My “Wealth Effect Monitor” & “Wealth Disparity Monitor” for the Fed’s Money-Printer Economy: December Update

Billionaires got more billions, bottom half of Americans got peanuts and inflation.

By Wolf Richter for WOLF STREET.

My “Wealth Effect Monitor” uses the data that the Fed releases quarterly about the wealth of households. The Fed, after having released the overall data for the third quarter earlier in December, has now released the detailed data by wealth category for the “1%,” the “2% to 9%,” the “next 40%” (the top 10% to 50%) and the “bottom 50%.”

Wealth here is defined as assets minus debts. The wealth of the 1% ($43.9 trillion, according to the Fed) is owned by 1% of the population. The wealth of the “bottom 50%” (only $3.4 trillion) gets split across half the population. My Wealth Effect Monitor takes this a step further and tracks the wealth of the average household in each category.

The average wealth in the 1% category ticked up by only $121,000 in Q3 from Q2, after skyrocketing over the prior five quarters, to $34,478,000 per household (red line). In the bottom 50% category, the average wealth ticked up by $6,800 $53,600 (green line). And get this: About half of that “wealth” at the bottom 50% is the value of consumer durable goods such as cars, appliances, etc. Even the top 2% to 9% (yellow), have been totally left behind by the explosion of wealth at the 1%:

Note the immense increase in the wealth for the 1% households, following the Fed’s money-printing scheme and interest rate repression in March 2020.

A household is defined by the Census Bureau as the people living at one address, whether they’re a three-generation family or five roommates or a single person. In the third quarter, there were 127.4 million households in the US, per Census estimates.

Those top 1% households were the primary beneficiaries of the Fed’s policies during the pandemic. And they have hugely benefited since the Financial Crisis. They benefit the most when the Fed prints money (QE), which is designed to inflate asset prices, which benefits those that hold the most assets the most. This is not a secret. It’s the official policy of the Fed and the desired outcome of these official policies is officially called the “Wealth Effect.”

Billionaires got more billions, half of Americans got peanuts.

The Fed doesn’t provide separate data on the truly rich (the 0.01%) and the Billionaire Class, a distinct class in American society whose members often get named in the media with specific titles that have “billionaire” in them. They’re the prime beneficiaries of the Fed’s monetary policies.

According to the Bloomberg Billionaires Index, the top 30 US billionaires are worth a total of $2.23 trillion. On average, that amounts to a wealth of $74.5 billion per billionaire among the top 30 richest US billionaires. Three months ago, each of the top 30 US billionaires at the time was worth on average $69.2 billion. So, over the three-month period, the average billionaire among the top 30 US billionaires each gained $5.3 billion in wealth.

But the bottom 50% households, that huge mass of Americans, on average gained just $6,900 in wealth over the third quarter. And the wealth disparity between the top billionaires and the bottom 50% exploded.

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, when in fact, it increased by only peanuts because the bottom 50% have so little and even a big percentage increase is still nearly nothing, compared to the billionaire class.

Over the past quarter, the average wealth of the top 30 US billionaires increased by 7.6%, according to the Bloomberg Billionaire Index. This amounts to an increase of $5.3 billion per billionaire. This is a huge amount of money for one person to gain due to inflated asset prices in one quarter.

The average wealth at the bottom 50% increased by 14% during the quarter. But this amounts to only $6,900, further blowing out the wealth disparity between them and the billionaires by the billions per household!

Within each category of wealth, the range of wealth is huge. The top 1% range from those who’re just run-of-the-mill wealthy to those who’re worth tens of billions of dollars. The bottom 50% range from the desperately poor to those who’re comfortable with a modest house, a small 401k, and some durable goods, and weighed down by lots of debt.

Fed goes all in on Wealth Disparity as solution to the pandemic.

Since March 2020, the Fed printed $4.8 trillion and repressed short-term interest rates to near-zero, for the sole purpose of inflating asset prices massively in order to enrich the asset holders massively. The Fed has long clung to the doctrine that making the already rich vastly richer by printing money and repressing interest rates creates economic activity.

This doctrine is called the Wealth Effect, and it has produced the greatest economic injustice committed in recent US history.

My “Wealth Disparity Monitor” (chart below) tracks that economic injustice by showing the difference in wealth between the top 1% and the bottom 50%, using the Fed’s own data, on a per household basis.

Back in 1990, the wealth disparity between the average bottom 50% household and the average top 1% household was $5 million. By Q3, 2021, that wealth disparity ballooned by nearly 600% to $34.4 million.

This is a great way for a handful of people at the Fed to tear up a whole society. Conversely, a big market downturn, with asset prices returning to where they were a few years ago, would repair some of the damage these horrendous policies have done to American society.

The Fed makes the rich richer, the bottom 50% pay for it via inflation.

The Fed’s policies are designed to create asset price inflation. Asset holders get richer. That’s the purpose. The more they have, the more they get from this asset price inflation.

The bottom 50% have nearly nothing in terms of assets – for example, they held on average only $4,077 in stocks per household in Q3 – and they get shafted. This has been the case for decades, but during the pandemic, the Fed embarked on a historic money printing binge, and the results in terms of this ridiculous wealth disparity are now everywhere.

But for the bottom 50%, this historic money-printing binge has now created the worst inflation in 40 years. Inflation means the dollar loses purchasing power. But for the bottom 50%, their labor, which is denominated in dollars, loses purchasing power in terms of housing, food, cars, etc. And so the bottom 50% get to tighten their belt to pay for the Wealth Effect.

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  281 comments for “My “Wealth Effect Monitor” & “Wealth Disparity Monitor” for the Fed’s Money-Printer Economy: December Update

  1. dishonest says:

    Thanks for acknowledging the lower half Wolf. The little people. The ones that exist to exploit.

    The Elephant party obviously cares naught for them. Nor does the Donkey party.

    Where is this all going? Any thought dear friends?

    • Flea says:

      Can u spell Elon M usk

    • BarryL says:

      “It’s people that make the difference – little people like you.” — Frank Shirley

    • Bead says:

      The serfs will remain distracted by the puppet show (wokedom, identity politics, owning the libs, etc.) while the paper chasers make off with the loot. It’s been a grand experiment.

      • Calvin says:

        You forgot pro and college sports, which is the greatest distraction, safety valve and ground discharge of building social static electricity, which were it not for sports idolatry, could explode in a spark of rage, gunfire and destruction of the elite’s lifestyle.

        No worries for the elite and the money masters of the economy, the average American man in his prime is busy memorizing meaningless sports statistics and idolizing the descendants of field hands instead of learning what’s on this website and getting educated and becoming proactive.

        This was driven home on a long road trip in a car with only an A.M. radio. Religion, sports and ads for useless crap and parasitical financial services.

        • Dan Romig says:

          George Orwell has a take on that in his ‘1984’ classic.

          I will admit that I will be watching the Premier League football games soon and having a non-alcoholic beer or two during the matches.

          Many of the team’s sponsors are bookmaking companies proudly displayed on the jerseys.

          And years back, after finishing up with a day’s worth of hustling tickets on the street for say, a Vikings vs Packers game, I would shake my head in disbelief that people would pay so much for three hours of beer drinking, shouting swear words and watching men give each other concussions.

          Oh well, I was good at my job, and got paid, “Straight Cash Homey.” (HOF Randy Moss quote)

        • NBay says:

          Nothing compared to the old SF days at Kesar….after a game they spilled out onto Stanyon, covered the entire street, 3/4 had been in a fight and the most all were still looking for one or a second or third. Tittle and Brody days, fans were famous for it. Old timers remember the Kesar fans nationwide.
          Us hippies stayed FAR away.

    • General Strike says:

      General strike followed by Socialist Revolution.

    • Nick Kelly says:

      The MSM is getting on board. Great read over on Politico.

      Heading is approx: ‘The Fed’s Doomsday Prophet warns where we’re heading’

      Yes, all the time we thought the Fed’s board was all about groupthink, all rallying around Bernanke. there was a lone dissident: Thomas Hoenig.
      The piece is why he opposed QE, why he lost and what will happen as a result. He resigned in 2011.

      ‘In 2010, Hoenig was president of the Federal Reserve regional bank in Kansas City. As part of his job, Hoenig had a seat on the Fed’s most powerful policy committee, and that’s where he lodged one of the longest-running string of “no” votes in the bank’s history.’

      I don’t have an ad blocker. Usually I couldn’t care less altho they are so thick on ZH you can hit them accidentally….anyway, half way thru the above piece there was a pop up for a book: ‘How the Fed destroyed the US economy’

      A

      • The Wealth Effect is a Ponzi Scheme says:

        I read this article and look forward to reading the book.

        It’s a hard story for MSM to cover. I think the right writer could make it fascinating… a Michael Lewis type, or maybe Matt Taibbi.

        All I know is that I watch one more puff piece on the good people at the federal reserve on 60 minutes I’ll f’n puke.

        They are disgusting and deserve to be treated as looters of workers and savers.

        • Nick Kelly says:

          At Chernobyl the crew was afraid the reactor was going to ‘go out’ which could be compared to a deflationary collapse in an economy. So they pulled out the graphite rods that were moderating the reaction which could be compared to stimulating an economy. They overdid it and the reaction ‘ran away’ very briefly putting out 100 times its rated power and then blowing up.

          This could be compared to the Fed’s error in overstimulating the economy, and now things are blowing up. Slowly compared to the reactor but fast for the world’s largest economy and reserve currency.

          The Chernobyl crew did not intend to hurt the reactor and the Fed did not intend to hurt the economy. Both f@cked up.

      • NBay says:

        Hey, I’m starting to think they pop up when there is activity, or just afterward…..still no big deal.

        • NBay says:

          Just happened again…right after posting….was that old hag with the $2000 hairdo…..

      • NBay says:

        There’s a GOOD article on Yahoo this am (Dec 29) about Hoenig, maybe just the same one, (I didn’t check), FWIW.
        But It was a good read for an Econ ignorant guy like me. I know Wolf has been Howling (his old byline) about this for years, but it doesn’t hurt to see it explained in different words, and learn a bit about the man, especially for the Econ ignorant, like I said.

    • rankinfile says:

      This is leading to WAR, a great culling is just around the corner.I do promise you this, it’s the bottom 50% that will go into the meat grinder while the children of elites suffer from bone spurs.While your kids fighting to stay alive theirs will be busy date raping or hazing at frat partys.

      That is unless this time the poor say NO

      • NBay says:

        “Ain’t no use in going home, Jody’s got your girl and’s gone”

        But the poor kids all ENLIST now……no hopes for a decent job, we have a lousy public school educational system, and of course constant ads to help them with the perennial problem at that age, “Who am I”.

        Why not become a Marine (an awesome fierce and feared warrior) and have the “respect of all”…(thank you for your service)…talk about LIP SERVICE…it’s a classic example.

        Except those laughing (and profiting off) your youthful ignorance.

        They won’t say NO….they are just kids in an economic and educational bind, the worst since the Gilded Age…maybe worse. The smarter ones just shoot dope and can at least ignore it all.

