July 25, 2016
Some economists are worried that swelling American wealth is unsustainable and leading to an asset bubble that, when popped, could trigger the next recession.
Since 2009 American households have enjoyed watching as their stock portfolios have nearly doubled, reaching an enormous combined worth of $20.6 trillion, Bloomberg reports. Yet only 6% of those gains are due to new flows of cash into the market—the vast majority is from price appreciation.
It’s not usually a good thing for the economy when prices appreciate faster than the economy can accommodate, and both bubbles in the late 1990s and early 2000s eventually led to recessions when they finally burst. [Bloomberg]