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Net Worth of American Households Hits Record High

According to the Fed’s Survey of Consumer Finances, household wealth in America is at a new high.

In a news release today (https://www.federalreserve.gov/releases/z1/current/default.html), the Fed says the last quarter put households at a record high of $96.9 trillion. Equity accounts for most of the gain, along with rising home prices.

The Fed also points out that the net worth of the bottom 90% only has 28% of the total net worth.

Charts show that net worth distribution and income have steadily risen for the top 10%, well above and beyond all other classes, since 1989.

For middle-class Americans (members of the 28% class), most of the gain is from rising home prices, much of which is due to speculative demand. Since most Americans are not going to sell their homes to realize the gain, however, net worth has a much different meaning.

For most Americans who have equity in a home, realizing a useful value in its rising net worth means borrowing against it. This is why the Fed lists data on net worth in its Survey of Consumer Finances (the SCF).

(Now, keep in mind what the incentive is. If the game is to consolidate wealth and power, what happens when the middle class borrows against its equity due to declining income share?

When debt-to-equity gets high, and there is not enough income distributed to pay it, there is a credit-default crisis. By default, then, what derives is confiscation of private property, having been subordinated to “the debt” owned by people who say the debtors never really owned it anyway. Debtors possess property by the extension of credit, existing in the form of net worth, on demand, in the aggregate.

To foreclose the deal, all the capitalist has to do is demand the debt be paid by people that cannot pay it by default.

A sure sign of an impending housing-price correction will be rising consumer debt, existing on demand, to effectively consolidate YOUR equity share.)

The SCF shows that consumer debt is steadily rising, and the Fed admits that it is the natural result of most new income distributing to the top 10%. In other words, if we want to increase the proportion of net worth for 90% of Americans, they must realize a more “equitable” distribution of income.

What then are the integral and derivative values?

What’s the incentive to change the distribution of income necessary to realize a rising rate of net worth for most Americans?

While the Fed, for example, presents the evidence for what needs to be done, identifying integral and derivative values, its mission is to provide a stable monetary system, which apparently has little to do with changing it.

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What’s the Incentive?

Logical Positivists say arguments should be devoid of philosophy. Arguments are properly formulated by identifying integral and derivative values, which is a function of pure logic (like mathematics). These analytical properties are not philosophical sentiments, like the “principles” that conservatives say we should rely on to determine tax-reform legislation.

Political economists identify the incentive to act as being fundamental to what moves political and economic values. Motivation is an integral value and everything else measurably derives from it. This is really simple until conservatives say, for example, we should not speculate as to motives because motives are hidden and people can be irrational.

Affluent conservatives are motivated to conserve their accumulated wealth and power. They argue that its accumulation is generally beneficial and have a litany of principles to validate that sentiment, despite being routinely disconfirmed when the data comes in to verify the hypothesis.

Much of the routine derives from the motive to consolidate industry and markets.

CVS’s CEO says its consolidation with Aetna, for example, is an economy-of-scale efficiency that makes the market more efficient. Since the CEO will get a $500 million bonus for completing the deal, which consolidates the use-value (the power) of the wealth (in the form of useful capital) even more than it already is, what’s the real incentive here?

The measurable result (the derivative value) is even greater consolidation of wealth and power; and according to conservatives, which includes many progressive liberals who subscribe to natural-monopoly theory, it is only natural (an integral value) to do so.

We have the same interpretational mix of integral and derivative values with tax reform. Although the big, budget deficit that derives from it will drive long-term rates up, and steepen the yield curve on “real” demand for long-term debt, a rising real rate will be deflationary.

Instead of the pro-growth picture, being painted according to conservative principles, we will have deflation.

Like with the CVS CEO, there is a big bonus associated with the deflationary risk being touted as pro growth. When the risk of default is rising, there is a panic, especially when we are told to expect growth. This results in a bailout situation, and the wealthiest people in the world profit from it. Assets are consolidated, even more, to “make markets more efficient” — and the CEO’s doing the art of the deal get a massive cut of the booty (dirty money to be laundered) in the process.

What’s the incentive?

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Creating the Abstraction

With all the abstraction, we are driven to distraction, when it comes to complex issues like tax reform.

There are now two competing versions and, by default, both are really bad for most Americans. The House and Senate will now reconcile the difference to abstract the best tax-reform bill, and since it is the product of our elected representatives, it has the force and legitimacy (the objective reality) of public authority (self-assembled on demand).

The objective is what makes the reality of US tax reform so abstract. Lawmakers say they intend to create a bill that benefits everybody, and since doing it from the top down is the natural way (objective reality, they contend), the reform’s measures are driven to abstraction.

Advocates of both the House and Senate versions say the issue is so big and complex that people should rely on conservative principles. Since these principles fail every time, being the public good by default is nothing but an abstraction.

Technically, the yield curve is going flat and on the verge of inversion if the Fed raises short-term rates. By making rates “normal” again, the inversion signals a recessionary trend, and with rising debt due to rising income inequality, this will be a massive financial crisis.

Capitalists then confiscate property to be resold at a profit, thus creating the reality (the natural condition) of the abstraction by default.

Since the confiscation of property is by natural condition, by default, it is not communism. The property is intended to be resold, retaining the identity of private property, but buying it requires debt (a public good) because of rising income inequality. This problem is no abstraction. It is objective reality, and the only way capitalism can deal with it is to keep increasing the amount of debt (the public good) into a number so large (yielding to the greatest good) it is just an abstraction of objective reality.

Financial analysts project the tax-reform bills now in Congress will increase debt by at least $1 trillion. Most Americans can’t afford one more dollar of debt, and by driving it to abstraction, objective reality is non-conforming, without any distraction, despite what conservative principles may attribute to it.

