the Enron situation at the beginning. Although none of these FED guys will go to jail over their theft.

    • Depth Charge says:

      These guys need to be stripped of their wealth and sentenced to life in prison. This is fraud and corruption at the very highest level. Where is the current puppet in chief on this, anyway? Oh, that’s right, “10% for the big guy.” Nevermind…

      • josap says:

        It’s always the same path in your comments. Maybe a political blog would be more to your liking.

        • Depth Charge says:

          You seem to be triggered enough to read and comment back to me. I’m honored. You can expect more from me in the future, snowflake.

  35. meadows says:

    I appreciate Wolf’s article as well as the many intelligent and humorous comments but the nihilism is tiring. We aren’t quite at The End Times yet, there are straightforward policies which would help reverse these crazy Fed actions.

    Education is key. Many people have no idea what the Federal Reserve is, they think it’s a federal program, another executive branch department rather than a cabal of huge banks and bankers… a monopoly. When the Secretary of the Treasury is a former Fed Boss, the needs of the majority will be suborned to the wealthy minority. “Corruption is dishonest behavior by those in positions of power.” (Investopedia)

    This country was settled by highly religious people who also equated wealth with moral superiority, a WASP disease that infected the general culture. It’s great snake oil for the poor and struggling to conflate money and religiosity with righteousness. It’s also completely untrue. Is our innate respect for the wealthy declining? I hope so, along with my hope that we get a Treasury Secretary that is a dedicated civil servant who will go to battle with the Fed.

    • Doctor Detroit says:

      Sure….anyone who goes against the fed is labelled a nut job by you lefties.

      You want free stuff…you got it.

      Now you will pay for it.

      The inflation tax is the fairest tax of all. EVERYBODY PAYS.

    • Xavier Caveat says:

      Your seriousness about rectifying the financial situation is noted.

    • Eastern Bunny says:

      The issue is not that americans hate the rich. Rather people discovered that the game is rigged, the key moment being the bail out of the bankers in 2008 and now the stealth cheating with honest money, enriching some at the expense of the others.

    • Bobber says:

      “there are straightforward policies which would help reverse these crazy Fed actions.”

      Really? Why hasn’t the Fed implementing these straightforward policies at a time when wealth concentration has exploded and inflation is running at 10%, when correctly computed for housing inflation?

      Do you think there might be a very strong bias to support existing wealth holders? If so, isn’t there reason for Average Joe Millennial and Average Jennifer Z to be nihilistic, as they watch housing prices and stock prices get out of reach, along with any potential for savings and financial security?

    • Medusapalooza says:

      I wonder if what is brought to light by the Pandora Papers will have an effect on the “innate respect for the wealthy” and these issues discussed within Wolf’s article.

  36. Breamrod says:

    the fed is totally evil! We let that camel get it’s nose under the tent in 1913. Oh it was just going to lend to banks in trouble who had good collateral. Now 100 years later their supposed to do something about climate change! The super rich had the most to lose in 2008 hence QE.

  37. PPT is PPPT, private plunge protection team. Here we all thought they were using funds to buy stock futures and boost the market at inflection points to preserve the free market institution, and it turns out they were buying stock futures to pad their own accounts. That’s like finding out the Marine Corps is a mercenary organization, or that the Red Cross shows up at disasters selling their aid. Hey wait a minute.

  38. Citizen AllenM says:

    LoL, so much debt, so little chance it will be refinanced with higher interest rates- which of course can’t happen.

    Asset bubbles are the hardest, because when they liquidate, well, everyone goes along for the ride.

    As for taxes, it will be interesting when the 1% finally has to pay their fair share. But hey, either we begin fixing the entire system, or eventually we get another revolution.

    And it won’t be kind, nice or good for the elites….

    Excepting those who fled to London and out of the reach of those revolutionary committees. My advice to all remains the same- stay below the event horizon lest it make you the next victim.

