Bad Money And The Demise Of The Middle Class, Part 2

As we explained in Part 1, today’s Keynesian form of inflationary central banking inherently benefits the small fraction of US households which own most of the financial assets.

Thus, since money-printing went into permanent high gear after the dotcom crash in 2000, the top 1% of households have gained $20 million each in inflation-adjusted net worth. Likewise, the top 0.1% or 131,000 households at the tippy top of the economic ladder have gained $88 million each in inflation-adjusted net worth.

Needless to say, the net worth gains available to the wage-earning classes are almost exclusively from what they manage to save after absorbing the relentlessly rising cost of living. And we do mean relentless. Even though the CPI tends to undermeasure the cost of living on main street owing to its flakey hedonics’ adjustments for “quality” and other statistical razz-matazz, this imperfect proxy for the cost-of-living is still up by +82% since the turn of the century.

Accordingly, during the last 22 years the median real annual wage, as tracked by Social Security payroll tax records, has risen by only 14.5% or just $235 per annum. And, no, we didn’t omit any zeros from that figure. These piddling gains amount to just $4.50 per week on average.

These annual inflation-adjusted gains in the median wage compare to real net worth gains of nearly $1 million and $4 million per annum for the top 1% and top 0.1%, respectively. In relative terms, these annual wealth gains for the top 1% were 4,250X larger than the median real wage gain and 17,000X larger for the top o.1%.

Needless to say, outsized gains at the top of the economic ladder are not owing to a superior growth of national income, which, in turn, might have been reflected in higher capitalized values for financial assets. Instead, the bulk of these gains are attributable to valuation multiple expansion. Thus, the net worth of the top 1% computed to 135% of GDP in 2000, but now stands at 207%. Likewise, the net worth of the top 0.1% rose from 50% to 85% of GDP during this 22-year period.

Stated differently, the values of stocks, bonds, real estate and other financial