No, ‘Americans’ Didn’t Get $34 Trillion Richer During Pandemic

Earlier this week, one widely-followed reporter at a mainstream financial media outlet took to Twitter to trumpet the latest Fed data on US household net worth.

Americans, this person exclaimed, are 31% richer since the onset of the pandemic, having seen the value of various assets, including stocks and real estate, balloon by more than $34 trillion over six quarters.

Invariably, he received the usual sarcastic pushback from the habitually cynical world of finance-focused social media.

The irony was the same as it ever was. Namely, no one addressed the issues that matter. The cynics are just as oblivious as the reporters they chastise. That’s because everyone involved lives sequestered away in some kind of bubble.

When it comes to household net worth, the issue isn’t how it’s calculated (as one critic suggested, replying to the above-mentioned reporter). The issue is that when we talk about “Americans’ wealth,” we’re actually talking about the wealth of people who own assets. And because assets are concentrated in the hands of a relative few, “Americans” is a misnomer.

I repeat that every, single quarter (and really, every chance I get) because I think it’s important to keep perspective.

The vast majority of people on the planet have no assets. Many “households” own nothing at all to speak of. In America, the richest nation in the history of the world, the richest own virtually all the stocks. Homeownership is a privilege, not a right, and thanks to the inexorable rise of house prices and the attendant encroachment of investors on the market, it’s becoming a pipe dream for countless first-time buyers.

Simply put: If you own stocks and a home, you’re the exception, not the rule. Certainly in the global context, but in the US context too, with the caveat that owning some stocks is commonplace and homeownership isn’t “rare,” per se.

As bleak (and blunt) as this sounds, the fact is that most people don’t have anything. If you do (have things), you’re an anomaly. In fact, if you’re a sentient being who’s able to live your life largely free of suffering, you’re an anomaly.

With that in mind, consider the boilerplate copy in the excerpted passage below,

Americans… appear positioned well to withstand the inflationary fallout until the economy works through the issues — mainly COVID-19 and the resulting supply chain disruptions — that are behind the jump in consumer prices. The Federal Reserve said this week that US household net worth has surged $34.1 trillion since the start of the pandemic to a record $144.7 trillion. That’s a whopping 31% increase over the six quarters ended September 30. The all-time high for any calendar year before 2020 was $12.5 trillion in 2019.

That’s from an “opinion” piece penned by Bloomberg’s Robert Burgess. And it’s a joke.

Of course, it’s not supposed to be a joke. But it is. And it’s not a funny joke. Read on.

The figure (below) shows the value of real estate in the US has risen by $1 trillion or more in four straight quarters.

That’s great. If you own real estate. If you don’t, it just means that with each passing quarter, your chances of ever owning any (real estate) diminish materially unless you’re getting a raise every three months.

According to data from Redfin, real estate investors bought more than 18% of all US homes purchased in the third quarter of 2021, the same quarter covered by the Fed data used for the chart (above). That was a record. Redfin’s data goes back 21 years. They define an investor as “any institution or business that purchases residential real estate.” The total amount spent by such investors on homes in Q3 was $63.6 billion. That too was a record. 77% of the 90,215 homes they bought were paid for in cash.

The value of corporate equities actually declined in Q3, but it scarcely matters. The standout number in the updated figure (below) is basically unchanged.

The value of corporate equities ostensibly held by “households” is up $20.2 trillion since the short-lived pandemic bear market wiped more than $7.5 trillion off the board.

The share of corporate equities and mutual fund shares concentrated in the hands of the top 1% hit an all-time record in Q2 of this year, at almost 54%. Throw in the share held by the 90th to 99th%iles (which has actually declined to the lowest level since Q2 1999), and you’re left staring at a situation where 89% of the stocks are held by just 10% of the people.

If you count yourself among the middle- and upper-middle class, I have some potentially distressing news. Your ownership stake is the lowest it’s ever been (figure above). You’re just a half percentage point away from seeing your share of the stock market pie dip into the single-digits.

I could go on. But I doubt the utility of additional editorializing.

The point is simply that the term “household net worth” is a misnomer. Americans didn’t get $34.1 trillion richer over the past six quarters (figure below). Headlines suggesting as much are patent nonsense.

The gain illustrated in that rather poignant chart accrued disproportionately to the people who needed it the least. And so shall it ever be.

To reiterate: A slim majority of Americans have nothing. Obviously, “nothing” means something different in the advanced economy context than it does in emerging markets and frontier economies. But the primary reason I now refuse to engage on finance-focused social media (other than posting links to articles) has nothing to do with the prevalence of propaganda and misinformation. Rather, it centers around participants’ lack of perspective and inability to recognize that even those who claim to be champions of everyday people are blissfully unaware of the stark reality that, for most people, to be awake is to suffer.

The cruel irony is that in advanced, rich nations, that suffering is primarily defined by financial hardship.

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