    As for money, once it becomes obvious to the rest of teh world we will never again choose austerity to slow the decline of the dollar, it will be replaced by something else. Meanwhile, high house prices can be solved by building a ton more of them, or doubling up. Surrounding me are large houses, often with one or two people living in them eg 2900 sq ft for one elderly widow across the street!

    What we have is the conflation of a status asset (housing) with retirement savings- so as they depart, these assets will be sold. Plus, what happens if the Chinese decide to sell their massive passive housing holdings here because they will no longer be able to get here and use them?

    So many questions that will be answered in the fullness of time….

  39. A says:

    The government prints money and hands it to the rich AND the rich don’t pay any taxes!

    What an amazing deal it is to be in the 1% and the rest of us are just stamped into the ground beneath their boot.

  40. c smith says:

    “This was the greatest economic injustice committed in recent US history.”

    Not just recent history. Since the early 1980s, when the activist, Greenspan Fed was born, the S&P 500 has compounded at more than 12% annualized – doubling every 6 years – and is up about 65X over that time. Real economic value is now so blurred by leverage and money printing as to be unrecognizable. And that’s just the way the kleptocrats want it.

    • David Hall says:

      Interest rates have been falling since the early 1980’s. The one year t-bill is at .085%. There are trillions of dollars of negative yielding bonds.

      The S&P 500 was close to 1500 in early 2000 (Y2K). It went down and reached 1500 again in 2013. Now it is over 4300 with a high P/E ratio ttm.

  41. GSH says:

    Yes, the Fed is pouring gasoline on the wealth disparity fire. However, I fear, the planned way out of this will not be interest rate normalization or a cessation of printing, rather it will be an explosion of new entitlement spending. Of course, all that new entitlement spending accrues immediately to the top 0.01%.

    • LeanFIREQueen says:

      > it will be an explosion of new entitlement spending.

      Indeed. It just means that Section 8 will end up becoming at least as important as Medicaid when it comes to gov spending.

      The top 1% cannot risk a revolt, that would put their property ownership in question.

      • Anthony A. says:

        I guess we have to have somewhere for the millions of illegals to live in once they cross the border. Free cell phones and health care for them will be included, I am sure.

        • josap says:

          Sure. It’s always those scary brown people. While you don’t understand that there are millions of “white people” living in poverty in the US.

          Illegals get no Sec 8, no SNAP, no health benefits. No cell phones.

          Instead of being afraid of people you don’t know, try learning a few facts.

        • Peanut Gallery says:

          What percent of violent criminals are undocumented?

  42. Yancey Ward says:

    This is an inevitable outcome of printing money for the government to spend. Those dollars end up somewhere buying some asset that someone owns. The poor end up buying durable goods and seeing appreciation in the hard assets they actually own- homes and land.

    However, you really do need to include in the calculation the present value of Social Security and Medicare benefits since that really is a financial asset. And there are ways to evaluate this with actuarial tables.

  43. enough says:

    Wolf is very good at laying out the data in an easy to see format, and all the posters here are very good at portraying anecdotally these obvious failures in our Gov. I come here daily, scanning the clever posts, and discussion, for answers. The best I have found is ‘this doesn’t end well’….but that isn’t really an answer is it? What I am finally coming to realize is, there are no solutions. This can’t end, until it does, and then I agree, this will not end well. For now however, all I think one can do is join the game, dig in, and get yours. Get all you can, with no regard for reason, sanity or ethics. Not even to get rich, but to stay par.

    With no other choices left, and no solution possible, greed has become the only means for survival left.

    • doug says:

      Perhaps consider cooperation over greed? Build friendships/alliances/whatever across a broad range.

    • AdamSmith says:

      Brevity is the highest form of intellectual ability….

      I take courses at California Community Colleges and have done so since 2016…. I see what those in the who are relevant to what I will say here about those who are ages 21 to say 35.

      They see no path to anything worthwhile in Capitalism as in being able to participate (let alone understand) in the “benefits” of Capitalism. Note I am a fan of Capitalism hence my hero’s name “AdamSmith.”

