After the economic crisis of 2008-09, the huge number of people employed in the construction business contracted severely. Many suffered long-term unemployment and consciously chose to look for work in less cyclical businesses. When the economy recovered, those workers were no longer available for construction jobs, so the construction business grew much more slowly.
Congress and the Fed have poured cash and credit into the economy to save the US from a major depression. While the Keynesian approach to increase government spending in difficult times saved the economy, it created huge inequities. The slosh of funds and credit gravitated to those at the highest end of the income and wealth spectrum. Add the growth of private investment driven by those at the highest income and wealth spectrum, such as private equity (PE) and hedge funds, and the problems worsened for the average American.
Wealthy investors were awash with cash and they looked for places to achieve a rate of return on their cash. Interest rates were low and returns on equities were slow to increase. They funneled their masses of cash into PE and hedge funds to achieve higher rates of return. Those private equity (PE) and hedge funds started to buy many of the distressed homes, build apartments and corner the market on housing. At the same time, some of the bevy of cash was used by PE to snap up companies and push down costs, including wages, to the gain of their wealth benefactors. Businessweek wrote an article titled “Everything is Private Equity Now” in October of 2019 about how PE has quietly taken over markets. In the last several years, PE has steadily and quietly continued to buy up all the "monopoly deeds".
All these events have left the remainder of the people with lower incomes and assets. With housing growth limited, the supply of homes is now much less relative to demand. So those who control a significant portion of housing assets, such as the big PE and hedge funds, can charge highly inflated prices. The result is even more money is funneled up to the people in the top income and wealth categories.
Hey, don’t get me wrong. America is built on capitalism and I am a proponent. But, making a fair profit is enormously different from being downright greedy. Some don’t know where to tow the line. If we’re not careful, the uber wealthy will have “all the marbles” before we even know it!
Be smart, be well-read, be aware and be successful.
