The conclusion that soaring asset prices mean the economy is strong is a hallucination that goes unrecognized because the entire financial system is hallucinating.
Consider the data that the financial sector bases conclusions / decisions on (i.e. the data that the financial sector “trains” on) in a Bubble Economy like the present. The Bubble Economy’s core goal is to inflate the valuation of assets not by increasing utility-value or productivity but by artificially expanding credit and leverage.
This benefits those who already own assets, as their collateral (i.e. “wealth”) expands without any effort, and this swelling collateral enables them to borrow money to buy more assets.
This also benefits those with high incomes and modest debt, as these boost their credit rating, enabling them to borrow at lower rates than the bottom 90% of the workforce–credit they can use to outbid the bottom 90% to snap up assets which are soaring in value.
This Bubble Economy dynamic is a self-reinforcing series of iterations: the central bank expands credit and leverage, goosing asset prices higher, which boosts the collateral foundation for further credit expansion. This flood-tide of credit flows to those whose assets are generating more collateral, enabling them to buy more assets and outbid the less creditworthy while also increasing their consumer spending.
Since the top 10% own most of the assets bubbling higher, this “wealth effect” is concentrated in the top 10%, who account for roughly 50% of all consumer spending......
The Bubble Economy will be the first point of contact. Prepare accordingly.