      They do not buy the BS of pretty much most media…. A comedian harping on the reality of total corruption has more credibility than the WSJ. Wolf, even though he is the champion of “telling it like it is” is in the exact situation described by “enough.”

      I worked in a firm with ex White House Alumni….Saw much that changed my views of reality. Have see the Republicans, the Democrats and all they do…. Not good….Especially for the Long Game.

      I am beginning the pull-back from outrage media which is producing the fear-based behavior that is going on even here in this truth-telling information beacon. Yet, we all here know this cannot last and it may be sooner than later then all the concepts of money-making will end.

      I detest AOC. But, she represents the point of view that is the community college students just mentioned. They think you, me, and we are all full of crap and only say what we do because it is our best interests.

      They do not give a care about what any of us think here and I think we have sown the seeds of our own destruction….

      Pretty much it seems the new form and concept of wealth will be simple as in owning home outright, owning vehicles outright, doing everything you can yourself, and give up on any of this nervous chatter doing anything but keeping you pecking at your computer to see if anyone has the answer you will only be able to find in your situation whatever that might be….

      • AdamSmith says:

        In years past the Christian concept of business was to “leave it better than you found it” which meant you make the company or business your own/run a long game running machine that serves all its constituents best. It was known as Servant Leadership.

        The minute it changed to “merit-based” it became everyman for himself, take as much as you can from whatever you do and leave the carcass remains for some other idiot to finish it off….

        • historicus says:

          It is incumbent on every generation to pay its own debts….

          and this has been lost …. ABUSED by the current people plugged into positions of power (Powell, Yellen, Bernanke, Fink, Pelosi)

          Wake up you 20 and 30 somethings…..your future is being stolen.

      • El Katz says:

        “Pretty much it seems the new form and concept of wealth will be simple as in owning home outright, owning vehicles outright, doing everything you can yourself, and give up on any of this nervous chatter doing anything but keeping you pecking at your computer to see if anyone has the answer you will only be able to find in your situation whatever that might be….”

        What’s old is new again. I’ve been doing that for as far back as I can remember. My parents did that before me. That’s how they paid for my college education… paid off their house and used the money they would have sent the mortgage company to pay my tuition. (But we did work through college to defray living expenses).

        “But, she represents the point of view that is the community college students just mentioned. They think you, me, and we are all full of crap and only say what we do because it is our best interests.”

        What is the difference between these community college students pushing the issues that are in their best interest and our doing the same? No difference at all.

        Once upon a time, people could figure a way for everyone to get at least a slice of bread, if not half a loaf each. Now they want the whole loaf and wish to burn the bakery so you can’t get any more, even if they ultimately starve as a result.

    • @enough, I agree. Buckle up and try to enjoy each and every day.

    • Trailer Trash says:

      “dig in, and get yours. Get all you can,”

      Personally, I have found that the more generous I am, the more I have to give away.

      It turns out that Medicaid is actually only a loan. Any poor person on Medicaid who later manages to save a few bucks will find Medicaid trying to grab their estate after death. My strategy is simple: I am giving everything away before the cancer gets me.

      Giving stuff away is fun. I suggest everyone should try it.

      • VintageVNvet says:

        Agree totally TT!
        SO much more fun and joy to give away, either at the curb or at the Salvation Army receiving station or just directly some times and places.
        Took a while to realize ”yard sales” and similar were total PITA trying to make it OK for some folks to feel they had ”the bargain” etc., etc.
        Thanks for the reminder!

  44. Spencer Bradley Hall says:

    During the U.S. Golden Era in Capitalism, small savings were government insured in the thrifts, the nonbanks, and necessarily expeditiously activated.

    Today, savings are immobilized in the payment system, destroying velocity, destroying AD.

    The offset used is added money products. This has a Cantillon effect. It stokes asset prices, aka, the wealth effect.

    I.e., in the circular flow of income, unless savings are expeditiously activated, put back to work, a dampening economic impact is exerted and metastasizes. And unlike, money products, savings products have a positive economic multiplier.

