Moments ago the Fed's latest Flow of Funds [8]report confirmed what the Philly Fed noted recently [9](and what blogger and Citadel trader Ben Bernanke vehemently denies): that the Fed keeps making America's uber rich ever richer, when in the first quarter thanks mostly to yet another $1.1 trilion increase in the value of financial assets (read stock market), the asset holdings of US households (or at least a very small subsection of them) rose by $1.6 trillion to a record $99 trillion, which net of $14.2 trillion in debt, means US household net worth is also a record $84.9 billion.
[10]
This is what a snapshot of the US balance sheet as of Q1 looked like.
[11]
Of course, saying US "households" implies all of them. This is anything but the truth.
As the following simple chart shows, the richest 10% benefit vastly more than everyone else from the relentless "wealth effect" generating melt up in stocks, courtesy of some $22 trillion in "assets" monetized by central banks.
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Yes, ordinary middle-class Americans are seeing the value of their 401(k) and other pension-related investments go up, but since these are largely untouchable until retirement, it means that the relentless increase in direct equity holdings has benefitted just the richest few Americans. For everyone else, this is truly nothing more than a confidence game propped up by the biggest equity bubble in history.
And in case there is any confusion, America's top 10% are encouraged to send their thank you cards to the Marriner Eccles building: of the $17 trillion increase in net worth since the last peak, financial assets, i.e., the Fed, is responsible for $16 trillion of this.
As for housing, that tangible asset for "everyone else"? At its past bubble peak in Q4 2006, real estate it amounted to $24.9 trillion: nearly a decade later, with the total value of US real-estate at $24.1 trillion, it still has to surpass this number. This likely confirms that what the Fed, which is clearly concerned with stock valuations, wants to do in order to "spread the wealth effect" is to stop the relentless growth in stocks and divert some of that wealth over to US housing. Good luck with that.
