Dollars and Jens
Friday, July 02, 2004
Asset-driven economy
Over the 1952 to 1985 time span, the ratio of household sector assets to GDP fluctuated in a fairly tight range centered around 3.75. But then, as the all-powerful secular bull markets in stocks and bonds took hold, that ratio started to drift upward. ... the ratio of US household sector assets to GDP pierced the 5.25 threshold in 1999.
An lot of reading material at Morgan Stanley about the fact that the wealth effect seems to be playing a bigger role in economic growth than it used to, and some concern that large fluctuations that take place in asset prices may reduce the stability of the economy.

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