        • Rusty Trawler says:

          Some of us enlisted because our parents couldn’t afford to send us to college. That said, we took advantage of the free school and made something of our selves.

        • NBay says:

          Yeah, there are some good sides to volunteering for those who weren’t born rich. My Auto Shop instructor started a long and pretty damn successful career based ONLY on his Army training.
          Pre Vietnam (and maybe during) a lot of kids in trouble with the law were given a choice by the judge, enlist and get straightened out or go to jail. Just had a buddy from NYC die who’s life was turned around that way. He grew up in a bad part of town, and when he went back many of his friends were dead, in jail or selling/doing smack.

    • Delikon Threetree says:

      A sharp increase in suicide rates.

    • leanFIRE_Queen says:

      How much NW increase did the top 20% and top 10% had?

  2. andy says:

    It is only with total lack of conscience and moral character can one make it to the fed’s governor seat. How else can one sleep at night.

    • Jay says:

      Agreed. It’s unconscionable that the FED has left interest rates so low for so long. 1-year CD’s bearing 0.60%. Well, at least the bottom 50% will be getting maybe 1.4% by the end of 2022 with, let me guess, 9-12% real inflation.

    • Cobalt Programmer says:

      Morals and public office do not mix well. You either resign or get a heart attack in the chair. Most honest office bearer is the poorest for the same reason…

    • historicus says:

      “Honey, how much higher is our stock market today? And why do our neighbors still go to work? Club for lunch?”

      Heard in 1% of the households in America.

      • rankinfile says:

        and claim they are “self made” when the generational wealth transfers are at block buster levels.
        Everybody else should pull themselves up by their bootstraps.I think people are wising up seeing the futility and choose not to have money as their god.
        They might not have cared for Trumps wall but I guarantee wall construction and security systems will boom.

        The movie Elysium comes to mind

        • NBay says:

          That would be done in a second if possible….the perfect gated community.

          I also liked the one where everyone had “time left before death” counters in their wrists and could use them like a debit account, got paid that way, and could even give time to friends/family.

          Began with some drunken doubting .01% er flashing 100/1000+ (?) years left in a dive bar where the richest had maybe a week left.

    • historicus says:

      Someone tell J Powell that it is UNAMERICAN to punish savings…
      and inflation at near 7% and savings rates based on Fed Funds at .05%….
      has never happened before and never so punished those who simply choose to save their money.
      And Powell worries about the tent people? What of the industrious who bounce out of bed each day to deliver, fill the shelves, turn the lights on in this country?

    • Old school says:

      Good article in Politico about Fed governor Thomas Hoenig. Voted against Bernanke’s policies. Predicted bad stuff is going to happen as Fed ties to extricate itself from the mess it has made with easy money.

      Interesting that the media is now running stories like this.

      • Anthony A. says:

        The media must be starting to position itself to be viewed as neutral when all this FED induced stuff blows up.

        • NBay says:

          The corporate media wants to sell ads.. period!…all motives/actions/content can be derived from this goal.

  3. Jay says:

    So it took the 1%’ers & 2-9%’ers about the same amount of time, 4 years, to recover from the great recession, while the poor folks at the bottom get a nice horizontal line. And, nowadays, they’re getting poorer. Yikes!

  4. Depth Charge says:

    This chart is just nauseating. The “no billionaire left behind” policies of this country have gone on long enough, yet the FED is STILL PRINTING and will continue to for another 3 months.

    I guess the billionaire set got their face-ripping Santa rally they were hoping for. Maybe Bezos can speed up the completion of his supergiganticmegayacht that has the carbon footprint of a small country with the proceeds.

    • Old school says:

      General consensus is that the stock market bubble is the biggest ever in US history. How it plays out, nobody knows. Expect losses of 50% – 90% if history is any guide. Another way to look at it is expect zero real return for 15 – 20 years as excesses are worked off.

    • historicus says:

      DC
      And we wait for the Fed to deal with inflation, stop stimulating, and let rates return to historical norms…..
      and where is the Senate Banking Committee, the overseer of the Fed?
      The Fed has been HIJACKED…….that is clear.

      • Depth Charge says:

        3 months is a long time. For the FED to announce that they would still massively stoke inflation for another 3 months, especially given how quickly this escalated, is unconscionable. Not only was the overstimulation grotesquely uncalled for, so too was their response to continue stoking it.

        As has been pointed out before, it takes time for policies to have an effect on inflation. Therefore, by continuing to feed it for another quarter, then perhaps engaging in pretend hikes of a chintzy quarter point, the FED is shouting F**K YOU to the poor and the working class. They’re not taking this seriously, they’re destroying lives on purpose. None of this was an accident. With soundbites like “we’re going to let inflation run hot for a while,” they have no cover. They exposed themselves.

    • Swamp Creature says:

      I heard the Elon Musk paid zero taxes in 2019 and 2020 on a net worth of 250 billion.

      • Swamp Creature says:

        I heard something similar about Bezos. The richest man in the world paid no income taxes.

        • PNW Greg says:

          Income tax, as the name implies, is a tax on income. It is not a tax on wealth. If I had Musk’s wealth, I could live in luxury for the rest of my life without ever making another dime in income.

          For 2021, when Musk sold a significant amount of stock, he will be paying over $11 billion in taxes—the highest personal tax bill ever.

      • Depth Charge says:

        That’s all going to change. They’re going to send out 1099s to all those wealthy Ebay sellers like Bezos, Musk, etc. Oh, wait….

      • Duke says:

        Elon about to pay 15 billion in income tax. Hows that?
        Elizabeth Warren pays almost none.

        Elon workaholic trying to colonize Mars, dig roads underground and revolutionize energy and travel.

        Bezos quit for yacht life. I don’t get why Elon gets lumped in with the ‘evil billionaires.

        • Old school says:

          I do. Elon has gotten super wealthy implementing government policy. Tesla would be a niche automaker without Fed and US government easy money policy.

          He has gotten super wealthy in a perverted age when the hurdle rate for projects was essentially zero. When the crash comes a lot of peons are going to lose 95% of their stock value in Tesla unless government dumps more fiat in.

        • Dan Romig says:

          A week or so ago, Mr. Musk did an in-person interview on another website. I would urge those who comment on him to listen to and watch the interview,

          He paid no taxes in 2018 as a result of over payment in 2017.

          Musk immigrated to Canada as a 16 year-old kid since his mom had Canadian citizenship. He worked as a hired hand on a wheat farm in Saskatchewan for a while at the time he turned 18. He is a self-taught and ambitious person.

          His motivations for creating Tesla and SpaceX are quite positive in my opinion.

          To get people and materials the the International Space Station at this time, Russia can provide to means needed for a very large cost, SpaceX can do it for less cost & NASA currently is not capable of the task.

          For Tesla, the motivation was to look ahead a few generations down the road and prepare for transportation without burning fuel in the vehicle.

          Commenter ‘Duke’ is quite accurate in his appraisal of Elon IMO.

        • Enlightened Libertarian says:

          Elon did not write the US tax code. Senator Warren did. Hillary Clinton did. Senator John Kerry did. Senator Obama did. Joe Biden did. Harry Byrd did. Ad infinitum. All Democrats.
          Is there a problem with the tax code [lots of problems]? You bet. Is it Musk’s fault or the fault of the voters who keep sending self righteous crooks to fill the DC swamp?
          Seems like the voters to me.
          BTW as far as I can see, Dems and Reps are two sides of the same crooked coin.

        • Swamp Creature says:

          I’m glad to hear that there are some lemmings that feel sorry for Bezos and Musk for any back tax liability, while the rest of us get 1099s for $5 worth interest our local credit union.

        • Dan Romig says:

          Swamp Creature,

          Unfair characterization if you imply I am a lemming regarding Mr. Musk.

          I am a Libertarian in favor of a modified flat tax. Every U.S. citizen should be taxed equally at a flat rate — for all types of income — after an un-taxed “living wage” (2,000 hours times minimum wage) is deducted.

          Please hear the interview Musk did where he explains his situation and philosophy and background and history. Until then, I would respectfully ask you to not to make assumptions regarding my comment.

          “If you could die of irony, she would be dead.” Musk on Senator Warren & Woke Culture.

          And speaking of 1099s, I did six figures plus of gross sales through StubHub alone for years, and know all about that subject.

          By the way, I wish you and yours all the best and enjoy your comments.

        • Dan Romig says:

          StubHub & 1099:

          One thing StubHub used to do when they reported the 1099 to the IRS was to put in the amount of proceeds returned to the seller. And they took a 10% cut for themselves from the listing price. Sell a ticket listed @ $100 & get $90 back with the 1099 showing $90.

          In 2018 I believe, StubHub’s fees had changed and were adjusted based on the volume a seller did with them. My fees taken by StubHub now were 15%. But StubHub sent me and the IRS a 1099 that showed the aggregate number of all listing prices as the income.

          In other words, the $100 listing/sale price of a ticket returned me was $85 (of which my client got $72.25 & my commission was $12.75), but the 1099 showed the full $100.

          I just wanted to clarify my comment regarding “six figures” as my net profit on a hundred grand of 1099 gross sales through the ‘Hub was $12,750.

          Some of my ticket brokering colleagues did not catch that change and over-payed the IRS when the change occurred.

          Damn glad to be retired!

  5. 2banana says:

    The wealthy started their road to uber wealthy in 2008…

    And the middle class, working poor and retired towards serfdom.

    Hmmmm….what major fiscal and political changes also happened that year?

    • Jay says:

      Modern Monetary Theory (aka – inflation’s & billionaire’s club best friend)

      • historicus says:

        Orwellian Monetary Theory (OMT)
        • Debt is good.
        • Lender is slave to the borrower.
        • Saving is Punished.
        • “Stable” now means increasing (prices) at a stable rate of
        increase. (2nd Fed mandate)
        • Extremely low interest rates are moderate, even though at
        immoderate record lows. (3rd mandate)
        • The future funds the present. (It is no longer incumbent on
        each generation to pay their debts.)
        • Free market economy is arranged by unbridled unelected
        power. (central bankers)
        • Democracy is ruled by these monetary dictators.
        • Ignorance is strength.
        • Inflation is GOOD!
        • Freedom is slavery.
        • We can not raise rates because there is too much debt, so we
        must allow the current condition of zero cost debt creation to
        continue.
        • Tax unrealized gains (fiscal response to inflation)
        • Rates must stay low to solve the employment situation, even
        though there are record job openings
        • Trade deficits don’t matter, even if we must import critical
        items to the survival of the nation
        • Central Bankers will champion “woke” causes that have nothing
        to do with banking
        • Employment metrics now must focus on inclusiveness (despite
        record job openings)

        • TK says:

          What does woke mean ?

        • Anthony A. says:

          TK: WOKE – Aware of and actively attentive to important facts and issues (especially issues of racial and social justice).

        • Cookdoggie says:

          Reading that definition of woke, a casual observer would think that’s a good thing. It’s the same surprise I felt when Rick Santorum called those with an education snobs. A last refuge of those left behind.

