By Dan Calabrese ——Bio and Archives--May 31, 2013
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From the peak of the boom to the bottom of the bust, households watched a total of $16 trillion in wealth disappear amid sinking stock prices and the rubble of the real estate market. Since then, Americans have only been able to recapture 45 percent of that amount on average, after adjusting for inflation and population growth, according to the report from the St. Louis Fed released Thursday. In addition, the report showed most of the improvement was due to gains in the stock market, which primarily benefit wealthy families. That means the recovery for other households has been even weaker. “A conclusion that the financial damage of the crisis and recession largely has been repaired is not justified,” the report stated. The study is part of a growing body of research on the role of household wealth — or lack thereof — in amplifying the impact of the recession and slowing the rate of recovery. Traditionally, economists and policymakers have focused on the effects of employment and income. But the report from the St. Louis Fed argued that swings in household balance sheets — which include home values, stock prices, savings and debt — were critical in determining which families weathered the financial storm and which got swept away.So not only have households not recovered their wealth, but the 45 percent that has been recovered is once against mostly of the pyrrhic variety - represented by stock prices that may or may not remain at their current high levels. Real, hard, sustainable wealth has not returned, especially to those who need it most - which sort of belies the whole proposition of the Obama presidency that he is here to help the common man or something. By the way, the report comes from the Federal Reserve, and they're not helping the situation either. David Malpass in today's Wall Street Journal:
The Fed's bond-market interventions probably helped during the 2008 crisis when markets had frozen, but after that the economy would have done much better without them. Recoveries are normally fast and broad once markets are allowed to clear and begin operating. Quarterly growth topped 9% in 1983 after a deep recession and 7% in 1996 leading into President Clinton's re-election. Interest rates were high, yet median incomes were rising sharply. Growth in the current recovery only rose above 4% once, in the fourth quarter of 2011, and averaged just 2% per year in its first four years versus 5% in the same period of the 1980s recovery, 3.2% in the 1990s recovery and 2.9% in the 2000s recovery. The underperformance over the past four years translates into more than three million jobs that should have been created but weren't, an economic disaster that lowered real median incomes by 5%. The disastrous state of affairs was rationalized as a "new normal" following the Great Recession, but the reality is that poor policy choices hurt growth. Tax-and-spend policies sapped investment, and the Fed's low rates and bond purchases damaged markets, hurt savers and channeled credit to the government at the expense of job creators. It's a zero-sum process that should be stopped because of the bad effect on growth and jobs.The truth is that real growth would not only have brought down unemployment to the much more palatable levels of the Bush years, when it hovered around 5 percent, but it would also have helped to produce much less new debt. But that would have required growth-friendly policies like lower taxes and less regulation. Obama never wanted that. He wanted government to micromanage the economy, which is why you see Ben Bernanke turning the knobs with maneuvers that are supposed to spur growth but actually # it. New normal indeed. The mortgage market meltdown of 2008 became an excuse for Democrats to subject the economy to central planning, under the notion that the crash had been caused by too much free-market economics. This was never true, but the media helped the Democrats sell it and the electorate bought it, and now we've got the weakest recovery in a century - if you can even call it that - but we're supposed to accept that this is the best we can do because God forbid we ever embrace free markets, since in the fantasy world of the Democrats, the media and far too much of the voting public, that's what "got us in this mess in the first place." So don't expect to see that wealth come back any time soon. Just listen to your wise economic overlords and be thankful for whatever they deem to allot to you.
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Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain
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