Choose any of these login options:

Who Really Benefits from Inflation and Why You’re Not Wealthier

By Sasha Cekerevac | Business 2 Communit

Who Really Benefits from Inflation and Why You’re Not Wealthier
 

The Federal Reserve Bank of St. Louis released an interesting report analyzing the underlying fundamentals of why America’s economic growth level still remains quite anemic. The results won’t surprise many people—most American households have rebuilt only a fraction of the wealth lost during the recent recession.

According to the Federal Reserve Bank of St. Louis, household net worth peaked at $67.4 trillion during the fourth quarter of 2007. Household net worth then sunk to a low of $51.4 trillion in 2009, and has since rebounded to $66.1 trillion. (Source: “Annual Report 2012,” Federal Reserve Bank of St. Louis web site, May 2013, accessed June 6, 2013.)

While it appears that nominal net worth has recovered 91% of the losses, the St. Louis Federal Reserve notes that this is not an accurate representation of either household wealth or economic growth.

Since inflation was present during this time—for a total of two percent per year over the last five years—and the number of households increased by 3.8 million, the real recovery rate is only 45% of household wealth, according to the St. Louis Federal Reserve.

Why is economic growth still lagging, and why don’t most Americans feel wealthier? As the St. Louis Federal Reserve reports, the vast majority of the gains have been in the stock market. Because the stock market is primarily an investment for a relatively small number of Americans, this leads to significant differences in wealth creation.

Increasing or decreasing wealth is just as important as income for economic growth. Because a large percentage of the population has not had an increase in total wealth or has not seen improvements in their balance sheets, economic growth remains stagnant as there is continued uncertainty throughout the economy. ...more



share on: Share it! Tweet it! Stumble it! Digg it! Email it!  |  Permalink  |  NeillsDeals in Financial News | Comment on this
Reader Comments

Post a Comment
Author:
Email:
(Optional)
  
Reputation: 5608 (99.6%)
Social Influence:  
Member Since:  Aug 2012
Last activity: 11/21/17, 9:17 am