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Latest Fed Bubble Pushes Household Wealth to New Record

by Thomas Ressler

American household worth rose $1.698 trillion to another new record of $96.196 trillion in the second quarter, thanks to booming stock market valuations and re-inflated housing prices, according to a new report from the Federal Reserve. The value of corporate equities increased roughly $1.1 trillion and the value of real estate rose approximately $0.6 trillion.

The totals include non-profit organizations, for which data was not broken out separately. Household worth has increased every year since reaching its most recent low of $56.418 trillion back in 2008 during the depth of the Great Recession.

Total assets grew from $109.571 trillion in the first quarter of 2017 to $111.415 trillion in the second quarter. Meanwhile, total liabilities increased from $15.073 trillion to $15.219 trillion during that time. Household indebtedness grew as well, increasing at an annual rate of 3.7 percent in the second quarter of 2017. “Consumer credit grew at an annual rate of 4.6 percent, while mortgage debt (excluding charge-offs) grew at a 2.8 percent annual rate,” the Fed report noted.

Much, if not all, of the gain in household wealth, can be attributed to the unprecedented amount of central bank intervention in the US economy, most notably through the Fed’s quantitative easing programs. Since the central bank first began its attempts to bolster and re-inflate the economy, the Fed’s balance sheet went from less than $1 trillion to roughly $4.5 trillion today. A large chunk of that support, approximately $2.2 trillion as of August, still sits in US banks in the form of excess reserves, accruing interest from the Fed.

If the Fed allows its entire portfolio to enter the economy, which is admittedly unlikely for a number of reasons, that $4.5 trillion theoretically could end up inflating the money supply by $45 trillion, thanks to the black magic of fractional reserve banking. That, in turn, would correspondingly crank up inflation in the US economy.

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