How wealthy do Americans feel?

Transcript

NIALA: Good morning! Welcome to Axios Today!

It’s Tuesday, December 13th.

I’m Niala Boodhoo.

Here’s what we’re covering today: fires prompt a movement to ban e-bikes. Plus, Utah becomes the latest state to partially ban TikTok. But first, how wealthy do Americans feel? That’s today’s One Big Thing.

NIALA: The net wealth of American households and nonprofits declined for the third consecutive quarter this year, and a 9% dip compared to last year. Axios Markets correspondent Matt Phillips is here to explain exactly how interest rates and the housing and stock markets are slowly melting away pandemic wealth gains. Hey Matt.

MATT PHILLIPS: Hey, Niala. How are you doing?

NIALA: Matt, Can you explain what household net worth actually is and how it's measured?

MATT: Sure. It's basically the short version is it's your assets minus your liability. So your assets being your 401k, any real estate you have, versus their debts. So the Federal Reserve comes up with these numbers for the entire US household and nonprofit sector.

NIALA: So economists like to talk about something called “The Wealth Effect,” which basically means the more money people have, the better they feel about spending, right?

MATT: Yeah, this is one of the more closely studied relationships in economics. It really gained a lot of traction during the 1990s when there was just a boom in consumer spending that also coincided with the boom in the stock market values. And this wealth effect notion was that people really began to feel much better about their financial position, therefore, gave them the confidence to go out and buy that big screen TV or splurge on a new car and things like that.

NIALA: And so how different are things this holiday season then?

MATT: During the pandemic when the economy, we all remember like those scary charts of like the number of jobs being destroyed, that was actually the start of a really good time for wealth because when the Fed moved to counteract the economic downturn, they cut interest rates to zero, you know, that brought mortgage rates down really quickly. It created this housing boom, and it also created this stock market boom. Even though the economy was doing really bad, like your wealth, if you're part of the population that had some wealth, was doing really well.

But I don't know about you, but, like, I didn't feel great during the pandemic, even though I guess the value of my house went up. So it's hard to really draw a straight line to what we can expect in the post pandemic world.

NIALA: Is it fair to draw a straight line, though, between interest rates and what we're seeing now?

MATT: I think so. Anyone who's been looking to buy a house has been shocked by the surge in mortgage rates, which briefly popped above 7%. And it's also, of course, anyone who's seen what's gone on in the stock market and the financial markets more broadly this year. One wrinkle in all this is that the decline in wealth that we're seeing now is almost all attributable to drop in the stock market.

And while a lot of people have some stock, almost the vast majority of all the stock that's owned in the US is owned by the wealthiest families. I think the more important source of wealth for most American families is their home. If you start to see housing prices soften sharply, which we have not seen yet, but if we do start to see that, I would expect that to have a bigger impact on how more middle class Americans are thinking about how they're spending over the coming year.

NIALA: So the Fed is meeting this week, probably gonna raise interest rates again. What effect will that have on all of this?

MATT: They're widely expected to raise interest rates another half percentage point. I mean, a lot of that is probably already baked into the market cake at the moment. What's gonna move the market will be any kind of surprises at the margin. Like, are they gonna hint and wink that maybe they're getting close to the end of raising interest rates. If that happened, I would expect the markets to go up quite a bit. Also, we get an inflation report out this morning. Last time the government reported inflation data, it was lower than expected and it set off this crazy big stock market rally. So there's a lot at play this week in terms of the main drivers of both the stock market and the real estate market in the form of inflation and the Fed response to those higher prices.

NIALA: Matt Phillips is a markets correspondent for Axios. Thanks, Matt.

MATT: Thanks Niala.

NIALA: In a moment, battery fires lead to bans of popular e-bikes.

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Fires prompt a movement to ban e-bikes

NIALA: Welcome back to Axios Today. I’m Niala Boodhoo.

I’m in New York City this week - where this year there have been more than 200 fires caused by the malfunctioning of e-bike batteries.