    The upshot is that the FED’s Ph.Ds. in economics are driving the economy diametrically in reverse.

  45. Sound of the Suburbs says:

    Why didn’t the Japanese use QE after their financial crisis?
    Japan saved the banks, but left the debt in place.
    QE couldn’t get into the real economy due to a lack of borrowers.
    The banks were ready to lend, but there were too few borrowers as they were struggling with the debt they had already taken on.
    This is why the Japanese used fiscal, rather than monetary policy.

    We saved the banks, but left the debt in place.
    QE couldn’t get into the real economy, but it could get into financial markets.
    The gap between economic fundamentals and the US stock market widened until it reached 1929 levels.

    This is why the Japanese didn’t do much QE until Kuroda, as they knew it couldn’t get into the real economy when people were more concerned with paying off existing debt than taking on new debt.
    Richard Koo has no idea what Kuroda is doing and has put this down to him having no central banking experience.
    Personally I think Kuroda does know what he’s doing.
    He knows QE can’t get into the real economy due to a lack of borrowers, but is using it to inflate asset prices as this is what QE does best.

    We look at the markets and think things are OK.
    This is where the QE money has been going.

    We have done nothing to solve the real problem.
    We have used monetary policy to try and solve a private debt problem with more private debt.
    The Japanese used fiscal policy to maintain the money supply as they paid down private debt. There is a way out this way, but it is a long and painful road.

    • Bobber says:

      “We have done nothing to solve the real problem.”

      Correct, the Federal Reserve has not solved the debt problem, but its policies have clearly created a new problem, which is obscene wealth concentration and societal strife.

      The Federal Reserve must quit intervening in markets, or even more problems will develop.

  46. Gen Z says:

    Money printer went BRRR in Canada and those who owned $100,000 houses in the middle of Ontario became millionaires.

  47. 42 says:

    The bottom fifty ought think about what living was like 100 years ago and accept that humility before they go about complaining. The Central Bank was created out of popular demand.

    • RightNYer says:

      Correlation, not causation

      • 42 says:

        Econobabble. There is no equilibrium accept for when the trade takes place. C.F, Ludwig von Mises.

        • 42 says:

          There is no perfect monetary environment, chasing that is washing up on rocky shores.

      • Raymond Rogers says:

        How is correlation when a central bank can assign numbers of values on paper or digits and give it away to people who provide no goods or services to the economy? And what happened during the “pandemic”? You had people who weren’t working making more than those that did.

        Labor participation is plummeting in every single age group. Look at the BLS labor participation projections-

        https://www.bls.gov/emp/tables/civilian-labor-force-participation-rate.htm

        And who pays for this? The working stiff.

    • VintageVNvet says:

      10-4, 6: but you must add that THE CB, and, in fact ALL CBs were created from popular demand BY THE International BANKING CARTELs…
      Most, if not all of, common sense working folks in world/USA put their savings, when times were good, into jars buried in the yard.
      Then WE the Peons dug up those jars and bought actual physical and practical ”HARD” assets with those savings when the financial folks managed to crash the economy once again, as usual.
      Only when the financial folks figured out that they must support THEIR BANKs from failure with the savings of WE the Peons did they come up with the ”FED” and they have fed off the productivity and savings of WE the Workers ever since and continuing today…
      ”Financial assets approximately SIX TIMES real/physical assets” should alone tell anyone with any common sense how corrupt our central banks and financial sectors have become since 1913, eh

  48. Auldyin says:

    Tour de Force.
    You’re onto something really big here W, if you can only get it to the mainstream psyche.
    French revolution territory. Let them eat stimmies.
    Numbers are always there, solid facts, like rocks in the sea, but it all depends how you look at them and present them.
    As you say MSM&Co do everything they can to present the facts to suit their agenda and that’s where top class statistical analysis can drive their case to dust if only a majority will listen. I said I would drop my other grudge on this topic and I will.
    Getting the truth out there is the hardest part of all but when it’s done it’s unstoppable.
    Tell Max&Stace to get these charts in everybody’s face.

