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NFIB Chief Economist Warns "Bubble In US Net Worth Has Reached Unsustainable Heights"
Excerpted from William Dunkelberg's Op-Ed in Bloomberg Briefs,
The relationship of U.S. net worth to GDP appears to have reached unsustainable heights recently, by historical standards.
American consumers have about $14 trillion in debt and a net worth of over $80 trillion, according to the Federal Reserve. Net worth is the sum of the values of all assets, real and financial, that consumers own, less their debt, including mortgage debt, leases, credit cards and the like.
The wealth we hold is a way of storing purchasing power. You can sell your shares of Apple and buy “stuff”, goods and services. Ultimately, for most consumers, that’s what our wealth is used for, to acquire “stuff”. Some of our assets provide services directly, such as our houses and cars.
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The broadest measure of “stuff” is the gross domestic product, the total value of final goods and services produced in a given period. Constructing the ratio of net worth to GDP illustrates the fluctuation of claims on output per dollar of output produced.
Not surprisingly, this was a fairly steady series for 25 years (maybe longer) from 1970 to the mid-1990s, as gains in nominal wealth were matched with gains in nominal output, averaging about 3.5 dollars in claims on output for every one dollar of GDP. Then came the dot-com boom and Fed bubble-blowing...
Each peak in this relationship was followed by a recession, the last one the worst in modern history. And now the ratio has once again reached 4.7 dollars. History suggests that the ratio will collapse again, probably toward the 3.5 dollar level. This can be accomplished by a massive increase in GDP (unlikely) or a massive decline in the value of assets, net worth (more likely).
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The adjustment might be accelerated because of widespread short covering and record high margin credit and other leverage.
Logically this seems unavoidable, unless you believe that we are truly wealthier now, even with an economy that is delivering a rather poor performance (historically weak output and sales growth) in real terms. It would seem not to be “whether” we will adjust but when.
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"Nuh-uh." -Obama
Bring on the Great reset.
Careful what you wish for...
Skittles and Unicorns have been the 'wish' for some time now. Time for the 'Men' to take the reigns from the 'boys'. Wink, wink, nod, nod... Reality can be a bummer if the rest of your psychological self has been living in illusion...
> "The broadest measure of “stuff” is the gross domestic product"
No it isn't! GDP is a measure of GOVERNMENT BORROWING-AND-SPENDING and has little to do with PRODUCTION.
GDP = C + I + G + (Ex - Im) ---> "G" = GOVERNMENT BORROWING-AND-SPENDING.
Indeed, to know how the reset will look like, people should study the period after WOII in Europe.
And I’m not talking about those stupid Disney movies that portay a victorious new beginning.
80% of the rich lost everything.
95% of the common people lost everything
and the poor... they really really had it bad.
It took Europe over 25 years to start to recover and so will America need that much time at least.
The once that made it, had connections and skills And guts.
So those who will be on top after the reset won’t be the nicest people.
When there will be a reset, nobody knows when and I wouldn’t start guessing because it will be wrong, but when the reset starts, people who aren’t succesfull now won’t be succesfull during and after. That’s a fact.
And for everybody it will be tripple as hard as it is now to get by.
Just ask the greeks how their reset is playing out....
I will know the reset I am looking for is here when I see the home prices in Socal lay a turd and drop 30-50%. Its a shame what $500k buys in Socal.
If you like your asset bubble, you can keep your asset bubble.
Fuck you Yellen!
Asset "values" are never going to "adjust"...there will just be less and less and less trading, selling, buying and liquidity until prices go truly nutty and the very last actual employee in North America is a public sector worker paid XX million $ a year, indexed to inflation...
Funny thing about inflation, around a year ago (give or take,) the USPS asked if it could increase its fees at a rate greater than the CPI. Guess they cannot be self sufficient on funding if they index their prices to inflation.
follow the 7 year bouncing ball...
Why worry. The Fed can repeal the business cycle at will, and stop the ocean waves!
All is peprpetually good. We just have to change what words mean to feel good and assured by our wizards of Fed.
Janet Canute.
And the Supreme Court is about to change the meaning of words put forth by Congress in order to save Obamacare, just like they did during the last challenge.
But my EBT card is still gonna work, right? Right!?
Maybe not, but look at it on the bright side: You'll get to riot in and loot a Walmart!
Me and the other jocks are going to show you what to do with your "data" nerd. Say it again and we tape your ass cheeks shut!
We've gone from a creditor nation to a debtor nation.
We've lost Most of our manufacturing base...we produce nothing
Our debt is a surreal 18 TRILLION dollars
We have an unknown entity in the whitehouse - born where?
A crooked coattail cunt potentially a shoe in for 2016 Pres Election
Social security created when there wiere 20 workers for every retiring person
All of the bubbles of past several years are fiat debt paper related
Mexicans are streaming over the border and even though their title is "Illegal" we want to give them a pass
Healthcare is fucked
Our pres is a fucking Liar
Corzine is free
i could go on...
velocity has dried up
baltic is all time low
ships lined up with cargo and striking guys making 170k a year
Global shit is shit
what could go wrong?
Or, more simply, what can go right?
Too many claims on output. A simple way to put it.
You can do a lot with that kind of money.
Too bad the Banks still don't seem to get it.
Well this is just a nonsense stastic. The people who have the debt are not the same ones who have the assets. (Don't ask me how I know.)
Shocked by nonsense stastic!
'When'...? Not until the whole menagerie seems so surreal that one wonders if he's living a parallel universe. So in other words, September or therebouts.
This won't seem to matter until prices rise. When we get there it will be obvious.
I will try this again, trying to post a chart.
Hope it works,
don't hurt yourself, now
Dude if every three week member could post charts, each thread would be hundreds of pages long. You can't post pics unless you are one of the anointed (or a contributor)
it is basically how much money go to the richest...who buy tiny fractions of their wealth un-like the 75% who actually buy cars, tv etc. Once we get to 100 people who own everything and everyone is a serf to them....this chart will be A LOT HIGHER
Seriously. I have never met a more useless buch of fucksticks than the travelling 'salesmen" for NFIB. Just a shout out for small business people. If one of these screw heads show up at your doorstep, plant a boot mark in their ass ASAP.
If you don't have like 70 employees, you are NOT on their RADAR. Matter of fact you are not even loitering in the parrking lot of the RADAR manufacturing firm. These leachfucks will just take your money and run. Totally useless assholes. Take it from my experience.
The winners will be illegals who stream over the Mexicco border with nothing and end up surviving.
" Can I offer you a driver's license sir so you can drive around stoned and drunk all day ?"
Being proactive, I reduced some of my net worth to build a garage.
He he, not mine. But I'll have my day because one man's tragedy...
Looks like Grizzly Adams, politicians, assassins and Rothschild clones will be the only ones able to stay out of the FEMA work camps.