Interesting chart (which we marked up) from the JEC of the U.S. Congress illustrating household net worth as a percent personal income. If that doesn’t look like a head and shoulders formation in the making, nothing does!
The second chart illustrates why the U.S. economy is so dependent on the wealth effect generated by asset bubbles. It’s stunning to think that average real earnings in the U.S. are almost 11 percent lower than where they were in 1973.
Policymakers’ focus should be on increasing worker productivity through: 1) reforming the country’s education system; 2) unleashing entrepreneurship; and 3) in the words of ECB chief, Mario Draghi, “doing whatever it takes” to empower small businesses.
This is tough political business, however, so we take the easy way out. The political pandering increases budget deficits, forcing the Fe