    • enough says:

      I like the Kaiser report, but Max is too much of a crypto bull…I understand he made millions on it early, but he never explains how it is supposed to work out for the rest of us, now that it is in the stratosphere.

      • Auldyin says:

        @e
        12yrs ago he said to buy it at $5
        I said Nah! I’m too old to learn all that stuff.
        Oops!
        I never miss that and Boom Bust

  49. historicus says:

    The “Do Nothing” Fed must be enjoying this wealth transfer…..

    5% inflation and they DONT LIFT A FINGER? Maybe in mid 22 we get a 1/4pt? Are you kidding?

    • historicus says:

      I think it very similar to “pulling up the ladder” … or the “we’ve got ours” syndrome.

  50. CJH says:

    Censored in perpetuity! Like the Hungarian physician who first suggested hand washing in medical settings, Ignaz Semmelweis. He died in jail! The Fed should let it’s debt ‘roll off’ and not create any new debt in the meantime. It should start raising interest rates while the roll off program is going on. This will ‘reset’ asset prices to more rational prices. As for all those who will lose their jobs while this is going on, Congress should adopt a national job program: Anyone who wants a job but cannot find one will be hired to do public service work. At a socially responsible wage with benefits. Full employment is a given under this scenario. It won’t cost much more than unemployment checks on the dole. At full employment a lot of classical economics becomes relevant.

    • Wolf Richter says:

      CJH,

      You’re an MMT troll, and have been trolling my site with MMT promos for years. I’ve had quite a few MMT trolls here before, but since I block ALL their MMT promos, they usually give up after a while. I block all your MMT pomos too. You just haven’t given up yet.

      Your comments that do not promote MMT pass. Many of them are very interesting.

    • Swamp Creature says:

      CJH

      Agreed. Anyone on UE should be assigned a job. I can think of some useful jobs that are available right now. Like cleaning up the forests in California to prevent the massive forest fires and the pollution that results from them.

      • @Swamp Creature, as for forest fires:

        Similar to financial markets, the policy wonks decided to prevent any/all forest fires, resulting in thick dead under growth that brought large fast devastating destruction once they lost control.

        This ill conceived concept that we can control everything around us and mitigate loses for everyone is a cancer that has metastasized and represents the height of humanity’s hubris.

        The current stage has politicians handing out free money en mass to maintain votes and power. Not even the mighty dollar can save us forever. The direction is set and we are all just guessing how this real life movie unwinds.

      • VintageVNvet says:

        Agree!
        Been advocating for a 100% ”National Service” ”DRAFT.”
        For decades:
        Everyone, EVERYONE! is drafted at age 18, or can volunteer to go sooner, 16 without parental consent, and goes directly to 6 weeks of ”Basic Training” AKA BOOT CAMP,,, even in total wheel chair, there is always something and usually many things of service needed…
        Best scores in basic mean best first choices for remaining of 2 years of service in Forests, Parks, Wildlife Preserves, Hospitals, all branches of military and naval services, Coasties, etc., etc… Many of which lead directly to career service opportunities,,, and ALL of which service is direct training for lifetime skills.

        • Swamp Creature says:

          When I first got to DC in the 1970s I was at the Officers Club in Andrews AFB just outside of DC with my office mates. This is where the President lands and takes off on domestic and foreign trips. The cafeteria cashier was a totally blind Vietnam Vet. He performed his duties with competence and distinction. I hope I don’t have to hear one more whining dog loser on this Website complain about not having a job when there are 10 million open jobs available and at least 20 million more public service jobs that could be easily created

      • 91B20 1stCav (AUS) says:

        Swamp/SoRep-and don’t forget that if it doesn’t rain and, probably more important, snow, to the necessary life-giving amounts in a generally-regular period, those fires are only going to expand and get worse in the coming years, ‘raked’ or not…

        Water remains the story of the American West, coming to a location near you, soon.

        may we all find a better day.

