As the generational war heats up, we should all remember the source of all the bubbles and all the policies that could only result in generational poverty: the Federal Reserve.

Federal Reserve chair Janet Yellen recently treated the nation to an astonishing lecture on the solution to rising wealth inequality--according to Yellen, low-income households should save capital and buy assets such as stocks and housing.

It's difficult to know which is more insulting: her oily sanctimony or her callous disregard for facts. What Yellen and the rest of the Fed Mafia have done is inflate bubbles in credit and assets that have made housing unaffordable to all but the wealthiest households.

Fed policy has been especially destructive to young households: not only is it difficult to save capital when you're income is declining in real terms, housing has soared out of reach as the direct consequence of Fed policies.

Two charts reflect this reality. The first is of median household income, the second is the Case-Shiller Index of housing prices for the San Francisco Bay Area.

I have marked the wage chart with the actual price of a modest 900 square foot suburban house in the S.F. Bay Area whose price history mirrors the Case-Shiller Index, with one difference: this house (and many others) are actually worth more now than they were at the top of the national bubble in 2006-7.

But that is a mere quibble. The main point is that housing exploded from 3 times median income to 12 times median income as a direct result of Fed policies. Lowering interest rates doesn't make assets any more affordable--it pushes them higher.

The only winners in the housing bubble are those who bought in 1998 or earlier. The extraordinary gains reaped since the late 1990s have not been available to younger households. The popping of the housing bubble did lower prices from nosebleed heights, but in most locales price did not return to 1996 levels.
As a multiple of real (inflation-adjusted) income, in many areas housing is more expensive than it was at the top of the 2006 bubble.

While Yellen and the rest of the Fed Mafia have been enormously successful in blowing bubbles that crash with devastating consequences, they failed to move the needle on household income. Median income has actually declined since 2000.

Inflating asset bubbles shovels unearned gains into the pockets of those who own assets prior to the bubble, but it inflates those assets out of reach of those who don't own assets--for example, people who were too young to buy assets at pre-bubble prices.

Inflating housing out of reach of young households as a matter of Fed policy isn't simply unjust--it's cruel. Fed policies designed to goose asset valuations as a theater-of-the-absurd measure of "prosperity" overlooked that it is only the older generations who bought all these assets at pre-bubble prices who have gained.

In the good old days, a 20% down payment was standard. How long will it take a young family to save $130,000 for a $650,000 house? How much of their income will be squandered in interest and property taxes for the privilege of owning a bubblicious-priced house?

If we scrape away the toxic sludge of sanctimony and misrepresentation from Yellen's absurd lecture, we divine her true message: if you want a house, make sure you're born to rich parents who bought at pre-bubble prices.

As the generational war heats up, we should all remember the source of all the bubbles and all the policies that could only result in generational poverty: the Federal Reserve.