      • Freedomnowandhow says:

        A far cry from MMT, as it explains the current state of monetary policy, not the makers of U.S. policy. That distinction and our current abyss belongs to the Board of the F.R.B., led by both Conservatives and liberals. Little is said about Pres. Nixon’s opening of relations and business with Communist China in the 70’s, Pres. Reagan’s encouraging for profit healthcare providers, Pres. Bush and Pres. Clinton’s deregulation of private Banks. It has been a 100 years since asset appreciation hasn’t been our economic driver. Very few have become rich by saving rates. No generation has paid It’s way and left no recurring debt for the next.

    • Pat says:

      The One West Bank CEO who illegally foreclosed on over 35,000 Californians, the future Treasury Secretary, Steven Mnuchin got a free get out of jail card from future V.P. then California Attorney General Kamala Harris?

    • NBay says:

      Try 1980…the Heritage Foundation got their B actor in office then.

      “…where free unions and collective bargaining are forbidden, freedom is lost.

      Reagan Labor Day speech, 1980.

      Look it up! He actually said it!…..it was just in his script…..I guess….and being an actor he just read what the script said……..

  6. Depth Charge says:

    “Fed goes all in on Wealth Disparity as solution to the pandemic”

    The “wealth effect” and “trickle-down eCONomics” should be relegated to the dustbin of history as moral and abject failures. Further, any talking head who tries to espouse their virtues should be ridiculed and then kicked in the shins for good measure.

  7. Escierto says:

    And the solution to this is? And don’t tell me it’s by voting for the other oligarchic party.

    • 2banana says:

      The solution to the massive wealth disparity.

      End QE.
      Raise interest rates to inflation +3%.
      Get government out of guaranteeing any contracts or mortgages or credits or subsidies to businesses….especially banks.
      Cut government spending by 50%
      Enforced fraud and GAAP laws with jail for executives.

      • Nathan Dumbrowski says:

        BRAVO

        • Enlightened Libertarian says:

          And….you have to have an inheritance tax to keep massive amounts of wealth from being passed on and destroying opportunity for those who are not born rich. I have come to the conclusion that a real inheritance tax is essential for a long term stable society like I want my grandkids to grow up in.

        • NBay says:

          Now THAT is the real key, oh Enlightened one!…things are way beyond looking at only mere yearly income now.

          A Constitutional Max Net Wealth would easily bring out more of the libertarian in me, e.g., “No harm, No foul”, but ONLY WITHIN (in this case WEALTH) BOUNDARIES, and effective referees, like any good sport has.

      • Anthony A. says:

        Even if you were “in charge” you won’t be able to make ANY of this happen. They will make you “disappear”.

        • Augustus Frost says:

          Trump’s election should make this obvious. He had a few good ideas as a candidate among a much bigger group of dumb ones but nothing changed.

          As examples, he talked about scaling back the imperial state. Look how far that went. Also called the stock market a bubble as a candidate until stupidly defining it as the success metric for his fake economy supported by even bigger deficits than Obama.

          I don’t know if he really intended to change anything. Point is, he was probably the only chance to do it. Ignoring conspiracy theories claiming he was a fake outsider, the establishment won’t be caught off guard again.

        • Swamp Creature says:

          Trumps failure to “drain the swamp” is evident with his appointments, especially those in the economic sector

          Gary Cohen – Goldman Sachs crook
          Steve Mnucian – Goldman Sachs crook, worked for George Soros
          Jerome Powell – Carlyle Group insider

          The list goes on

        • Jack says:

          Trump only cares for trump. That should be evident by now. The only thing he wanted to change was to make himself and his buddies wealthier. And to stay in power at any cost like a dictator so he could pad his own ego. Worst president ever.

        • Swamp Creature says:

          Instead of draining the Swamp, Trump brought more Swamp Creatures to Washington D.C. to add the ones that were already here.

        • NBay says:

          He brought an entire fully crewed pirate ship with him. No Jolly Rodger flag, though…..flag said Trump Organization.

      • historicus says:

        2banana

        Historical norms are Fed Funds = > inflation

        copy and search for this chart

        journal.firsttuesday.us/wp-content/uploads/Inflation-Fed-funds-rate.png

      • gametv says:

        It isnt the executives that need to go to jail, it is the politicians. Not to say that I respect the executives, but if we started to implement and enforce the right laws and government policies, it would all change rapidly.

        • Seneca’s Cliff says:

          Let’s send them all to jail , just in case! Better to error on the side of caution.

      • Freedomnowand how says:

        Agreed with all, except cutting Government spending by 50%. At all levels, from local to Federal would drive a recession. Every recession and depression has started with lower public spending Nationally, without exception. Lowered government spending lowers personal income especially the poor, always. The fallacy that taxes pay for Federal spending went out the door a hundred years ago, yet we maintain a world leadership in innovation, expansion of a middle class, scientific knowledge and better healthcare. To expect all the advancements we have with private bank loans as the only source of a larger money supply is blatant ignorance. More dollars in the economy are needed both for a increased population and economic growth, private loans that must be paid back with interest remove dollars from the economy or there is a default favoring the private loaner. Federal “deficit ” spending removes dollars from the economy after they have accomplished a goal, and are savings in Federal Bonds and T-bills. Those savings are privately owned and can be sold or redeemed at any time with interest that adds dollars to the economy. Simple stated Federal debt is owned by private individuals and can return to the economy at any time, private loans don’t have that advantage.

      • Eugene says:

        IF government cut spending by 50%,U will be unemployed.

      • Happy1 says:

        Yes, and end the Fed to top it off.

    • Auldyin says:

      @E
      In the language of the 99% these people counterfeited billions of dollars and gave them to their friends.
      The problem is a legal one, that they could carry out an act which is blatently morally illegal and get away with it. They need to be held to account and made to return the money to the public purse in restitution.
      We are millions, they are few, it should be easy and it’s coming.

      • historicus says:

        Indeed.
        The Constitution gives Congress the right to

        MINT MONEY
        TAX

        Those powers MAY NOT BE DELEGATED

        The Federal Reserve has been, in the past, allowed to expand the money supply to meet the demands of an expanding economy.
        They are also empowered to provide temporary liquidity to assuage short term banking issues.
        BUT BUT, has it ever been conceded they could expand the money supply over 30% in less than two years….and not have any intention of retrieving that which was injected for stimulus?
        And what is INTENTIONAL INFLATION if not INTENTIONAL TAXATION? Coupled with artificially pegged low interest rates and intentionally stimulated high inflation.

        search for this chart

        fred.stlouisfed.org/graph/?g=evnk

        • historicus says:

          The Fed exists under the agreement that they are charged with certain responsibilities…
          ONE is stable prices
          TWO is moderate or not extreme (up or down) long term interest rates

          The Fed has IGNORED both….and not a word from the Senate Banking Committee

        • Happy1 says:

          This is why we must end the Fed.

      • gametv says:

        You have too much faith in your fellow American. Most of them are stupid and short-sighted. Ask them if they care about the deficit and most will say no. Because they are clueless about how it actually works.

        Let’s not pretend that the politicians or bankers or any of the ultra-rich will EVER be held to account in this lifetime.

        • roddy6667 says:

          Most Americans are mesmerized by the 21st Century Bread And Circuses of spectator sports, TV and movies, video games, gambling and porn.

        • JBird4049 says:

          With respect, and I really do not want to be rude, but just how are Americans short-sighted and stupid about the deficit? I find it a distasteful comment.

          The federal government has created trillions (and spent) of dollars for illegal, disastrous wars full of warcrimes, made whole and even wealthier Big Finance, and building the Security State, including our incompetent, joke of a military while having pedophiles commit “suicide.” All this while at least half of the country grows poorer and for decades. The homeless population around here is bad and been getting worse for decades because wages never, ever approaches the increase in housing costs.

          Maybe, just maybe they think that taxing away much of those unearned trillions of dollars would do much for the deficit and that it is very convenient that the checkbook is always open for the lobbyists, contractors, and the wealthy, but not for the rest especially the poor?

          Once those confiscatory taxes are here and money is being spent on stuff like the roads, or healthcare, or education, or really on almost anything, but stuff like the F-35 Super Turkey, and the right people are being sent to Club Fed in large numbers, then talking about short-sightedness would appropriate.

      • The Wealth Effect is a Ponzi Scheme says:

        “These ‘people’ counterfeited billions of dollars and gave them to their friend”

        You spelt trillions wrong

    • Old school says:

      In reality the solution is a collapse. We are addicted to government and Fed heroin and that means each dollar of government debt is being less and less productive as it flows out into the hinterland . The government is keeping us alive daily, but slowly killing us in the long run.

      • Bead says:

        I think the Fed wizards will just print “prosperity” until the dollar is used to wipe things off. There will be occasional spasms of turning the drip down followed by the “only political solution.” Oddly enough we may still be last in the race to the bottom.

      • Enlightened Libertarian says:

        I have to agree with you. Things will just keep getting worse until the country implodes. Too bad for my grandkids. They don’t deserve to inherit 30 trillion dollars in debt. Sure be funny if they just refused to pay.

        • Freedomnowandhow says:

          In8, I share your sentiment, but the “deficit” is the saving account owned by public. Every Federal deficit dollar is sold daily on the open market. Capitalism, at It’s core needs a secure transfer, dollars backed only by the full trust in the Federal Government. Each deficit dollar is sold via Treasury Bonds which when redeemed add dollars to the economy with little interest paid. There is so much demand for the safe saving deposits that the interest adds little to debt compared to the increase in Gross Domestic Product, or our Nations combined private wealth. Wolf, perhaps a essay on the creation of the dollar and how Federal spending is accounted for would dispel a lot of misconceptions. Actually the Federal Reserve Bank retires dollars and returns them to the Treasury, where they are only notations on a ledger. No loss and no gain for them.

    • MWM says:

      There is only one Party; the Lobby party, and we’re not in it. Sadly, these will be the good old days 10 years from now. God help us !

      • NBay says:

        Yep. The most powerful bunch in DC (or States). Saw it first hand growing up. My uncle was one of the most powerful lobbyists in DC. Had many Congressmen “in his pocket”, as my cousin says.
        You would all be amazed who I met and where I went. How does a Presidential Candidate’s primary residence sound, just for starters?

    • Dave says:

      What we really need are a couple more political parties. And publicly funded elections.

      • Jay says:

        I would be fine with fair, honest, & believable elections. I don’t like the idea of raising taxes to elect politicians. Just make all donations from people not corporations with caps & mandatory reporting.

        • phoenix says:

          “I don’t like public funding of elections. Instead let’s implement a system of caps and mandatory reporting that creates more bureaucracy anyway and surely won’t contain a billion loopholes.” Cmon man

  8. Bobber says:

    Words cannot describe the level of hubris, callousness, myopia, spinelessness, and plain old stupidity currently on display.

  9. Xavier Caveat says:

    Wolf,

    With so many of the youngins deathly allergic to peanuts, could we go with something smoother sounding as a descriptor that almost reads like money, cashews?

