Analysts and commentators are debating what to call the present state of the U.S. economy. Is is a deep recession or an early depression? I have another suggestion in this regard. Perhaps we might more accurately term it a major economic reshuffling—a dramatic reordering of national wealth.
The most obvious symptom of this reshuffling, of course, is wealth diminuation. A great many people are getting much poorer as asset values plummet from artificial levels to real levels of worth. This has affected all classes of society. The poor hardest, not surprisingly, but the middle class and rich as well to varying degrees.
But look a bit closer at what is beginning to happen and what it bodes.
President Obama’s advice about this being a good time to buy stock index funds is really a wonderful prescription for future wealth—for certain people. Not those whose stock portfolios have already shrunk so badly. Buying now will just get these people back where they once were when times improve. People just beginning to invest in the stock market, however, the previously very prudent and the young newcomers to the marketplace, could well be shuffled into higher income brackets to a marked degree in years to come if they start buying these funds near the bottom. A bottom we may now be nearing.
A huge flock of investing vultures is also starting to take advantage of massively distressed real estate prices. Some of the biggest players here are the same hedge funders who fed so fulsomely on a phony asset boom they helped to create. But a great many small investors are also starting to pick on the real estate bust’s leavings. Tomorrow’s millionaires are well represented in this latter group.
The meek will not end up inheriting the earth from the present downturn. Indeed, a tragically large number of people will be obliged to be still meeker to survive in future years. But for the clever, the risk takers, the entrepreneurial types in this country (and we are blessed with many such people) these worst of times could one day prove to be the best of opportunities.