Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.
I guess we sort of knew that. Throughout the Bush years we heard about economic growth which did not raise incomes, and that the Bush tax cuts were redistributive, concentrating ever more wealth in the hands of the already wealthy few. But effectively no new wealth at all?
Indeed, it's worse than that. For even as there was no growth, everyone was borrowing and spending as if there were growth all around and lots more just around the corner. (Well, not everyone.) Every pundit in town has noticed that Bernie Madoff's ponzi scheme wasn't the only one in town. It wasn't just the subprime conjurers, but a whole culture: everyone thought you could borrow to buy a house which you'd be able to sell to some other sucker at twice the price in just a few years without a thought to where that sucker was supposed to find the money to ensure your nearly effortless and virtually instantaneous achievement of immense wealth.
What's got me puzzled and dejected is the layoffs resulting from the start of a slide towards reality, and that so many of them are abroad. Fifty million in the next year, I read somewhere. Were those livelihoods all premised on our delusions too? What would those fifty million otherwise have done? And what responsibility to we bear? I certainly don't know the answers to these questions, or even how properly to frame them. But it's just not right that others should be paying for our mistakes.