    • Wolf Richter says:

      Pecans? The true native American nut. We used to pick them off the ground in college in Texas when they fell off the (huge) trees, and we’d roast them and eat them. Delicious. My favorite nut. I eat a lot of them now (store-bought), and since I don’t like peanuts, I will switch to “…half of Americans got pecans.” But wait, that doesn’t sound right because pecans are so good!

      • Jake W says:

        pea-can or puh-kahn? the perennial debate.

        • Wolf Richter says:

          I’m in the puh-kahn camp. But some of my best friends are in the pea-can camp. And we still get along :-]

        • BarryL says:

          Somehow in northeast OK we have merged the two with pea-kahn. So begins the nut-dialog wars, a pivotal point in our societal breakdown.

        • NBay says:

          pea-khan camp here. But allergies and dislike of peanuts, damn!…..that may easily be one root of societal breakdown.

        • NBay says:

          Annette Funicello saw it coming and tried to stop it.

      • historicus says:

        U of TX?

        • Wolf Richter says:

          College was Midwestern State in Wichita Falls, TX (that campus was full of pecan trees). MBA a few years later UT at Austin, but I don’t remember pecan trees on that campus. But I was just going to one particular corner of it.

      • Xavier Caveat says:

        I never liked the taste and texture of Brazil nuts and there’s no good reason the American downtrodden shouldn’t suffer too…

      • Anthony A. says:

        Are you a native Texan or were you just stopping by for college and the good times?

        BTW, I’m “almost” a native as I have been here in Texas 29 years and one month now. LOL

        • Wolf Richter says:

          Anthony A.,

          “Are you a native Texan…?”

          No. My father (b. 1911) and my grandfather (b. ca. 1870) and their entire clan were from the Kingdom of Bohemia, which was part of the Austrian empire and is now the Czech Republic. All German speakers, though they’d been there for thousands of years and were described by the Romans, were ethnically cleansed out of there. So my father’s family lost their farm and guesthouse and everything. My father and grandfather became naturalized German citizens. I was born in Germany and left when I was 17. I spent nearly 30 years in Oklahoma and Texas, back and forth. Here is part of my story:

          https://www.amazon.com/BIG-LIKE-CASCADE-INTO-ODYSSEY-ebook/dp/B00613TA56

        • Auldyin says:

          @W
          You should add traveling behind a V2000 diesel-hydraulic on Deutchse Bundestag to the German part of your history for kudos. ( guessed the spelling)
          Just sayin’

      • Great article as always, Wolf. One thing, is there a cut off figure for the various percentiles?

  10. breamrod says:

    you know Wolf of all of the financial commentators out there on the internet you explain this F–k job we’re all getting better than anybody! I hope Wolf street goes viral( I tell everybody I know About it). Happy New Year!

    • William C Jernigan says:

      I agree. I have already sent this to many that will find it refreshingly logical and easy to grasp.
      Thank you Wolf

      • Chinedu says:

        Wolf attention to details is unparalleled. Dedicated and Resolute. Wolf makes economic analysis Simple and Understandable.

  11. Eastern Bunny says:

    The biggest economic crime and looting of treasury was the $1 trillion PPP sent to businesses that lost no money during the pandemic which is being forgiven and it is also tax free and the only condition to get to loan was to state: I have been negatively affected by Covid.
    Case in point : Owner of small construction company I know got two PPP loans first for $540k already forgiven, second for $680k in the process of being forgiven. Guy never lost any business, it has never been better in his words, just tax free money.
    Needless to say he dumped the money on more real estate and expensive cars.
    Our money rests on a trust system and I fear that the public is losing it gradually and then it will be abruptly.
    It is the most egregious dereliction of duty by the Fed and the government I have ever witnessed. It will no tend well.

    • Depth Charge says:

      Yep. It’s this money that really set things on fire. It is all pouring into real estate, cars, boats, RVs, etc. These people were the ones who didn’t need the money in the first place. This is top down “wealth effect” nonsense on steroids. It is unfathomable that they did this.

      • kam says:

        Words matter. That is why stealing wealth from the less powerful and giving it to those whose cup already runneth over, is not called:
        THE POVERTY EFFECT.

    • Nick Kelly says:

      The Secret Service estimates 100 billion has been stolen from US Covid relief money. I assumed this was a typo first time I read it, but no. They ‘ve recovered 400 million. Who would imagine that a recovery that size is
      pretty poor, 4 percent.

      This theft was done by setting up a myriad of shell companies. A lot of the money and perps are no longer in the US.

    • Hadron says:

      Doesn’t he have to prove that the funds were used for payroll though?

      • Wolf Richter says:

        Hadron,

        No, you only have to prove that you had that amount of payroll during the period. You didn’t need to prove that you needed the funds or anything like that. And you can use the funds to buy jewelry for your wife.

        It’s fraud when you claim payroll figures that you didn’t have. But if you had that payroll amount, and you claimed it but didn’t need it, and then bought two Tesla’s with it, it’s perfectly legal.

        • NBay says:

          So “Entitlements” can’t be used only for bitching about the lazy and unambitious poor anymore?
          Mine all went to the dentist and his endodontist poker pal.
          Both are cool, they went to 4 day workweeks and aren’t taking any new patients. Endodontist plays good CW, dentist plays good 70’s stuff.

  12. phleep says:

    That is sad for those starting out, as the drain of rents and other essentials monthly will prevent capital formation. Not that all the “get rich quick” noise helps, either. For me, plugging along over the decades, living with great discipline and building a few meager assets has been a cornerstone of my quality of life, modest but excellent. I couldn’t afford to rent the worst unit in my complex now, and I own the best one, almost all paid off. I have missed 5 days in 37 years at my job. Just dumped a friend from way back, entertaining as he is, as he has been purely living off the fat of the land for decades, and the productivity of his fellow citizens. I hear a pleasing sound here: the sound of character.

    • OutsideTheBox says:

      Amazing you haven’t broken your shoulder with all that back patting.

      • Jake W says:

        you completely misread his post. he’s basically saying that he was able to work hard and afford a comfortable home, but that young people now can work as hard as they want and they still won’t be able to afford a home.

        i don’t see any back patting there at all. he’s decrying structural economic decay that makes his story no longer possible.

        • gametv says:

          One of the really big problems in the US is that residential real estate has become an investment, not an expense.

          Real estate is not a productive asset, it ages and doesnt make anything. A business is a productive asset that creates value.

          It is bad economic policy to encourage people to jack up the prices of real estate as a way to get rich, it steals investment from things that are truly productive.

          The amazing technology advancements of our modern era are the only reason our economy is not in the tank. If we had not shipped all our manufacturing base to China (and much of the tech base) we would have a killer economy that is soaring for all manner of people. Instead we allowed the few to get rich and screw everyone else.

      • Anthony A. says:

        OTB, a lot of us have done what phleep has done with his working and saving life. It’s the process that built this country. It’s a shame to see it all unraveling before our eyes, though.

        • Brant Lee says:

          Seriously, if having children these days and forward: plan on saving for their education AND a place to live, because they won’t be able to do it for themselves.

        • 91B20 1stCav (AUS) says:

          Brant-echos of the future from a time in the mid-’80’s when i was in Nagoya finalizing a business relationship with the VP of a belt manufacturing company. Over a Kobe beef lunch he related how his adult son and daughter were still living at home, for, despite being well-employed, they: ‘…couldn’t afford to marry and buy homes of their own…’. Lovely man, wish i knew how things turned out for him and his family.

          may we all find a better day.

      • Pea Sea says:

        You’ll have to shout that a little louder; I don’t think he can hear you from his high horse.

      • OutsideTheBox says:

        Perhaps the virtuous, spouting their self regard needs to be leavened with an observation or two.

        Perhaps the virtuous were too busy working and saving to recognize the system decaying.

        Perhaps the virtuous should have taken a day off here and there to work on preserving the system for the next generation.

        Perhaps the system continues to fail because they only took out but forgot to give back.

        • Dan Romig says:

          O T B,

          You make valid, but generalized points.

          What Wolf is reporting in this piece is an analysis of how the Fed and Congress have engineered a system to reward the ultra elite.

          As a voting citizen of the USA who is outside the power structure, I have only one tool for equity, and I use it: Never miss a vote & never vote for the T P D (two party duopoly) at the national level.

          Aside from that, Wolf is doing the only thing that can be done, and he does it extremely well: Speak the truth & make the masses aware of what is happening.

          Does that mean the Fed and Congress and the President will change what they are doing? Probably not, but it does shine light on how and why we are where we are.

          Until the status quo T P D is broken by a majority of voters, or until unrest causes a change of policy by those in control, we will continue down the road to wealth disparity.

          I see and live with the unrest in south Minneapolis. Christmas night, kids in a stolen car got cornered by the cops. The driver reversed and rammed a squad car. One cop was hanging on to the stolen car and got hurt. Two in the squad also got hurt. A passenger was arrested, cited and released. The driver got away on foot.

          The kid that ran away is now, at least time-being free, and is probably laughing to his pals. It’s just a small fraction out there that are going off the deep end, but it’s increasing very rapidly, and I would opine that it is largely caused by “The Wealth Disparity” that is a direct result of the Fed’s actions.

          Yeah, I break the law when I carry without a permit. Yeah I’m going to go through the necessary and legal hoops to get a permit soon.

          “It’s survival in the city
          When you live from day to day
          City streets don’t have much pity
          When you’re down, that’s where you’ll stay”
          -Anthem from the movie “The Warriors.”

        • historicus says:

          Great post

          Those who sought self sufficiency …. who made sure they have money for an unforeseen event or emergency…..
          Those who saved to actually buy (cash) a car or even a home…
          PUNISHED

          I always hopes an unscreened questioner would ask Powell if his parents ever saved money.
          Why is the ability to SAVE punished NOW, when throughout the history of this nation Americans could SAVE their way to financial stability….. but not now.
          The 1% and the Fed are pulling the ladder up on the rest of the country.
          Earners / Savers / Workers are PUNISHED by Fed policy, and someone should make this point.
          Labor shortage? People are giving up. And Powell worries about the druggies and mentally ill in the tent town he walks past…… are you really that dumb Jay?

        • 91B20 1stCav (AUS) says:

          DanR.-re: ‘only tool for equity’, will add an old R.A. Heinlein aphorism from way back in the ’60’s-“…of course the game is rigged-but if you DON’T play, you CAN’T win…”.

          may we all find a better day.

  13. Nathan Dumbrowski says:

    Started listening to Ray Dalio – Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail after readying a comment about him on this site. Interesting concepts being presented about printing money and impacts. Compliments the amazing input found on this site. Strange times for sure. So glad I found Wolfstreet

    • Peanut Gallery says:

      I have read most of that book and even though I think Ray Dalio is sort of an exhibitionist / false moralist, I do think his study of historical debt cycles is interesting and useful.

      I think for those without a background on debt cycles, it is a must read to understand that most financial crises and many, many world political events are all caused by debt and its mismanagement

      His video “How the Economy Works” is also a great intro video for people just starting out on their journey studying finance and economics as well.

      • Random guy 62 says:

        Funny. I sent that video to a group of about two dozen friends when the topic turned to how the economy works. It went completely in one ear and out the other with nearly all of them.