  51. LM says:

    What about Brainard? What would change if she replaces Powell in February?

  52. Mark says:

    “The bottom 50% of US households (green line above) – 63.2 million households – are worth on average $47,900 per household… The bottom 50% gained $7,900 per household over the quarter”

    That’s a gain of 16% per quarter, which is over 60% annualized. I don’t see the problem. They did very well. The very rich didn’t gain that much as a percentage. Not even close.

    I don’t understand this jealousy over money. Some people are born great athletes. Do we say Michael Jordan should play basketball in cement shoes so normies can compete with him?

    We should celebrate our talented people, for what ever talent they have. It is just being mean to run them down. I have no problem with people being more successful than I am. Is it because I’m not insecure?

    • Wolf Richter says:

      Mark,

      It is just for people like you that I included this heading and paragraph about halfway down the article:

      You can kill someone with reckless usage of percentages.

      “If I give a homeless person $5, and he already has $5 in his pocket, I increased his wealth by 100%. But he still is homeless and still doesn’t have any wealth. Percentage increases are touted as a way to show that the wealth at the bottom increased sharply, when in fact, it increased by only peanuts because the bottom 50% have so little.”

      • Stephen says:

        Wolf, I totally agree. I am able to save on average $13,800 a year for the the last 10 years and have just over $180,000 in all my accounts. I am trying everything possible to make my 2.8% average interest rate on my GIC’s go as far as possible. I read up on personal finance and tax tips in various places to see what I could do with my limited, low end hourly wages per hour. I also saw interest rates were much higher in the past as I suspected. In my home country 6% to 7% were the normal bank deposit locked up rates.

        My boss a good long time guy I know gives me alot of hours and appreciates the hours I put in 6 days a week, 9 hours a day. He likes the fact that I am reliable and never left him hanging or in a bind. I get paid 44 hours straight time and 10 hours overtime so 15 there. My total gross pay is based on $14.25*59 hours a week=$840.75*1.04 because of 4% vacation pay=$874.38$52 weeks a year=$45,467.76 annual gross income. I am determined to not let my low wage job keep me in poverty or living paycheck to paycheck.

        Me being in Canada, I use my maximum registered accounts, RRSP, TFSA every year to contribute. The RRSP grows tax deferred and I get my income tax refund in which I put all of it into a savings reserve account, the TFSA is tax free compound of interest. I work for minimum wage here, $14.25 an hour. There is a small bump up coming to to minimum wage, 10 cents more an hour so this will mean an extra $5.90 a week or $306.80 more a year but really after taxes, $225 net pay to me.

        Obviously with inflation running higher and cost of living running higher this will not help enough but better than nothing. I have learned to make wise and informed money decisions and me being single nobody will take care of me. I have no family here in Canada either. I came to escape poverty in my home country. I came to Canada 10 years ago and worked hard and work hard and in just after 2 weeks got a job not the one I thought I could get but it is what it is. After all my income taxes, CPP, EI, paying for my cost of living from rent to groceries to car expenses, gas, insurance, clothing, utilities etc. in the last 12 months I saved just over 37% of my gross pay to $16,900.

        I always stayed out of debt and only have only 1 credit card and 1 debit card which on both no debt, no overdraft, no credit account etc. My owing a used car and my job being only 15 minutes away helps alot. I guess if my friends and colleagues at work knew that after 10 years had $180,000 they would not believe it but this is what is missing today, nobody thinks they can make life better for themselves.

        I should know, life is tough with a minimum wage job and keeping on your bills every month but to save money too seems impossible for many. The real problem from my experience is people get trapped in getting something so easy on credit, fall for the what other people think of what I have, what I supposed to be like. This is where spending too much, going into debt at 18%+ credit card rates or worse 300%, 400% payday loans. You have to be very wise and smart before you take money out of your pocket, think twice and do the math. Don’t just say I deserve this or I will find a way to pay it back. It never or rarely works out.

