The Process Of Inflating Asset Bubbles And Transferring Wealth To Targeted Groups


Why do people feel poor even though the stock market is at a record high? The process of inflating asset bubbles and transferring wealth to targeted groups. S&P 500 up 145 percent from 2009 low.

The stock market provides a beautiful scent of success although most Americans will only catch a whiff of that aroma.  The S&P 500 is now up 145 percent from the gloomy low reached in 2009.  Even though this unrelenting trend upwards has added wealth to a few, the majority of Americans are still seeing the purchasing power of their dollars slowly erode.  The one secure location for wealth in housing is now being usurped by Wall Street as investors begin to invest heavily in the rental real estate business.  Speculation in the markets is once again booming.  Japan had a mini-crash this week but the media cycle continues to pretend that printing your way into prosperity is somehow as easy as having central bankers pushing play on the iPod and expecting the hits to come one after another.  The reason you likely do not feel the big gains of the recent run is because most of the gains have come from artificially low interest rates and companies slashing wages and squeezing profits out of current workers.

S&P 500 and Case Shiller

The vast majority of Americans have their wealth locked up in housing.  While stocks are at record levels, the housing market still has a far way to go to reach the previous peak:

snp and case shiller

This is startling divergence especially when a large portion of the recent housing gains have come from the Federal Reserve going bananas into purchasing mortgage backed securities and easy money flooding the rental housing market.  Is this sustainable?  It is hard to tell especially when we are also reaching peak food stamp usage in the country.

Our reliance on foreign debt has grown very large:

debt held by foreign investors

 Nearly $6 trillion of our debt is now held by foreigners.  When I look at a chart like this, I realize that our reliance on others is only going to grow more and more as we continue to spend at the current rate.  We are now seeing much of this money flooding back onto our shores in the form of exclusive product purchases and also real estate investing in more select markets.

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