        I view it as a lesson on why the a-holes at the top are able to get away with everything they do. The average person is not interested in thinking about big picture economics and politics…just the daily media circus sometimes.

    • Bobber says:

      Yes, it’s nice to see a little sanity and integrity amidst the rampant get-rich-quick cronyism that prevails today.

    • Depth Charge says:

      What Ray Dalio engages in is called “virtue-signaling.” In reality, he’s just another one of the robber barons hoping to be spared once things go full tilt.

  14. JeffD says:

    Something rarely discussed is how massive wealth disparity culls competent people from the workforce who no longer have any real incentive to work. Between 1950 and 1980, everyone had to work because lines of credit were hard to come by, and usually required physical collateral to back them up. Now, anyone can get credit and speculate the money away over long time periods, hiding any actual losses they might be accruing.

    • OutsideTheBox says:

      Really, how would you know such a thing is being done ?

      • Pea Sea says:

        It’s my preferred narrative, therefore it’s being done. That’s elementary logic, man!

        • OutsideTheBox says:

          Regards Mr Holmes

        • NBay says:

          “Holmes” is OLD jail-talk…(NO Mr)..it was used like “Mac” used to be, even to people you that knew their names, to emphasize a point or situation. Now it’s been changed to “homes”….(at least seems that way from TV), not first hand.
          Was upstairs with career criminals serving time or waiting for trial to finish, in Sac Co jail for a few days in ’66 and learned that, and some other jail stuff, like etiquette, routines, etc….it’s a sub culture like many others.

        • NBay says:

          Or just as friendly greeting to “members”.
          On the outside, one might say, “Hey, there’s that man who walks that walk and talks that talk”, or maybe “Hey Holmes”.

        • OutsideTheBox says:

          Cute digression…..Sherlock

        • NBay says:

          If you took a simple story personally, you have some real hang-ups. Btw, what Jeff D said made sense to me, and your response again shows hang ups…….or just a bad mood.

    • historicus says:

      Jeff
      I think people are giving up.
      Inflation.
      The inability to save your way onto your financial feet.
      And the solution govt gives is to forgive student debt. Again, borrowers are rewarded for not honoring their obligation.
      These rich universities should be lending out the tuitions…then lets see where the costs of education go.
      You want to buy a Ford … you dont borrow from the federal govt, you borrow from Ford Credit. SO you want to go to XYZ IVY LEAGUE SCHOOL? Have them lend you the money.

  15. Hal says:

    I’m on that lethargic “2-9” line. Conservative market holdings with some safeguards, and some cash reserves becoming worth less each day. I guess the really big dogs can afford to lose 50B and still be happy with 25B left over. But that still makes no sense. Wolf, what am I missing here? Surely the “in” crowd gets a heads-up to protect their 75B before the bubble pops? And not caught holding tulips? And how the heck do you reorganize 75B of holdings into some kind of preservation mode without drawing a LOT of attention?

    • Happy1 says:

      The billionaire class takes advantage of low interest rates in two ways.

      They borrow against their holdings at very low rates very long term to fund their lifestyle tax free.

      And they participate in speculative ventures funded by artificially low borrowing (VC, PE, crypto) aiming to harvest even more wealth, and rates are so low that failure in any one venture is not as costly as it would normally be.

  16. ivanislav says:

    The bottom 99% just isn’t trying hard enough. Pull yourself up by your bootstraps, you dirty hippies!

    • Peanut Gallery says:

      The beatings will continue until morale improves!!!

      -J.P

    • historicus says:

      The bottom 99% are waiting for the Fed to FIGHT INFLATION

      The bottom 99% are waiting for a return to normalcy……a fair return on savings and no inflation..

      But the 1% seem to know/sense that the FED is making things ABNORMAL for the purpose of fluffing assets……the younger folks should be aware their future is being emptied out to fluff today’s markets. ($20 Trillion in last 12 years added to a National Debt that was a total of $9 Trillion for the first 215 years of this nation)
      Give me the Trillion dollar squirt gun, and I can make things look good too.

  17. Depth Charge says:

    In my opinion, there is zero chance anything changes. The wealthy control everything, including policy. They own the lawmakers. They will never relinquish control or do the right thing. They are becoming so fantastically wealthy that they are giddy with delight. So we will continue down this very path until the country ultimately fails. They may be able to hold it together for a few more decades or so.

    • Jake W says:

      i agree that they own the lawmakers, which is why both republicans and democrats are so thrilled to congratulate powell on doing such a “great job saving the economy.” because they are from the elite class.

      i, however, have doubts that it lasts a few more decades. i’m thinking 2030 is the end.

      • Jay says:

        Medicare Part A (Hospitals) trust fund goes negative in about 4 years. Medicare Part B (Drs) was $500B in the red last year. The Drs were smart and made sure their monies come from the general fund. Part B’s deficit will only grow. We know this. In 2-3 years, the SS Trustee report will have a good fix on what the net effect of deaths vs early retirees will do to the SS trust fund. Personally, I’m expecting ever increasing dire predictions.

        You’re probably right, though, that red date will probably move from 2033ish to 2030. Between now and then, we’ll have to see what Uncle Sam does to fill these donut holes. Raise taxes! Bingo! The question is when and how decisively will they act?

        So, we were on the course to run $1T deficits as Trump was leaving office. Now, that’s on tap to punch up to $1.5T for the next decade. So, there’s a really good chance our total debt will swell to at least $45T or approaching 200% debt to GDP. The only real question is what happens to Treasury yields during this time.

        We’ve averaged $540B in interest expense on the debt over the last 3 years. One has to wonder where that number will be by 2030? There’s a very simple reason why the FED has to keep interest rates low: interest expense on the debt. With social programs expecting to continue to swell and take over an ever-increasing amount of the federal budget, that just as mandatory interest expense will grow much larger as well.

        Correct me if I’m wrong. We don’t actually pay off debt. We just roll it over to the best available rates at that moment in time.

        Yeah. I agree. 2030ish sounds like a REALLY interesting year for America.

    • Peanut Gallery says:

      So now what?

      Just focus on how you can provide for yourself and your loved ones, and carry on. That’s all you can do at this point.

      End of story.

      Now go write your romance novel… ;)

    • Petunia says:

      Heard an interesting perspective on the mechanics of how policy gets injected into our lives by our psycho overlords. Policy is created on the Davos, NGO, think tank level. Implemented by our money grubbing legislative layer. And enforced by the bureaucrats and police. Not much democracy going on in anything that governs us anymore.

      The model is not just domestic, it is a global model that governs the world.

      • Depth Charge says:

        Reminds me of the WHO head Tedros parroting Build Back Better, I think before Biden was even elected. These people are transparent.

      • Augustus Frost says:

        There has never been much democracy anywhere, ever. It’s an illusion.

      • Michael Gorback says:

        And it’s been in effect for about 4,000 years. You can even find legal guidelines for lending in Hammurabi’s Code. It was world wide from Europe to Japan.

        In ancient times religious temples were used as banks.

        The methodology has evolved (goldsmiths invented debt-backed paper and fractional reserve lending), the players have died and been replaced, but the behavior is constant. Whether it was Crassus, the Medici, or the Rothschild family, banks and lenders have always looked out for themselves first, their clients second, and the plebes didn’t matter.

        See my comments about Jackson vs Biddle further down.

        • MarkinSF says:

          So true but at least they had Debt Jubilees back in Babylonian times.

        • NBay says:

          Check out the Old Testament. Says an Econ “reset” (The Jubilee) was held every 49 years. I suppose to stop excessive wealth inequality, and the resulting social unrest, but I wasn’t there to be sure.
          The Rulers (Priests), of course, were exempt from it all, and probably most of the Ten Commandments, too.
          BTW, the Docs had long ago given up their original combined doc/priest role, so would be subject to the wealth reset along with the rest. (No AMA)

        • 91B20 1stCav (AUS) says:

          NBay, et al-have a strong suspicion that some biblical archaeologist rummaging around Mt. Sinai will someday unearth the broken-off fragment of the tablets Moses was depicted as lugging down-that fragment, of course, listing the Eleventh Commandment (“…Thou shalt not allow thyself to be Caught… “), of which, until recently, a violation resulted in SOME consequences (sidebar-see Babel, Tower of…).

          may we all find a better day.

    • I think the financial system only works as long as production and consumption keeps increasing every year. Therefore, the general public can easily put a stop to all this by either decreasing consumption or decreasing production. One of the two is enough to bring down the system, or at least stop the trend towards greater wealth inequality. There seems to be little appetite for consuming less, but antiwork is one of the hottest topics trending on Reddit now. What’s the probability that antiwork forces the Fed to crash the market to force all these idlers back into the workforce? It’s gotta be greater than zero. Maybe 1-2%?

      • jon says:

        what general public you are talking about ? General public has no idea what’s happening around them and they have no clue about the bigger picture.

    • historicus says:

      DC
      Beginning in a few weeks, look for a new pricing structure across the board. (for 2022)
      And look for unions striking for higher wages to compensate for the Fed’s inflation. (Even Larry Summers admits the bottlenecks are a RESULT of the inflation, not the source)

      Hoping the election year will prompt a vigorous debate about Fed policy and promoted inflation, which is soon to spiral.

    • Seneca’s Cliff says:

      That is what Marie Antoinette and the house of Bourbon thought back in the late 1700’sin France. But history says they were wrong.

    • Red says:

      Honestly this is so accurate it hurts.

    • Kevin McKinney says:

      Ask Tzar Nicholas how being the wealthiest man in Russia worked out.
      Nearly all American Billionaires’ wealth is in printed pieces of paper.
      We are at the stage where the Ubermeisters believe their own controlled Media.

    • Happy1 says:

      The bubble is far too large to be sustainable for even 5 more years.

  18. Jonzo says:

    Why do I think the small family farms got nothing, and the big Corporate farms got everything ? I know, because the small family farm went extinct years ago.

    “The Government Accountability Office said in a report released Monday that international disputes resulting from tariffs imposed by President Donald Trump hurt farmers but that the U.S. Department of Agriculture’s county-by-county methodology for computing the extent of damage was flawed, leading to overpayment and inconsistent compensation.”

    https://apnews.com/article/technology-business-donald-trump-iowa-agriculture-f1b2216306fa2a5ed410710033c70c06

  19. Peanut Gallery says:

    So now that we know wealth disparity has already occurred (to historic proportions), what are the chances that wealth redistribution occurs? And in what form would it possibly occur?

    • Depth Charge says:

      There is not going to be any wealth “redistribution” going on EVER. Do you think these people want to share? Of course not. That’s why they’re taking it all for themselves right now. They are some of the cheapest people known to mankind. Billionaires tip worse than people who earn $30,000 per year.

      • Depth Charge says:

        It’s “business owner” to you, little guy.

      • OutsideTheBox says:

        You have such a short temper.
        Perhaps you would benefit from anger management counseling.

      • Swamp Creature says:

        DC

        You left out one of the cheapest politicians in US History. Our dear leader gave a total of $250 to charity in his last year as a Senator from Delaware.

