Remember when people got rich from working? Yeah, me neither. Welcome to 2025, where your brokerage statement matters more than your actual paycheck – and honestly, that’s kind of terrifying.
Here’s the wild part: The Wall Street Journal just confirmed what we’ve all been suspiciously eyeing. The economy isn’t running on wages anymore. It’s running on people feeling rich because their Tesla stock went up. They call it the “wealth effect,” which sounds way fancier than “I bought a new couch because my 401k looked good this morning.”
But here’s where it gets spicy. We’ve basically created a two-tier economy that looks like the letter K – and not the fun kind you see in OK. The top part? People with assets are living their best life, buying business-class tickets and renovating kitchens because their portfolios are printing money (on paper). The bottom part? Everyone else is getting crushed by inflation while their paychecks stay flat.
The numbers are bonkers: The richest 10% of Americans now account for nearly half of all consumer spending. That’s right – one out of every ten people has the same economic power as the other nine combined. It’s like economic Hunger Games, but with more stock options.
The Problem With Playing Make-Believe
Here’s where this gets really fun (and by fun, I mean potentially catastrophic). We’ve created what I’m calling a “reflexive economy” – basically, we’re all betting on our own success before it actually happens.
Take the AMD-OpenAI deal. Instead of OpenAI writing a $60 billion check for chips, they gave AMD stock warrants that only become valuable if AMD’s stock price goes up. So AMD’s success depends on OpenAI paying them, but OpenAI can only pay them if AMD succeeds. It’s like financial inception, and everyone’s just hoping the dream doesn’t collapse.
When the Music Stops
The scary part? This whole system works great until it doesn’t. Right now, corporate earnings are solid, so everyone’s paper wealth feels real enough to keep spending. But when earnings start to slip – and they always do eventually – here’s what happens:
Stock prices fall → Rich people feel less rich → They stop buying stuff → Companies make less money → Stock prices fall more → Repeat until someone cries.
Meanwhile, the bottom half of the K can’t come to the rescue because they’ve been shut out of this wealth party from the beginning. They’re too busy trying to afford groceries to prop up the economy.
The Bottom Line
We’re living in an economy where prosperity flows from portfolios, not paychecks. It’s working for now, but it’s also more fragile than a house of cards in a hurricane. The moment people stop feeling rich on paper, this whole thing could unwind faster than you can say “market correction.”
So yeah, enjoy the ride while it lasts. Just maybe don’t bet the farm on it continuing forever. Because when everyone’s wealth is based on everyone else feeling wealthy, well… that’s not exactly what you’d call a solid foundation.
Stay smart out there. The economy might be running on vibes, but your portfolio doesn’t have to be.