One of the worst fires was at an apartment complex in midtown Manhattan that injured 43 people last month. Fordham University just banned e-bikes and scooters from its campuses on Friday citing the recent increase in fires.

As electric bikes surge in popularity, cities around the country will be dealing with these growing pains of the e-bike industry. Here with the story is Axios’ Chief Correspondent, Jennifer Kingson. Hi Jennifer!

JENNIFER KINGSON: Hey Niala.

NIALA: Jennifer, let’s start with the fires in New York. What kinds of issues is the city dealing with?

JENNIFER: One thing about battery fires is that they are explosive. One New York City fire marshal described them as like a blow torch. They just blow up in your face. There's no time to escape. And the one that happened early in November, in a Manhattan high rise, was on the 20th floor. A couple was, apparently, fixing e-bikes illegally. They had to be rescued out the side of the window. This was the icing on the cake from the perspective of the fire marshals in New York who say that there have been more injuries and deaths related to e-bike and e-scooter fires this year than in the past three years combined. One of the big wrinkles is the city has an estimated 65,000 bike delivery people. And there's a coalescing movement to help them buy high quality vehicles, e-scooters and e-bikes to get the work done. But, for the most part, these are expensive vehicles. And so there's a big black market and it's become a perfect storm for this debate to play out here in New York where I live.

NIALA: Jennifer, this reminds me of when you check into flight and they ask you if you have a battery in your luggage. Does this have to do with the safety of lithium batteries or is it to your point, these reconstituted or refurbished batteries that are not safe.

JENNIFER: Most of the problems have been linked to batteries that weren't safe, or that weren't properly stored or maintained. People who buy reputable quality bikes and maintain them properly and obey all the manufacturer's instructions, you know, storing them in a safe place and so forth, most people don't have problems. It's the reason that you don't see people's electric vehicles exploding in their garages right and left, because that's a regulated industry. But it's more of a wild west situation with e-bikes. For all their virtues, you know, from an environmental, sustainable front and ease of use and transportation, goodness knows, e-bike advocates and fans love getting around New York City that way because it's fast and cheap and easy. The pandemic certainly got us out e-biking. It became a real go-to, form of transportation where you could be outdoors. You didn't have to rely on other people or being crowded into mass transit. This is gonna be a fact of life in cities despite the turbulence that we're having. So it's kind of a harbinger of what's to come.

NIALA: Axios' Chief Correspondent Jennifer Kingson. Thanks, Jennifer.

JENNIFER: Thank you, Niala.

Utah becomes the latest state to partially ban TikTok

NIALA: A few more stories we’re watching.

Utah Governor Spencer Cox announced an executive order yesterday immediately banning TikTok from state-owned devices. He cited cybersecurity risks with the popular Chinese-owned video-sharing app. A growing number of GOP-led states – including Maryland and Texas – have made similar moves. TikTok told Axios Salt Lake City reporter Kim Bojorquez it’s disappointed by these decisions it says are fueled by quote - “misinformation” - end quote.

Workers in Richmond, Virginia removed its last city-owned Confederate statue from its pedestal yesterday morning. This marks the end of a two-year effort to remove Confederate monuments in the southern capital, something many city leaders have long resisted.

MIKE JONES: I think Virginians are all in the same space where we just want to move on.

NIALA: That’s Richmond City Councilmember Mike Jones on local CBS affiliate WTVR.

And today, The Department of Energy is expected to announce a major scientific breakthrough in the quest for cheap, clean power. For the first time scientists have been able to create a fusion reaction that creates a net energy gain. This is considered the “holy grail” nuclear power scientists have been searching for since the 1950s.

That’s it for us today! You can reach our team at podcasts at axios dot com or you can text me at (202) 918-4893.

I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.

NIALA: Join Tyler Foggatt and her colleagues as they go beyond the headlines and deepen your understanding of the forces shaping our world today on “The Political Scene,” a podcast from The New Yorker. With episodes three times a week, “The Political Scene” accesses the sharpest minds in politics for insight and analysis about everything, from abortion rights to the war in Ukraine. Make sure you’re following “The Political Scene," available now wherever you get your podcasts.