Bubble Prices are not Wealth

Conservative sites are running with this story:

OBAMANOMICS IN ACTION: Typical US Household Worth One-Third Less Than Under Bush

Seriously?  The bursting of the housing bubble, which actually began under Bush, is Obama's fault?  Because that is what likely drove middle class household worth down (while the Fed-sponsored asset boom in financial instruments drove up wealth of the top 1%).  I suppose one could say that the Republicans sponsored a bubble that helped the middle class while Obama is sponsoring a bubble that helps the wealthy.

I won't say this stuff is meaningless to the economy, because clearly they affect people's perception of wealth and thus spending and optimism.  But sound long-term economic growth has got to come from stable and rational monetary policy that allows interest rates and financial assets to find their correct level.  Getting political mileage out of bubble pricing of assets only creates incentives for politicians such that they will never stop fiddling with interest rates and credit.

  • Onlooker from Troy

    "But sound long-term economic growth has got to come from stable and
    rational monetary policy that allows interest rates and financial assets
    to find their correct level."

    Better stated: no monetary policy at all, and no central (at least) government to set such a policy. Ah, if only; what prosperity would result without them stealing all the productivity benefits from the rest of us.

  • Paul Dubuc

    Bob Shiller had called it a bubble by 2003 (which the study uses as the comparative year), but home values were still in sight of the hundred average up until 2005. It wasn't till 2006-7 that the housing "hockey stick" appeared in the Home-Price Index. I think the current stock bubble probably cancels out the 2003 home values, making the years an apt comparison, though I'm not sure the disparities have much to do with the president or the Pepsi Party.

  • Scott G

    Don't be too quick to accept the facts here as correct. According to the Fed's data on household net worth, it has never been higher.

    http://scottgrannis.blogspot.com/2014/07/household-net-worth-is-up-not-down.html

  • Rick C

    The bubble may have started under Bush, but Obama's administration has done not a single thing that would help.

  • Rick C

    BTW, that doesn't mean I disagree with the title or content of the post.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    The bursting of the housing bubble, which actually began under Bush, is Obama's fault?

    The policies which led to the bubble were almost exclusively initiatives and products of Obama’s team, so he gets the blame for their catastrophic failure.

    Further, he is now doubling down on many of those policies, and has destroyed what little was left of the housing market.

  • HenryBowman419

    The bubbles caused by the policies of the Federal reserve have nothing to do with Republicans or Democrats, though either side will take credit when things look rosy and blame the other side when there is a downturn.

    The bubbles are deliberately created by the Fed to enrich the top 0.01% of the wealthy at the expense of the middle class.

  • Tanuki Man

    As long as Clinton gets credit for the internet bubble "economic success," then I have no problem with Obama getting the blame for the bursting of the bubble. Meanwhile, the policies of the Obama regime make sure the rich get richer as the stock market inflates.