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Misdirection to Miss the Point

In this series of articles on “missing values,” let’s look at the recent argument over allowing AT&T and Time-Warner to merge.

Remember that both companies were allowed to merge with other telecom companies because they were not horizontally related. Both said, and regulators agreed, that competition in the vertical space discounts the harm to consumers of consolidation in the media-telecom market.

To turn this into an intended work of art, that conforms to “objective reality” (“that’s just life,” as Objectivists explain it, referring to the “natural monopoly” model), these oversized, media conglomerates subsequently went to consolidating the vertical competition.

The risk element has been misdirected by deliberate design of the argument. Now, understand, people that criticized the vertical integration argument as pure hokum (like me) were disparaged as cooky, paranoid, conspiracy theorists; but lo and behold, here it is. Once the argument for vertical integration was won, big corporate went right to vertically integrating what they admitted is “the competition.”

Since the US DOJ is not buying this obvious gaming-of-the-argument to define the legitimate propriety of the risk in a free market, big corporate says the DOJ is “defying long-established regulatory precedent.”

Of course, big corporate’s counter-argument misses the point.

AT&T and Time-Warner are now saying that the President is retaliating against CNN, for example, but this redirects the argument so that we will miss the point.

The proposed merger is intended to defeat legitimate market forces (which can be both horizontal AND vertical, which means that both dimensions should not be allowed to integrate). Referred to by capitalists as “bringing industry and markets to scale,” consolidation (both horizontal and vertical) is intended “to make it all more efficient” (the “natural monopoly” model). What is missing, now, at the moment, is the harm it actually does. The result, then, is the notion of objective reality being, by default, having to do the harm, to expand the profit margin, beyond what free-market mechanics will properly allow.

With capitalism, actual free-market mechanics is a progressively missing value, intentionally yielding to efficient-markets theory. The argued efficiency, however, is really an effective-causal attribute, which means it is a deliberate fraud.

Intending to commit a fraud is a crime, especially if it means billions of dollars in revenue, which is what motivates these big-corporate mergers and acquisitions.

Big corporate conglomerates say they are being more competitive, but that’s a fraud! They intend to make the marketplace less competitive (reducing the real, efficient cause — but without actually reducing the real, inherent risk, mind you, which is naturally conserved, consolidated into a catastrophic dimension, the gamma-risk dimension). Since the intent is to make a profit by doing harm, which a free market will in no way tolerate (with natural-mechanical efficiency), DOJ is on it, and the propriety of the action does not have anything to do with the President’s personal perception of CNN.

CNN, by the way, by means of consolidation, has become the worst example of a “news” network. It is mostly gossip and drama, and filled with feature programs that are not intended to be “the news.” It trivializes the news into a form of entertainment, missing the point, deliberately misdirected with idle gossip, pop-cultural hooks, and heavy-handed sensationalism. So, given the level of allowed consolidation of other media outlets, what’s the alternative?

What’s really missing?

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Fundamental Momentum

Financial analysts are busy cyphering the trend. Will the equity rally continue despite that the Fed will probably raise the rent?

The current momentum has everything to do with the fundamentals, which means it is important to you and me, whether we all own equities or not.

Fundamentally, when the rent is low, demand is high. Raising the rent should, fundamentally, slow the momentum; but analysts are saying the fundamentals don’t work anymore to predict the trend.

Now it’s all about yielding to the momentum — being forced into the risk — on demand.

What’s missing?

Accepting the hypothesis of pop-analytical thinking (although they never say it outright) admits there is too much value in the hands of too few people. (That’s what Sanders was saying during the 2016 election — the analytic was not missing — and he is considered by most equity analysts, and the DNC, to be a communist.) What is said, outright, is that the equity-price rally will not end because, fundamentally, there is too much demand for it at any price, which includes (you see) the probable losses, trending in all the futures now.

Even if the US Fed raises the discount rate dramatically, the value consolidated at record levels has to go somewhere.

Since the Fed will not raise the rent too much (to avoid the gamma risk, which is extreme political risk associated with extreme economic data points, like record consolidation of wealth and power), Goldman Sachs, for example, predicts the current trend will continue into 2018.

With the trend continuing, the risk goes gamma!

Here, at the point in which the “best and the brightest” fundamentally miss the point, we have the fundamental, zero-hedge effect. The trick is to keep the system fundamentally out of balance although nature is otherwise determined.

The value that determines the outcome is not actually missing. Out of stupidity and ignorance, however, capitalists think they can continue the trend because it is, like Ayn Rand said, “objective reality.”

Divergence of the real and the actual really matters, and it is always a philosophical discussion to divine the risk.

Having the good intelligence to naturally model for the probable risk is not communism. It is not ideological. It is a fully assumed, natural condition of the risk financial experts work with every day, but intend to ignore, yielding to the objective reality they say does not exist. Not until it “just happens” by default, anyway, yielding to the fundamentals, with growing momentum (and gaining the gamma risk), by natural design.

The Fed’s latest minutes, published this morning, say low inflation is still a concern. However, it is unwise to not raise rates, they say, since record equity values (inflation) with low volatility is a bad sign.

The Fed never says outright that record consolidation of wealth is naturally unstable. Although low, price volatility suggests stability, it really means the system is actually unstable (inflated with risk). Saying that, though, is missing since consolidation of the capital — forming a “natural monopoly” — is considered the best practice, yielding to the natural model of “objective reality.”

Inherent instability of the model (like Kant said) is not really missing (it is an imperative value), but the analytical intelligence to properly deal with it actually is. The efficiency of the effective cause naturally yields to, on demand, what is categorically imperative. Right or wrong, it is never actually missing.

The right thing to do is always now, existing on demand, fundamental to the moment.

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