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Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

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Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#21

Post by Paul_Dessert »

alexeisadeski3 wrote: post #13
anigbrowl wrote: post #6

Earlier quoted context omitted.

Wage freezes at nominal values which did not keep pace with inflation during the 2000s, I'd guess.

Converting home equity to consumption is my guess. Remember HELOCs?

HELOCs are back and bigger than ever!

Home-equity lending surpassed 2009 levels in 2013, with $111 billion in new home equity lines of credit (HELOCs) opened. In the fourth quarter, new lending increased 43% from quarter four 2012, according to data from Experian-Oliver Wyman Market Intelligence Reports and Experian’s IntelliView tool.

http://www.marketwatch.com/story/helocs-made-a-comeback-in-2...

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#22

Post by ehmish »

cwal37 wrote: post #3
alexeisadeski3 wrote: post #2

Long story short: The wealth of non rich Americans is almost entirely contained in their highly leveraged houses. If housing prices collapse, their wealth collapses. In 2008, housing prices collapsed.

Not exactly. The 25th percentile's wealth was dropping even before the recession, which suggests some additional downward pressure, although I am not sure what that could be off the top of my head.

The chart that showed the movements of the various percentiles showed an interesting thing, where in 2003, the 25th percentile's wealth started to drop, while at the exact same time the higher percentile's wealth suddenly went up, before dropping after the recession hit. I have a feeling there's a link

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#23

Post by alexeisadeski3 »

araes wrote: post #11
cwal37 wrote: post #3

Earlier quoted context omitted.

Not exactly. The 25th percentile's wealth was dropping even before the recession, which suggests some additional downward pressure, although I am not sure what that could be off the top of my head.

My suspicion is that it may be due to the inflation adjusted real wage effects, which hit the bottom 25th percentile the hardest, as that is generally their only source of income, and their resulting margin for wealth storage is so much closer. [1] Honestly, real wage income has been flat since about 1965, and for many has been going down since the great recession. [2] And if you only got high school or less, well, y…

That would explain only a slowing in the rate of wealth increase, not a decrease in wealth.

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#24

Post by alexeisadeski3 »

ehmish wrote: post #22
cwal37 wrote: post #3

Earlier quoted context omitted.

Not exactly. The 25th percentile's wealth was dropping even before the recession, which suggests some additional downward pressure, although I am not sure what that could be off the top of my head.

The chart that showed the movements of the various percentiles showed an interesting thing, where in 2003, the 25th percentile's wealth started to drop, while at the exact same time the higher percentile's wealth suddenly went up, before dropping after the recession hit. I have a feeling there's a link

2003 was when the stock market recovered.[1] The wealth of the rich is highly correlated with the stock market.

[1]http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#symbo...

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#25

Post by thrownaway2424 »

alexeisadeski3 wrote: post #2

Long story short: The wealth of non rich Americans is almost entirely contained in their highly leveraged houses. If housing prices collapse, their wealth collapses. In 2008, housing prices collapsed.

What's the home ownership rate in the bottom quartile of net worth? The closes I could find was rate for the bottom 90%, which was apparently 66% in 2004.

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#26

Post by [deleted] »

thrownaway2424 wrote: post #20
Retric wrote: post #16

Earlier quoted context omitted.

Supporting 1 person on x income is harder than supporting two people on 2x income. Put simply, a couple does not need two stoves, and any shared trip is less expencive etc. There are a few edge cases at the individual level for things like end of life care and taxes, but the overall economic bennifits are huge.

On the other hand, 1 person with x income pays less income tax than 2 people with 2x income.

[deleted]

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#27

Post by nickff »

jacobolus wrote: post #17
nickff wrote: post #4

This study is misleading, because it uses 'household' wealth, instead of individual wealth, and may be incorrectly interpreted as showing a decline in the middle class, when it is really showing the results of changes in family structure over the past 50 years. This graph shows how this choice affects the results: http://1.bp.blogspot.com/-g3WZGpDibPM/Up3ZAPRtScI/AAAAAAAAJq... The following blog-posts go in to more d…

Your chart shows income distribution, while the linked study is talking about net worth.

You are correct about the chart, but if you look at the second and third blog-posts, you will see how family structure has changed, and how it will have a similar impact on measured household wealth. I wish that I had a similar wealth distributions graph handy, but this was the best source I could remember, and I think it serves to adequately demonstrate the point.

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#28

Post by [deleted] »

cwal37 wrote: post #3
alexeisadeski3 wrote: post #2

Long story short: The wealth of non rich Americans is almost entirely contained in their highly leveraged houses. If housing prices collapse, their wealth collapses. In 2008, housing prices collapsed.

Not exactly. The 25th percentile's wealth was dropping even before the recession, which suggests some additional downward pressure, although I am not sure what that could be off the top of my head.

[deleted]

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#29

Post by alexeisadeski3 »

Retric wrote: post #16
nickff wrote: post #4

This study is misleading, because it uses 'household' wealth, instead of individual wealth, and may be incorrectly interpreted as showing a decline in the middle class, when it is really showing the results of changes in family structure over the past 50 years. This graph shows how this choice affects the results: http://1.bp.blogspot.com/-g3WZGpDibPM/Up3ZAPRtScI/AAAAAAAAJq... The following blog-posts go in to more d…

Supporting 1 person on x income is harder than supporting two people on 2x income. Put simply, a couple does not need two stoves, and any shared trip is less expencive etc. There are a few edge cases at the individual level for things like end of life care and taxes, but the overall economic bennifits are huge.

Irrelevant.

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#30

Post by alexeisadeski3 »

epistasis wrote: post #8
nickff wrote: post #4

This study is misleading, because it uses 'household' wealth, instead of individual wealth, and may be incorrectly interpreted as showing a decline in the middle class, when it is really showing the results of changes in family structure over the past 50 years. This graph shows how this choice affects the results: http://1.bp.blogspot.com/-g3WZGpDibPM/Up3ZAPRtScI/AAAAAAAAJq... The following blog-posts go in to more d…

Wow, very interesting that GINI by individual is fairly constant. However, household GINI is definitely the more relevant figure, as most big economic decisions (where to work, where to live) are made at the household level rather than at the individual level.

>>However, household GINI is definitely the more relevant figure...

Not relevant to the point OP made.

Whether or not it's "better," it still impacts the numbers.

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