        • NBay says:

          So….then…that might prove the guy who won was more “cheap” than the guy you voted for…am I right?

          Excuse me if I have too much cognitive dissonance…just trying hard to keep up with the rest of you.

    • Augustus Frost says:

      Depends upon someone’s assumptions.

      Since I know most “wealth” is fake existing only on paper due to an asset mania, there is a lot less actual wealth to redistribute than most people advocating it believe. But given that most people are utterly economically clueless, it’s not surprising that a belief exists that it can be converted to provide the masses with real goods and services which have not been produced and don’t exist.

      This should be totally obvious from the current supply chain distortions but it’s still lost on some progressives. It’s not remotely possible to convert hardly any of this “wealth” to mass consumption, as the economic production capacity doesn’t exist to accommodate it.

      As to the mechanism, a temporary implementation of MMT generally, whatever the format. Refundable tax credits and “stimulus” are the most obvious examples. Maybe also selective debt forgiveness.

      Before much of this happens though, an asset crash with no real recovery should end the delusion first.

      • georgist says:

        Exactly.

        Powell meets the angry crowds.

        > you want me to write you all a cheque, just so long as you don’t cash it?
        > how many zeros you want on it? I’ll write it right now, just say? six each? seven?

        Paper zeros are always available in the US of A. Actual goods so you don’t have to work all the time? Not so much…

    • MyLadyHumps says:

      They seem happy enough to distribute the purchasing power from those that work to those that don’t work.

      For politicians to distribute wealth from the investor class to pay welfare would mean handing over some of their own insider trading wealth. Don’t hold your breath, they like things just the way they are.

  20. Biloxi says:

    Since the Fed set the reserve requirement to 0% for banks, it might imply that the deluge
    of inflation we are seeing is due to the money multiplier effect going exponential. Since the bank reserve requirement was previously 10% common sense would say the banks only have 10% more money to lend. But the money multiplier suggests a near infinite growth in money supply.

    So did the banks only get 10% more money or was it a much larger number? I assume there was a reason for coming up with the below equation.

    Bank Money multiplier = 1/(reserve requirement)

    • Wolf Richter says:

      The reserve requirement was useless when banks had already trillions of dollars in reserves sitting at the bank – currently $4 trillion. At the time, most of them “excess reserves,” meaning reserves past the 10% requirement. Since the Financial Crisis, the Fed has paid interest on those reserves, and that’s why banks keep them there. I don’t think that the removal of the 10% reserve requirement changed anything in 2020, though it would have changed the dynamics in 2005, before money printing loaded the banks up with reserves.

  21. Frustration with the wealth pyramid structure has led to the great equalizer. Whereas 1% of people control around 1/3 of the wealth in the overall economy, in bitcoin, 0.01% of hodlers control 1/3 of all the bitcoins. This is going to democratize finance and give the millennials a chance. Or at least that’s how it’s sold to the masses.

    • Augustus Frost says:

      Crypto is going to democratize finance to provide opportunity?

      That’s really funny. The majority of Americans are destined to become poorer or a lot poorer.

      There is never something for nothing, ever.

    • Depth Charge says:

      The billionaires are the “whales” who control crypto. Who are you kidding?

  22. Richard Greene says:

    I should have said this before Christmas:
    This website has the best, easiest to read, economics charts on the internet.

    Today I’m trying to figure out what the Federal reserve Bank means by “taper”.

    I think it has something to do with tap dancing.

    Whatever taper means, it does not seem to mean reducing Red Credit.

    Federal Reserve Credit last week surged $66.7billion to a record $8.742 trillion. Over the past 119 weeks, Fed Credit expanded $5.015 Trillion, or 135%.

    So I guess “taper” means INCREASING Fed Credit?

    It’s always hard to understand what any central banker says — typically a financial word salad !

    • Depth Charge says:

      They are not tapering their balance sheet right now, they are tapering their rate of increase to the balance sheet, which is why “taper” is a stupid term for their current expansionary policies. Bottom line, the FED is printing recklessly, STILL, and for the foreseeable future, for which there is no justification or explanation other than stealing the fruits of the future generations for their own selfish greed.

    • Wolf Richter says:

      Richard Greene,

      If you look at the Fed’s week-by-week asset levels, you’re going to get a lot of noise. At the end of November, those assets fell. Before the holidays they rose. Probably in the week ending Wed or next week, they’ll fall again.

      The unevenness has largely to do with MBS, which the Fed buys in the “to be announced” (TBA) market, and it won’t book those purchases until they settle, which is 2-3 months later.

      Meanwhile, pass-through principal payments on MBS reduce the MBS balance in an unpredictable and uneven way (refis, mortgage payments, sales, etc.). So the MBS balance jumps up and down weekly.

      The tapering of MBS won’t show up in the numbers until 2-3 months after the start (late Nov) due to the issue with settlement of the trades that I described. If you look at the purchase schedule that the NY Fed released today, you can already see the reduced scheduled purchases. But those trades won’t show up on the Fed’s balance sheet until February or March.

      I think it’s time again to cover the Fed’s balance sheet for the period ended Wed next week. There’s a lot of confusion out there about the taper. But this stuff gets very technical. And not many people read it :-]

      • Richard Greene says:

        The Fed’s plans and goals can change.
        Fed Credit set a new record last week.
        That’s real.
        What happens next is assumed.

        At the current very high level of Fed Credit,
        predictions of a slower rate of Fed Credit growth
        are not very impressive.

  23. Michael Engel says:

    Tomorrow, or on Wed ==> $3T.

  24. Anon1970 says:

    I wonder how much wealth Americans who owned shares of companies on the Trump/Biden banned list of Chinese Companies have lost since Nov. 2020, when the original list was first announced.

  25. Bobber says:

    Must be nice to settle into your chair, sip your gourmet coffee, and watch your wealth grow a few billion, with your feet up and Bing Crosby playing in the background.

    • Depth Charge says:

      If they could watch some starving people on tv, they might get an even bigger dopamine hit.

    • Dan Romig says:

      Bobber,

      Sitting in a chair, which, like all my furniture, is homemade, sipping fresh ground and brewed coffee, watching my conservative and diversified portfolio inch upwards — by the thousands, not billions, and listening to the Minnesota Orchestra playing on SACD (with my neighbor on bass clarinet), is indeed nice.

      But that’s what living the American Dream is about, and I got here by working from the time I was fourteen years old until being able to retire at age 57 two years ago.

      The problem is, and as Wolf explains why, that’s not very likely for many youngsters these days.

      Speaking of youngsters, a couple houses down the street is a family with two hard working parents, and three fine young men whom I’ve watched grow up. All three learned how to be mechanics by working with their dad in the back yard.

      The oldest two are both highly skilled, and I would assume well paid technicians at the Penske owned BMW dealership where I bought my M4 last year.

      And that’s another good way to get to the American Dream. Learn a skill in demand, bypass college and work hard to build a secure life. Regardless of what hurdles are thrown in their way, I’m betting these guys will get there too.

  26. SocalJim says:

    A shocking number of socialists visit this site.

    • Wolf Richter says:

      SocalJim,

      Correction: “a shocking number of people of all stripes visit this site” :-]

      The most capitalist thing to do for Congress would be:

      1. to make it illegal for the Fed to engage in QE, and

      2. to force the Fed to sell all it’s QE assets, keeping only what is needed (less than $3T).

      But there is no stomach for Capitalism in this country. The US is a hybrid system: mega-socialism for the rich, and capitalism for the rest.

      • historicus says:

        “But there is no stomach for Capitalism in this country.”
        Exactly

        Capitalism without bankruptcy is like religion without Hell.

        And the 2008 bailouts were such. And the 2018 attempt by Powell (I was a fan back then) to equalize Fed Funds to inflation, make it an obligation to borrow rather than some sort of free ride, was admirable.
        Where did it all go?
        The Fed has been hijacked, and my guess as to who has done it is an unpopular one on this website.

        • Red says:

          I really like you Historicus but damn your a accurate broken record.

        • historicus says:

          Red…
          Is there a difference of opinion on this site I’m missing?
          You’re right. To continually point out things to people that agree with one another is really fruitless, isnt it?
          A waste of time.
          I’ll go see my Democrat Representative, or maybe my Democrat Governor, or my Democrat Senators…..and see if they can get a movement to hold the Fed to their prescribed mandates.
          Meanwhile enjoy the inflation.

        • OutsideTheBank says:

          Red

          Don’t be too hard on h. He is in deep mourning and depression that he can no longer buy bank CDs that pay 7%.

        • historicus says:

          OutsidetheBank

          Yep. I made the mistake that I believed the Fed would adhere to their duties and stand to their post.
          For 7 decades Fed Funds = or > inflation.
          I guess you knew it would be different this time. Well, it aint over yet.
          Brace yourself…. for every union in the country going on strike, and every business invoking new pricing structures.
          Price of fertilizer nearly tripled. Nat Gas doubled.
          All good for the Fed fans.

        • Pelican says:

          OutsideTheBank

          >> He is in deep mourning and depression that he can no longer buy bank CDs that pay 7%.

          Why would it be so outlandish to expect bank CDs to be at 7% or more when the inflation is at 7%?

      • Michael Gorback says:

        Wolf is absolutely correct. I continue to wonder why, amongst all the gibberish here about Fed plumbing and wiring no one has ever mentioned “Whose bread I eat, his song I must sing”.

        The Fed is a privately owned organization whose shareholders are banks. Whose bread do they eat?

        First of all, the Fed needs to look after itself. It’s not a charity. The Fed will do what’s best for the Fed, which entails protecting its owners, which will also look out for their big customers. Did we elect Bernanke, Yellen, or Powell? No we picked the corrupt cronies who picked them as directed by Big Money and Citizens United.

        Look at the fight between Andrew Jackson and the Second Bank of the United States. Jackson called the Bank “a hydra-headed monster… it impaired the morals of our people, corrupted our statesmen, and threatened our liberty. It bought up members of Congress by the Dozen… and sought to destroy our republican institutions.”

        Could have been written yesterday, except the Second Bank had far less power than modern central banks. The Second Bank had cannons; today’s banks have nuclear warheads.

        It is often argued that Jackson had a personal axe to grind since the paper he was paid with for some land became worthless when the issuers went bankrupt. It left him very antagonistic towards the use of paper currency and credit instead of hard money.

        After being re-elected and successfully vetoing renewal of the Bank’s charter, Jackson ordered withdrawal of all federal funds from the Bank.

        Meanwhile the Bank was run by Nicholas Biddle, a very competent banker with an unfortunate tendency to play favorites, generous to friends and denying funds to enemies. To his credit, as a banker he was a miracle worker salvaging our economic system after the War of 1812. Unfortunately he was also a pompous crook.

        Biddle responded to Jackson’s action by announcing that the Bank would not respond to the loss of government deposits by attracting new private deposits or raising new capital. Instead he decided to limit credit and call in loans. He hoped the contraction of credit and resultant recession would create a backlash against Jackson. Biddle’s move backfired when his plan was leaked and bolstered Jackson’s claim that the Bank had been created to serve the interests of the wealthy, not the People.

