June 14 (Reuters) – It won’t be the American consumer who
powers the economy and financial markets.
An examination of the Federal Reserve’s new tri-annual
Survey of Consumer Financesshows we didn’t
just suffer a debt bubble – we had an income drought.
The statistics are stark: in the three years through 2010
the median family saw its net worth fall by nearly 40 percent,
wiping almost two decades of asset accumulation off of the
books. The real source of concern was a 7.7 percent drop in real
income in the period, leaving many families still struggling
with intractable debts.
There are two really important takeaways from the survey.
First, U.S. households, far from being a source of real
pent-up demand, are sailing into their retirement years with
very little wriggle room. Saving has been deferred, yet again,
and consumption will have a very difficult time driving growth.
Second, and unsurprisingly, the poor and volatile
performance of equities during the bubble years has driven
savers away from the asset class, setting them up for another