So Who Are the Debt Slaves in this Rich Nation?

Jon Blogosphere, Economy, Fiscal Policies, Market Commentary

The American economy has split in two: how averages of wealth & debt paper over the risks.
We constantly hear the factoids about ‘American households’ that paint a picture of immense wealth – and therefore a lack of risk for consumer lenders during the next downturn. We hear: ‘This – the thing that happened in 2008 and 2009 – won’t happen again.’
For example, total net worth (assets minus debt) of US households and non-profit organization (they’re lumped together) rose to an astronomical $92.8 trillion at the end of 2016, according to the Federal Reserve. This is up by nearly 70% in early 2009 when the Fed started its QE and zero-interest-rate programs.
Inflating household wealth was one of the big priorities of the Fed during the Financial Crisis. It would crank up the economy. In an editorial in 2010, Fed Chair Ben Bernanke himself called this the ‘wealth effect.’ So with this colossal wealth of US households, what could go wrong during the next downturn?

This post was published at Wolf Street by Wolf Richter ‘ Apr 16, 2017.