DATA & FIGURES
The national savings rate has fallen from 6.3% to 0.5% of GDP, while the net worth of US households has increased from $32 trillion to $169 trillion. The average net worth per household has risen from $320,000 to $1.250 million. The top 1% of households account for $44.1 trillion of the gain, while the top 10% account for $94.2 trillion. The net worth of the top 0.1% of households has risen to $25.072 trillion, while the bottom 50% of households have a combined net worth of $4.266 trillion.
THE SCENARIO
The overarching context is the significant increase in wealth disparity in the United States, driven by the capture of the Federal Reserve by Wall Street speculators and the resulting Cantillon Effect. This has led to a situation where the wealthy have accumulated vast amounts of wealth, while the bottom 50% of households have seen their net worth increase at a much slower rate.
DIRECT QUOTE
"Redistribution of wealth from rich to poor is none of the state's business. Full stop." — David Stockman, Former Director of the Office of Management and Budget
BBN INSIGHT
The Positive Side: The increase in wealth for the top 1% and 10% of households may lead to increased investment and economic growth. The Negative Side: The significant wealth disparity may lead to social and economic instability, as well as a resurgence of socialist ideology. The BBN Insight analysis suggests that the Cantillon Effect, resulting from the Federal Reserve's monetary policy, has contributed to the wealth gap, and that a sound money and honest markets approach may be necessary to address this issue.
MARKET REACTION
The S&P 500 has traded at around 30X trailing GAAP earnings, up from 11X in the late 1970s. The valuation multiple trend is not compatible with the steadily falling rate of US economic performance, which has marched downhill for 40 years, currently posting at barely 2.0% per annum.