The chart below shows why we are dismissive of those, even Nobel laureates, who would argue that the U.S. economy is “healthy.”  Clearly, household savings, a crucial economic component, has not kept pace with the allegedly robust economic conditions that are all but universally believed to obtain. Mr. Greenspan et al. would argue – have argued, actually – that charts such as the one below do not take into account other important forms of saving – particularly the swelling in home equity. But in making this argument, and a related one that views inflated real estate valuations as “wealth,” the former Fed chairman and his acolytes only demonstrate how ignorant they are of freshman economics.  Any Econ 101 student understands why inflation does not produce real wealth, only the illusion of it. Did Mssrs. Greenspan and Bernanke perhaps sleep through this important lecture when they were undergraduates?

Such dumbfounding ignorance is not dangerous per se, but when it becomes the entrenched thinking of the nation’s, and world’s, central bankers, and their delusional thinking spreads to the masses, then it becomes cause for concern.  Even so, we long ago stopped wondering why Wall Street has shown no concern whatsoever, only exuberance in the face of statistical evidence that would sink an Austrian economist into the depths of despair. For we recognize that this is simply one of those periods in history when mass psychosis holds sway, feeding on the always appealing idea that we can all get rich without having to work very hard.

This is certainly true for workers who punch a time clock, for in real terms their pay has remained stagnant for more than a generation. But this would not be true for the value of the houses in which they live. Home prices long ago left wages in the dust, perhaps causing the wage earner to wonder why he should even bother to work. The answer, of course, is that he works in order to secure a mortgage – and a shot at capital gains that typically dwarf any pay raises that he will have received over the last 30 years.

But Joe Sixpack is an exemplar of caution when compared to his Chinese counterpart. There, it is reported, investors are pawning their valuables in order to participate in China’s first-ever stock-market boom.  Margin accounts are not permitted the individual Chinese investor, so he must hock physical goods to raise cash for investing.  Will America’s eventual collapse into economic depression have to wait until China’s genuinely booming economy goes over the edge? If there is a bullish case to be made for U.S. stocks over the next 12-18 months, that is it: China is the global economy’s Fat Lady this time around, and her final aria is still one act removed from a fittingly spectacular finale.