The "booming" wealth inequity

This from today's WSJ, I can't put up the entire article but you can get the basic "problem" from this:

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The decadelong economic expansion has showered the U.S. with staggering new wealth driven by a booming stock market and rising house prices.

But that windfall has passed by many Americans. The bottom half of all U.S. households, as measured by wealth, have only recently regained the wealth lost in the 2007-2009 recession and still have 32% less wealth, adjusted for inflation, than in 2003, according to recent Federal Reserve figures. The top 1% of households have more than twice as much as they did in 2003.

This points to a potentially worrisome side of the expansion, now the longest on record. If another recession comes, it could be devastating for people who have only just recovered from the last one.

Wealth, also called net worth, is the value of assets such as houses, savings and stocks minus debt such as mortgages and credit-card balances. Net worth is different from income, the cash a household receives each month such as wages, dividends and government benefits. It is common for countries to have a highly skewed wealth distribution. Nonetheless, in the U.S., wealth inequality has grown faster than income inequality in the past decade, making the current wealth gap the widest in the postwar period, according to a study by Moritz Kuhn, Moritz Schularick and Ulrike Steins, economists at the University of Bonn.

Behind this trend: More than 85% of the assets of the wealthiest 1% are in financial assets such as stocks, bonds or stakes in private companies. By contrast, slightly more than half of all assets owned by the bottom 50% of households comes from real estate, such as the family home. Economic and regulatory trends over the past decade have not only favored stock over housing wealth, but have also made it harder for the less affluent to even buy a home.

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This is neither healthy or sustainable.

Why did Obama get us started down this road?

I dont know why you would say that. I know many of the sub 50%ers and Im not surprised at all. :shrug: I've also heard that land poor argument for generations. Im surprised at what people are surprised by.:dunno:

(Reply to daves post)

I have a dollar two ninety eight left in my IRA so feel wealthy.

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Originally Posted by CactusCurt

I dont know why you would say that. I know many of the sub 50%ers and Im not surprised at all. :shrug: I've also heard that land poor argument for generations. Im surprised at what people are surprised by.:dunno:

(Reply to daves post)

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Curt, I'm not following what you wrote---would you mind expanding on it?

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Originally Posted by Dave Grubb

This is neither healthy or sustainable.

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What I should have said is that it looks normal to me. I am always a skeptic when it comes these numbers games articles anyway and I dont like this one either.

My point is that the top 50% will always have more than the bottom 50% by definition. And my demographic comment is that the bottom 50% is well represented by people who will never be successful as defined by net worth because they either can't* or don't want to achieve that success. I suspect the differences between the people in their respective halves has always looked the same- at least in recent history (worse 1000 years ago I suspect?).

We can all run the numbers and conclude that high net income produces high net worth and the paper investments that the lower half cant afford (unless you are stupid and then you find yourself right back where you belong anyway). How is this a surprise? Maybe I remember things the way I wish they were, but I seem to recall as a kid that the American dream was to work your whole life to pay off your home so you could enjoy your golden years living on SS and your pension (I am wondering how pensions were valued in this good old days comparison,its in the evil rich guy investments column nowadays). I guess the definition of the American dream changed.:shrug:

I struggle with the housing price aspect as well. The only value my home has is to provide me a comfortable place to live and store my toys. I suppose it will be valuable when I die or become institutionalized. But I tend to belive that the home you buy has the same valuation as the one you sell unless you add value like a builder or diy'er would. Or downsizing like us empty nesters might do. My land poor comment referred to farmers who have been using that term forever. Your family farm just wont produce the income you need to break into the top 50% unless you sell it. But we appreciate those of you who would rather farm than sit in a cube.:usa:

So what happens when this new generation of renters becomes the dominant demographic?

*I mentioned the low rate of first generation college students in the other thread; 15% where my sons go. I find this leading indicator alarming. We can all agree that a degree is the surest way to earn more. I have two concerns about how to grow the 15%: first, most 15%'r kids come from families that dont know how to prepare them for college academically or financially, and second I worry that that the solution will be to devalue a college degree by making it worthless by increasing the supply. I know lots of "working" families who don't understand the value of the education and I know lots of kids who dont want to go to college. We still need soldiers and wildland fire fighters.:usa:

I could blather on forever but the long and short of it is that I dont see anything new here and wish they would have looked at retirement security or what the middle 50% looks like instead (good old days pensions vs todays paper investments). Judging by the golf course mid week (or Walmart depending on your demographic), I would say todays single-family-home-owning-retiree is doing ok. But maybe I missed the point.:doh:

Thank you Curt.

The core issue is not only the spread in income as it exists today but the trend--and that cannot be ignored. The GINI Index is a measure of income quality---now I know that will raise the hackles on the back of the neck of every conservative out there---but it is an important measure.

I tend to use the CIA World Fact Book, but there are any number of repositories of this information out there. Currently the US is 39th out of 157---and we are 39th worst not best--it is a reverse scale. What is important is the unstable nature of those countries with a "high" score. Go to the top and read the list, how many of those countries (many of which are in Africa) would you like to call home?

Again, the concern is the trend, a few years ago we we in 43rd place in the GINI Index.

As for college, I think I am beginning see a swing back toward skill based craftsmen and away from college--a swing I have long endorsed and wrote widely about over the years. A two year program will often net a better life time return than a four year.

Free college tuition does concern me. I don't think we are wise to "educate" everyone, many of whom have neither ability or direction. To put it rudely---the students need to have skin in the game.

But that is getting off topic. The take away form the WSJ article (which had many graphs which helped demonstrate the point) is that we are moving closer to the poorer nations of the world (as in third class) and further away from those they we regard as more stable.

Once again, with no data to back up my statement, I believe :

The USAs slide toward third world status has more to do with the rise in Govt. dependent people who are residents and the increase in the number of ILLEGAL immigrants pouring into the Country and being given Govt. handouts.

The stagnation of middle class wages is being further hurt through the amount of taxes being taken to support those not working . I have seen numbers ranging from $ 18000 - $ 35000 per year to support each individual that is not self supporting .