        • Gerald says:

          Hey Stephen, you are doing a really good job with your finances. I keep hearing tow things motive or impact a person in life fear or greed. It looks like you fearing of being poor, living in poverty has really gave you the push for your life for 10 years now.

          I think your boss is very lucky to find you and is maybe not able to give you a raise right now but as you said minimum wage increase is about $306 in your yearly pay but he should at least give you a bonus every year for a job well done. It does not have to be a huge amount but say $500 to show the appreciation from your boss every year. As for saving, I was taught at a young age from my Hungarian parents to always say for the future.

          This has served me well and those that like these low interest rates and high debt, high risk taking, I don’t want to be in your shoes. One day this will not end well, heck, it may not be even at once, it could be a slow, downward decline which looks temporary but it will show it is not. I was smart enough to buy longer term 24 years provincial bonds here in Canada back in 2010 with 4.7% to 4.8% yields. These are currently 85% of all my income so only 15% are at lower yields, rates which are 2.4% to 3.05% in GIC’s, term deposits. I would not be surprised to see 3.75% and 4% Canada, Canada, US 20 to 30 year bond yields by Jan-2024.

        • Juan says:

          Stephen, I never could save alot of money as I am the only person making paid employment in the household plus I have 3 teenage kids, a mortgage. We do have a savings account with $65,000 but that is it. When I got laid off permanently as the factory closed after 20 years working there. I did get a big severance package of $205,000 and this is net as they took 40% withheld income taxes. This was back in 2019. I did not like getting into more debt with real estate, income properties. I did not like stocks, bonds, Reit’s, ETF’s any of that stuff I have no idea about. My local credit union had a 3.5% 7 year GIC rate so we jumped on it.

          It was all compounded so we knew at maturity, 2026, February $260,817.25 was fully provincially, Ontario deposit insured. It is almost $8,000 a year interest for 7 years which is not bad with a 3.89% annual guaranteed return. It could not happened in a better time as I lost my job during the pandemic and I am getting EI, unemployment for 1.5 months now. It will run out in 7 maybe 8 months.I have a few jobs lined up, mostly in the manufacturing sector which is not the best these days but I will be making much less. My total wage package was $29.55 an hour but $4.00 an hour was deducted for pension, benefits but now I have a choice of $17.85 to $18.55 an hour with 6 hours more a week than my previous job. It will impact us alot as a family but we will cutting two big expenses soon.

          We will be getting rid of our second car this month and eating no more out like 3 to 4 times before the pandemic or ordering out 3 to 4 times a week after the pandemic. We may get a pizza, delivered take out once and a while but that is it. This would save us at least $14,000 a year car payments, gas, insurance, maintenance, repairs, food delivery expenses. We do have at least that good size severance package money for our retirement and CPP, OAS which would likely cover 50% of our living expenses when I hopefully officially retire in 2036.

  53. Swamp Creature says:

    My great dentist who I had for 30+ years passed away from Covid and left me with no dentist amid serious dental issues. He was in the vulnerable group and should have closed his office during the peak period here in the DC area last January. It was 10% infection rate at the time here, and vaccines hadn’t been distributed yet. He kept operating his dental practice. Turns out he got a large PPP loan from the government and was forced to stay open in order to get the government handout.

    I think it was the “Gipper” who said “the scariest words in the English language are:

    “I’m from the government and I’m here to help you”

  54. dj says:

    Maybe put a footnote: For similar trends other central banks are available.

  55. Rcohn says:

    Some interesting stats
    Trained truck drivers in certain industries are being offered 14,000$/week.
    My daughters fiancé , who just graduated with a PhD in chemistry from Berkeley is starting at $ 75,000/ year
    Leeches on Wall ST with only a BA are starting out at 125,000$/ year
    Some non famous teaching golf pros are asking $ 500/ hour
    Lawyers with degrees from second tier law schools are lucky to make $65,000/ year
    Fauci is the highest paid bureaucrat in the US government

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