        Whatever Jackson’s motivation was, it was undoubtedly to improve conditions for the common people. Biddle was obviously working for the rich and powerful. The Second Bank was locked and loaded to throw the economy into recession and destroy livelihoods just to beat Jackson. This is how banks have always operated and that is why whatever happens will favor banks and elites over the 99%.

        Biddle lost his job, tried to recover in later shady financial endeavors, and died a despised pauper. His clumsy arrogant approach to fighting Jackson did him in.

        This time it’s no different. You know why QE, Twist, RRPs, etc aren’t working out for you? That’s not the intention. You’re not who they’re protecting. You’re getting maybe 3-4% of the benefit of Fed gyrations.

        “Let me issue and control a nation’s money and I care not who writes the laws.” — Mayer Amschel Rothschild

        • Flea says:

          Rothschilds own us or u.s.

        • Dan Romig says:

          Well stated & thank you Michael.

          My favorite quote from Jackson was made in 1833 in response to what you state regarding the contraction of the money supply, “You are a den of thieves’ vipers.”

          The Fed today is doing the opposite by inflating the money supply.

        • Petunia says:

          Dan,

          Now Jackson’s statement, “You are a den of thieves’ vipers,” would be considered a compliment in the financial world.

      • VintageVNvet says:

        Wolf,
        “Mega-socialism” for the rich now is exactly correct, but has been that way for many decades now, with their profits going to their pockets and their inevitable losses subsidized by WE the Peons ( thanks Una )…
        Socialism for the poor has also been going on for many decades too, at least since the ”Great Society” allowed/forced WE the Peons to pay people to be poor, or continue to be poor by providing Aid to Families with Dependent Children, Food Stamps, Section 8 Housing, and totally free medical services, to name a few of the subsidies WE provide, all of which should be available on a temporary emergency basis, but are now permanent for many.
        As has been made more and more clear for the last few decades, it is always the middle classes, especially those of us who have worked at something other than manipulating others savings/OPM our entire lives that end up paying for both the rich and the poor.
        Both those trends are now coming closer to ending, as the milk of human kindness become more and more sour, and the fatted cow sees more and more clearly how much closer to the slaughter house it approaches ever more quickly.

    • phoenix says:

      Hey, don’t forget the Maoists! ;)

  27. MyLadyHumps says:

    I detected a bit of sarcasm in this article (it’s about time).

    I recently resigned from the working class, if money has no value in the future than I have no motivation to earn money today.

    My leaders adopted an official policy of confiscating retirement savings in order to buy votes and cut taxes. To show anything for my hard work and thrift I need to spend my retirement savings now, and fast.

    As for Fed policy giving a leg up to billionaires don’t worry, the Fed will soon enough make everyone a billionaire.

    I’m afraid objections will fall on deaf ears so gird your loins because they believe out of control inflation is the least worst option, we have crossed the Rubicon and the die has been cast.

    Alea iacta est

    • Jake W says:

      yes, and the elites are very myopic. their “assets” won’t be worth anything once the currency and society fails.

    • Flea says:

      Here here to good cheer

    • Gen Z says:

      But how are you going to afford a million-dollar crackshack in Tennessee or in the middle of Canada, how are you going to pay C$2,500 for a cockroach infested two-bed apartment in the birthplace of Justin Bieber, Stratford, Ontario (a town 100 miles away from a major city)?

      Can we opt-out of the Jerome Weimar Boy and Justin Trudeau Sunny ways feudal system?

      • The Real Tony says:

        The Chinese are the reason the rent in Stratford is $2,500 today instead of $800 what it would be if the Chinese didn’t destroy the entire real estate market.

  28. Michael Francis says:

    If I borrow a billion dollars to buy stocks, does that make me a billionaire.

    • Wolf Richter says:

      Michael Francis,

      No. That makes you a zero-naire.

      Wealth here = assets minus debts. So if you borrow $1 billion to buy $1 billion in stocks (if you could), your wealth = $1 billion minus $1 billion = zero.

      • historicus says:

        Wolf
        That’s old school

        • Michael Gorback says:

          Yep. You take the money, start up a SPAC and skim 20%. Then you dump the SPAC on a greater fool (or a hedge fund looking to take another bite of the sandwich before passing it along).

          Now you have $200 million.

        • MyLadyHumps says:

          I agree, that’s really old school thinking.

          Real wealth, in today’s world, is the ability to buy hard assets with plentiful liquidity at an interest rate deeply below the rate of inflation.

          If you are among the few who can buy billions in assets, with other people’s money at ridiculously low rates, you are in fact very wealthy.

      • roddy6667 says:

        That’s only for the old-timers who still use GAAP. These days corporations and private individuals use accounting systems that would make Madoff wince.

    • Depth Charge says:

      Yes, in the same way that people brag about “owning a million dollar house” that they owe $975,000 on.

      • roddy6667 says:

        Back about 1993 I got so upside down in my mortgage that I owed about 50% more than the house was worth. I see those times coming back.

      • Michael Gorback says:

        You never own your house. Just like your freedom you rent it from the government. If you don’t believe me try not paying your taxes

        • OutsideTheBox says:

          You never own your body either.

          Experiment: Never pee, sleep or eat again.

          It’s always something making you do sonething.

        • Depth Charge says:

          “You never own your body either.

          Experiment: Never pee, sleep or eat again.

          It’s always something making you do sonething.”

          This is a low IQ comment which is better suited for, I don’t know, Fakebook or something.

        • OutsideThe Box says:

          DC

          Gotta complement you.

          Have never seen a combination of bluster, anger and outrage in such an explosive package as you.

          Happy New Year

        • NBay says:

          Is it low IQ because he left out going #2? All animals go #2 but many don’t go #1.

          And DC, unlike many others, I don’t think your comments are “explosive”…..still waiting.

  29. Michael Engel says:

    1) In Mar 2020 the top 1% net worth was $24M. In Sept 2021 : $34M, up 40%. Net worth stalled at the top, perhaps because the started to liquidate.
    2) In Mar 31 2020 SPX was 2600. In Sept 30 2021 : 4300, up 65%.
    3) The $3T, this week, will give them a booster, but in Q1, Q2 2022 they will start to decay, even if they park their money in short term US treasuries.
    4) BSV (Vanguard short term bond) don’t move like AAPL.

  30. 91B20 1stCav (AUS) says:

    Wolf-another one over the ‘400 ft.’ sign in center field and outta the park. Many thanks.

    may we all find a better day.

  31. Douglas James says:

    Okay, whichever one of you 50%-ters got my $6,900, send it back to my Chase account. That way, unlike Jpowell you will be able to sleep at night. Thanks in advance!

  32. historicus says:

    Swamp
    Dont forget the gifting of “carbon tax credits” that he received out of some sort of magic…..which he then sold.
    And the NY State deal on land and real estate taxes for his solar panels…
    What’s the phone number one calls to get deals like that? Is it published?

  33. cynic says:

    A lot of folks here seem to think a market crash or other disaster will hurt the megarich. They didn’t get there by being total idiots and many have lots of resources in the areas we hoi polloi try to stock up on…beans, bullets, bullion.

    It won’t be the French Revolution..their heads will be just fine and there will be plenty of cake left.

    • Jake W says:

      in my experience, the megarich don’t think anything will ever happen to them. they have no ability to do anything, including defend themselves, without the army of people they think they can always pay to do it for them.

      when shtf, those people will be long gone.

  34. georgist says:

    The less America produces the more “billionaires” you have to have.

    You have less stuff. How do you massage that? You take $100 from every person who wants to exchange $100 for “stuff” and you give it to a person who can only eat so much in a day, who just puts it into bidding up existing stuff.

    If you took all the billions and gave it to the regular Joe and then they tried to change it for “stuff”. You think you have inflation right now?

    America can’t deliver.

  35. Gen Z says:

    The rest of Americans and Canadians get large mortgages that take decades to be repaid, while the job market is reducing wages via offshoring, staffing agencies and importing international students (Toronto colleges are mainly diploma mills to bring in cheaper labour to work in blue collar jobs).

  36. Gen Z says:

    There was a Conservative MP in Ontario who told crippled war vets to pull themselves by the bootstraps, and she told welfare recipients that “the best social assistance is a job”.
    But during the pandemic, her government gave away HUNDREDS OF MILLIONS of dollars to cronies and donors which are unaccounted for.

  37. Bet says:

    If the S&P were to continue its present trajectory for 2022, it will be a gain of about 250%. What is the probability of this happening. The most overleveraged, overbought market, in the entire history of the markets.
    Will the billionaires get hurt on the correction? depends. Do they own ponzi stock options, or Blue chip. All I know is , the carnage affects primarily retail joe stock holders. How many portfolios are leveraged now, how many crypto portfolios are leveraged. As for crypto, its extremely illiquid. It can take up to several hours to complete a trade. What happens when they all rush to sell, or get margin calls. 2022 Maybe an interesting year. buckle up

    • historicus says:

      Bet
      The mantra will be the Spiked Prices in stocks must be defended by the Fed.
      Spike them up, then cry for help if something happens.

  38. OutWest says:

    This is an excellent time to start a business in the US. After all, the data here proves it. Being a business owner and possibly even an innovator pays off…generation, after generation, after generation.

  39. I am sorry to have to disagree with you Wolf, as I see it, you are using the wrong metrics. Yes, as far as your argument goes, the problem seems to be a responsibility of the banking system; but what you are describing is the symptom, not the disease. The disease is the financial services industry directing all savings into funds . . . where the funds only invest into the already exceedingly wealthy. All viable businesses, yours included, require a basic foundation of equity capital to underpin the borrowing of working capital. Today, and for at least the last 4 decades, all savings, (once directed into the personal choice of investing a percentage into a small local business . . . who paid you a fair dividend often in the region of ~8% every year), are now all directed by substantial bonus payments to the “financial adviser” into a massive fund. Today, the wealth of the US is held by Blackrock etc. etc. So this is my challenge to you for the new year; present one of your excellent posts on the transfer of the wealth of your nation, once held by many in the nation as shares of business . . . into funds.

    • drifterprof says:

      “The disease is the financial services industry directing all savings into funds…”

      The financial services industry’s activities cannot be compared to a disease, as if it was a virus that randomly mutated and sprang out into human society.

      In late 1990s, Greenspan as Fed chair (i.e., banker oligarchs)

      1. Rammed through repeal of Glass-Steagall, giving birth to all kinds of corrupt financial relationships between commercial banks and securities firms. The financial services industry is a symptom of this, not the disease.

      2. Greenspan also actively promoted unregulated securitized derivatives, special purpose vehicles, credit default swaps, etc., as the new age of economics. The financial services industry was a symptom of this, not the disease.

      The financial services industry was not the cause of the supposedly objective major ratings agencies giving AAA or AA ratings to Greenspan’s wunderkind, mortgage backed securities, even when those securities contained subprime or worse mortgages.

  40. Michael Gorback says:

    Now if only they could invent some cool innovative stuff like drywall and cream cheese.

    I don’t know where you get your data from, but the failure rate of startups is rather high.

