Exponential Illusions vs. Linear Reality

Click to enlarge.

The low points are following a linear trend, implying that growth is slowing over time. If it took 30 years for real net worth per capita to roughly double from 1982 to 2012, then it will take 60 years for it to roughly double again. That's assuming we even should extrapolate past history into the distant future of course. I for one am skeptical, especially now that we've entered a "QE Trap".

"I sensed the Fed’s full attention is now devoted to the question of whether and when to 'taper' its purchases of longer-term Treasury securities, leaving officials little time to think about long-term costs and scenarios," he writes. "The same could be said for the market participants I met with in New York and Boston, where the typical response was 'we haven’t thought that far ahead' or 'it’s tomorrow’s problem.'"

The high points are following an exponential trend, implying that the bubbles are growing exponentially over time (relative to the linear base line). I expect an epic failure that even mainstream economists can see coming if we get anywhere near that blue trend line again. Note that the data only goes through June of 2013. The stock market's up another 7% since then. To the moon, Alice!

This chart is more disturbing if one factors in that the federal, state, and local debts are not included in the household net worth as calculated by our government. That's not quite true. We get credit for owning them as households, just not as owing them. Win win. Perhaps we'll someday find an alien species that we can bill instead of American households. That must be the thinking.

If my net worth is $10,000 and I loan it all to the government then the government would claim my net worth is still $10,000. If the government then spends the $10,000 to keep the government running then my net worth is still $10,000. I'd only be in big trouble if the government actually taxed me $10,000 to pay me off. But why do that? Stick with what works! Deficit spending for the win!

The chart is even more disturbing if one factors in rising wealth inequality. I doubt that real median net worth would make such an optimistic looking chart. That's just my way of saying that there are parts of this economy that were financially subprime heading into the Great Recession and they remain financially subprime. In fact, there were 34% more households on SNAP in July 2013 than were on SNAP in October 2009. How's that for a recovery!

And lastly, who would have thought that the Fed could make the average household so much richer simply by helping us earn even less interest on our savings. Genius! And sustainable? Well, who can really say for sure?

Sarcasm abounds. To the moon! Alien species! Government running! Optimistic! Sustainable! Beware, it's a bungle out there. Seriously.

Source Data:
St. Louis Fed: Custom Chart