Are we in another bubble?
The United States has added more than $31 trillion dollars of household wealth since the crash of 2008, but that's not necessarily something to celebrate. According to the Global Wealth Report from Credit Suisse, wealth accumulation is outpacing income, which may be a sign of upcoming economic trouble.
The ratio of wealth to income is as high as it was during the Great Depression. Our rigged economy allows those at the top to hoard more riches, while at the same time, average incomes remain stagnant. The result is that middle-class wealth has actually declined during the same period.
There have been two times in our recent history when the wealth to income ratio reached similar heights. Once in 1999 before the dotcom bubble, and again in 2007 before the banksters crashed our economy.
According to the Credit Suisse report, the current rate of wealth gains “is a worrying signal given that abnormally high wealth income ratios have always signaled recession.” In other words, the super-rich are raking in cash from a soaring stock market, and that's a really bad sign for the rest of us.
Tim Yeager, the chair of the Arkansas Bankers Association, explained why we should be concerned about the wealth to income ratio. He said, “Stock market and financial industry wealth are always moving around looking for the highest returns, and [that] makes bubbles more likely.” And, we know from history what happens when those financial bubbles burst.
Our economy will never be stable while income and wealth inequality remains high. We need widespread prosperity that benefits more than just those at the top. Only then will we break the cycle of bubble and bust.