    Using the SBA definition of a small business as 500 employees or less, the mortality rate is about 90% at 10 years, with 20% failing the first year.

    What saves the system is that the stellar successes compensate. One ebay, PayPal, Amazon, or SWA makes up for all the losers.

    There are those here who scoff at nosebleed valuations and love to point out how much the 2020 high flyers have fallen but if you buy 25 of those overpriced innovators chances are you’ll make plenty of money. Tom Gardener at Motley Fool once did a presentation on Netflix. The graph of the frequency and severity of drawdowns was astonishing.

    Your best strategy in investing is time. The more patient you are the better your returns. You get the same message from Jesse Livermore as Jeremy Grantham, two investors with very different styles. What crushed Livermore was he broke his own rule.

    And just owning a business per se doesn’t guarantee anything. Try opening a typewriter factory.

    • Jake W says:

      except that, the old school method of investing in time worked in the past because the economy was growing. now, it’s not, so all “returns” are really pulled forward from the future.

    • Wolf Richter says:

      Michael Gorback,

      “I don’t know where you get your data from, but the failure rate of startups is rather high.”

      1. I downloaded the wealth data from the Federal Reserve. The number of households is from the Census. The calculations to get per-household-wealth are from Excel, as instructed by me.

      2. A note on business “failure rates.” Small businesses are risky but not that risky. “Failure rates” for small businesses is a misnomer. The metric that should be used is “business bankruptcies.”

      The Census just counts what businesses are still active after x years. People interpret that the no-longer active businesses are therefore “failures,” which is not true.

      The Census just counts disappearances of businesses. A business disappears when the owner retired and shut down the business and sold the assets, or when the owner sold the business which was then integrated into the acquiring company, or when the owner shut down the business, takes the money, and starts a new business, maybe in the same location — happens all the time with small businesses. etc. etc.

      These are not “failures.” These are all pretty good to very good outcomes. The actual rate of businesses going bankrupt is much smaller. This whole metric is being misused.

      • Michael Gorback says:

        Gosh Wolf I just naively used the actual SBA data instead of an indirect measure like the census. Your version is incredibly simplistic when it comes to why startups fail.

        • Michael Gorback says:

          Sorry, data are at BLS.

          Just a little broader reading would enlighten you as to the numerous reasons why startups fail. Plenty of articles, blogs, private research, very little of which gets sorted properly by the census.

        • Wolf Richter says:

          You’re trying very hard to misunderstand what I said. Fine with me.

        • Michael Gorback says:

          Wolf just admit you used the wrong data.

  41. historicus says:

    Entlightened
    ” a real inheritance tax is essential for a long term stable society”

    Perhaps what is going on as noted in the article provided should be focused on FIRST. The wealth creation from low rates is only serving a sliver of society.
    And have you noticed that the future generations you are attempting to shelter are being emptied out by the massive debt creation that is pulling wealth from future generations? All allowed by a Fed that does not abide by the safeguard put in place by the Federal Reserve Act to prohibit such activity…..”promote moderate long term interest rates” instead of record lows that allow unrealistic costs to long term debt creation.

  42. Michael Engel says:

    1) There was a young man doing piece work in the 70’s, when laborer beat inflation.
    2) He and his wife bought their shop when the building went co-up.
    Later on he added two more shops for rent.
    3) They opened a store, selling their own designs.
    4) The store was doing very well in the 80’s and the bought a 3BR apt.
    5) Their two boys came back after college after the father died.
    6) They survive the insane rent, maintenance and taxes by sacrificing
    few sales at a steep discount.
    7) The PPP loans helped, but now their small business struggle again.
    8) On paper their net worth is in the tens of millions, but they survived
    in the last fifty years due to a very frugal life style.

  43. Spencer Bradley Hall says:

    We’ll get a money number today. That will tell the tale.

  44. The Real Tony says:

    Since Covid-19 all the money was stolen from the retirees and pensioners especially the ones with fixed pensions that pay for life. In a zero sum economy this was where all the money was stolen.

    • georgist says:

      First they came for the gen z, and removed the right to pensions, and I said nothing.
      Then they came for millenials, and removed their employment rights. It didn’t effect me, so I said nothing.
      Then they came for the boomers, and inflated our pensions away. And despite the previous two sentences they saw no irony in this and learned nothing, and nobody lifted a finger to help them.

      Above the gates to hell the boomer read, with joy: Financialisation makes one free.

    • historicus says:

      The Real Tony…..

      You got that right.

    • Happy1 says:

      Yes, the Fed is stealing from the elderly, who should be massed at the gates of Eccles building, pitchforks in hand.

  45. Spencer Bradley Hall says:

    People just don’t get it. The FED’s Ph.Ds. in economics don’t know a debit from a credit.

    • Michael Gorback says:

      They do. They just aren’t focused on your best interests.

      That’s why they look like idiots: they claim to be working for the benefit of the American people, but the things they do are for the benefit of their overlords. You shouldn’t expect their actions to be concordant with their words.

  46. Horhay says:

    I would think median income would have been a better statistic than average income. Similar to home sales data.

    • Wolf Richter says:

      Horhay,

      1. This is about “wealth” not “income.”

      2. To get median wealth, I would have to have the entire list of households, by address, and their wealth in that category, and then I can choose the median. The Fed didn’t give me its list of households by category, address, and wealth. So I cannot do the median. And you’ve got to live with the “average wealth” — not “average income.”

      3. The Census does “median income” by income category, which I cover separately, but it lags:

      • NBay says:

        Yet another chart showing very disturbing trends beginning in1980. The worshipping of Reagan (who really gets no blame, as he was merely an ignorant senile puppet who just wanted a top “role”) by the “losers” is an All-Time PR Coup…..sadly.

        But we are WAAAAY past income being the most significant metric, as the charts in this article show.

        My other favorites are the S&P 500 and Incarcerated Americans.

  47. stan65 says:

    Apparently, the wealthiest 1% account for 15% of the world’s emissions–more than twice the emissions generated by people in the bottom 50%.

    We could see the flocks of private jets during the recent heavily hyped COP26, in Glasgow, the city of brotherly love.

    That makes sense, I suppose. One needs to burn a great deal of energy to survey and maintain all of them assets.

    • NBay says:

      Takes big bucks to have the bragging rights for causing the most planetary destruction.

  48. Nathan Dumbrowski says:

    Was Thomas Honenig right? Past member of the Federal Reserve Bank. Voted against policy and was the lone dissenter for many years. Feared exactly what we are seeing in policy today with too easy money. With a grain of salt the article is from Politico

  49. Michael Engel says:

    Ilan Space X almost hit a Chinese satellite.
    If the fuming ShiShi boycott Tesla, Ilan 1800 minis will chase the maneuvering Chinese satellites, destroy them and dominate space race.

    • ivanislav says:

      About a dozen startups seek to make space more accessible and affordable. As the number of satellites increases and access gets cheaper, the risks of Kessler syndrome (cascading collisions) skyrocket (forgive the pun), both from mistakes and intentional destruction.

      • NBay says:

        Yeah, could make for a REAL interesting game of “Earth Roulette”, Once a few collisions get it all going, especially with the plutonium satellite power plants, and whatever else is in the military stuff up there.

        Might play hell with property values, too……and drive the realtors/developers/investors nuts.

  50. The Fed has no policy to widen the wealth disparity gap. They subsidized the banks in 2008 because that is where the bleeding had to be stopped. The problem with helicopter money is that the banks have big nets and none of that money makes it to the people on earth (that they don’t touch it first). Post Covid some real cash has gone into ‘private’ hands. There is now a more moderate choice for OCC, and ‘they’ are going after the big banks, for get this, climate policy. That is almost as clever as going after Capone for income tax, and maybe it will work. These are banks without depositors, with FDIC insurance. Just about every function of the antiquated banking system has been replaced by some shadow entity, whether its retail fund transfers, or capital formation. The big banks don’t do anything, other than massage the bond and the stock market using low interest government margin loans. Once upon a time the banks failed and we will never forget that, even while they lay the foundation for the next grand failure, the currency.

    • Wolf Richter says:

      Ambrose Bierce,

      “The Fed has no policy to widen the wealth disparity gap.”

      BS or propaganda, you pick. Read the Hoenig article on Politico. He was a Fed governor during the Greenspan and Bernanke Feds and voting member of the FOMC. Since you don’t believe me. No one believes me. So I just have my little blog in my little corner. But maybe you’ll believe a Fed governor. Google the article and read it carefully all the way through.

      Then read this and click on ALL the links to official papers and publications, including one by Yellen and one by Bernanke, on the Wealth Effect:
      https://wolfstreet.com/wealth-effect/

      I have no idea why people REFUSE to accept that this is official Fed policy when the Fed itself says it’s official policy. In writing. Published.

    • historicus says:

      Ambrose
      IF the Fed had a policy to pad the rich, would it look any different?

      The ladder is being pulled up on the PEOPLE of this country…..inflation to fluff the assets of the fully invested…
      PUNISHMENT via promoted inflation from the Fed.
      Punishment for saving…..ever happen before? Ever happen from intentional Fed decisions…..ie promote inflation, keep rates at zero?

      Former Fed Gov Hoenig saw it coming, warned of it coming, and he was shuffled out of the deck.

  51. Michael Engel says:

    ShiShi might have more troops, more ships, more tanks, but he
    cannot beat Ilan in space.

  52. Michael Engel says:

    TY is rising. JP isn’t tapering. RRP is down from $1.75T to $1.63T.

  53. historicus says:

    Former Fed Gov Hoenig predicted this….and was basically shown the door.

    Read his history on the Fed and his comments today by searching for the below

    • Michael Gorback says:

      That was a great article and the psychological insights into the FOMC alone were worth the read.

    • Wolf Richter says:

      historicus,

      Link to Yahoo deleted. The article was published on Politico, titled: “The Fed’s Doomsday Prophet Has a Dire Warning About Where We’re Headed” Subtitle: “Thomas Hoenig knew what quantitative easing and record-low interest rates would bring.”

      Google it. The article is serious and very good. But to us who’ve followed the Fed back then, it’s nothing new. It’s just now that the MSM is paying attention to him (years after he retired).

      However, with the title, Politico is trying to discredit him. The title, calling him a “Doomsday Prophet,” is derogatory and MSM bullshit. The editor (whose job it is to come up with a title) is trying to reduce Hoenig’s credibility and make fun of him.

      • Depth Charge says:

        This is why I think we’re closer to “the end” of this country than people think. Things have gotten so bad that the people in charge have resorted to ridicule and mockery to try to discredit soothsayers and anybody speaking openly and honestly, since facts are not on their side.

      • historicus says:

        Not important to me who published it.
        I wanted people to be aware.
        Yes, the article is serious and very good.
        The misleading header on articles is the game being played.

        Those who caution are shuffled aside……despite being proven correct. Fed Gov Hoenig is case in point.

        Wolf, Will the visitors to your site be led to the article?
        That was my objective.

        • Wolf Richter says:

          Just google: Hoenig Politico, and it comes right up.

          If you want to go through an extra step, copy and paste the title into the search bar.

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