Thursday, February 23, 2006

Distribution of Wealth Update!

by Tom Bozzo

I just got an e-mail notice that the Federal Reserve is releasing a Bulletin article on the 2004 Survey of Consumer Finances today. The most recent data previously had been from 2001. If you're interested in such things, get it here (444 KB PDF). Commentary to follow, once I've had a chance to read it.

Update: From a quick scan, the headline result is that between 2001 and 2004, median net worth increased 1.5%; mean net worth increased 6.3%, adjusted for measured inflation. Those represent sharp declines from the 1998-2001 and 1995-1998 increases. Among households with holding financial assets, the median real value of the holdings fell from $29,800 to $23,000; the percentage of households with financial assets of any type rose fractionally, from 93.4% to 93.8%. Here's the authors' gloss:
Three key shifts in the 2001–04 period underlie the changes in net worth. First, the strong appreciation of house values and a rise in the rate of homeownership produced a substantial gain in the value of holdings of residential real estate. Second, despite the general recovery of prices in equity markets since 2001, the direct and indirect ownership of stocks declined, as did the typical amount held. Third, the amount of debt relative to total assets increased markedly, and the largest part of that increase was attributable to debt secured by real estate.
The lower real holdings of financial assets are particularly worrisome should housing see a less-than-soft landing. In Madison, where the local economy has been pretty good overall, a lot of people selling upscale houses (here, concentrated in the $400-$600,000 range) have seen 10% or more knocked off what they thought their gross real estate wealth to be on paper; many more would see it if they tried to add to the inventory of listings.

Also, the low official savings rate, which gets pooh-poohed in some corners, does seem to have translated into the more tangible weak results for holdings of relatively liquid financial assets.

Mark Thoma has some key graphs and an excerpt of the Wall Street Journal's story at Economist's View. A couple previous posts of mine based on 2001 SCF data are here and here.

Another Update: I assembled two graphs showing the evolution of the wealth distribution here.
An interesting FED study and a very interesting post on it (as you have figured out already, we at the Angrybear have been advised by Mark Thoma to follow your blog more closely).
Thanks, PGL. And thanks to Mark for the vote of confidence.
I wonder if there is some way of normalizing the stock market component of net worth which was high in the 2 preceding periods, and normalizing the real estate component of net worth in the latest period --which may look high if that correction does come.
I think I'd rather look at the distribution of wealth than this 'net worth' picture that purports to tell us something about how our nesteggs generally are doing.
The median or mean obscures a key trend in the concentration of wealth.
Could be that we have not done as well as the previous 2 periods, but we hikers want to see the topographical map: the one that shows how the ranks have swollen on the downside and thinned on the upside. More or less according to calmo.
Anon: You could do some 'what ifs' like that with the means pretty easily. That's implicit in the article's qualitative decomposition of the wealth change into a decline in stocks and an increase in real estate assets.

There is some distribution data in the article (some of which is graphed in the post linked in the update), though there's so much inequality in the top percentiles, it's hard for it to show the whole inequality picture. The sample gets thin in the top percentile, too.
Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for all of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They will never settle for a reasonable share of ANYTHING. They will do whatever it takes to get even richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductable crumbs and call themselves ‘humanitarians’. IT CAN’T WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. Crime, poverty, and suicide will skyrocket. So don’t fall for all of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductable contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. WAKE UP PEOPLE. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Vioxx. Their idea. Sub-prime. Their idea. NAFTA. Their idea. Outsourcing. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. The MASSIVE campaign to turn every American into a brainwashed credit card, pharmaceutical, love-sick, celebrity junkie. Their idea. All of which concentrate the world’s wealth and resources and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, and executives. IT MAKES THEM RICHER. So don’t fall for their ‘ good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTABLE PR CRAP. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. EXTREME WEALTH HAS MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

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