I have to agree with this assessment by Martin Luz at the Huffington Post in which the recent gnashing of teeth over a Federal Reserve Wealth Survey(.pdf) really is much ado about nothing, the more important issue being declining real wages in recent decades rather than another asset bubble that has inflated and popped.

Bloggers and reporters need to stop with the gnashing of teeth over a Fed report that claims Americans lost 40% of their wealth in the Great Recession, mainly due to a decline in housing prices. The reality is: you can’t lose 40% of something you don’t have.

What Americans really lost was 40% of our national credit line. It wasn’t real “wealth.” It was merely an expansion of housing-related credit that made us feel wealthy.

The key thing to take away from this chart is that all the “wealth” the Fed is claiming we lost was never really there. Money flooded the housing market, beginning in around 2000, and pushed prices up. It wasn’t real. It was a bubble! In other words: imaginary, non-existent, illusory, fake, phony, phantasmagorical.

Of course, along with this “imaginary” wealth came jobs and, then, job losses, that were all too real. This was the unfortunate side effect of what Luz characterizes as a deliberate attempt by former Fed Chief Alan Greenspan to inflate home prices and create a “wealth effect” in order to offset the effects of the bursting internet stock bubble and sluggish wage growth – in essence, propping up the vital consumer spending component of the U.S. economy by means other than income in order to sustain growth.