The Fed, Housing and Stocks: The Chimera Of Middle Class Assets

The Fed, Housing and Stocks: The Chimera of Middle Class Assets
On the surface, the Fed's $2 trillion-dollar campaign to prop up housing and equities may look beneficial to (what's left of) the middle class. But that is more perception than reality.

The primary driver of Fed policy is of course rescuing and enriching the too-big-to-fail banks. But the politically viable cover is "saving" what's left of Middle Class assets: housing and stocks. This chart from David Rosenberg's recent column on the Wily E. Coyote economy on Zero Hedge tells an important story: by propping up housing and stocks, the Fed is providing political cover for the status quo by seemingly acting to preserve what's left of the Baby Boom's middle class assets, which are still concentrated in housing and stocks.

Of the 26% of assets in "other," i.e. pensions and life insurance, much of those underlying assets are in bonds and equities--so the middle class wealth is probably roughly 20% in bonds, 33% in equities (stocks, emerging-market mutual funds, etc.) and 26.5% in real estate (those Boomers who still own some equity).

But beneath the surface of these "middle class" assets lurks highly concentrated wealth. As we can see here, the vast majority of "middle class" wealth is concentrated in the top 15% of the "middle class"--the tranch beneath the top 5% which owns the bulk of the nation's financial and real estate assets.

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