How to lose 40 percent of your net worth in 3 years – Americans see their net worth collapse during the recession. Federal Reserve survey highlights a case of austerity for the masses and social welfare for the politically connected.

Working and middle class families already feel the burden of a more limited financial middle in our economy.  What was once taken for granted such as affordable quality college education, homes with moderate mortgages, and healthcare costs that didn’t put families on the verge of bankruptcy are now largely harder to come by.  The Federal Reserve in their triennial Consumer Finance Survey (CFS) showed what most of us already know.  The middle class has been crushed since this recession.  The survey looks at data going back 18 months but the trend is unmistakable from 2007 to 2010.  Middle class families were crushed as their number one asset in housing has plummeted while stocks which are largely consolidated in the top echelons of our wage earners had a stellar recovery since 2009.  The median net worth of families fell a stunning 40 percent over this period.

From six digits to five digits

Wealth is a good measure of financial success.  It shows the ability to earn but also to save in a variety of assets.  For most Americans, housing is their number one net worth booster.  Yet with the housing bubble popping thanks to financial de-regulation and incomes being crushed, most Americans have seen their number one asset plummet to the floor.  In fact it drove the median net worth down by roughly 40 percent from six figures to five figures:

us household median net worth 2012

At the same time the stock market has done this:

case shiller and snp500

This large discrepancy in wealth but also of how the rebound has occurred also highlights the growing income inequality in our nation:

“(CNN Money) Families in the top 10% of income actually saw their net worth increase over the period, rising from a median of $1.17 million in 2007 to $1.19 million in 2010.

Meanwhile, middle-class families who ranked in the 40th to 60th percentile of income earners reported that their median income fell from $92,300 to $65,900 over the same time period.”

This is central to what is going on with our economy.  As most Americans saw their wealth contract severely, those in the top 10 percent actually saw their wealth increase.  Low wage capitalism and social welfare to financial institutions does have its benefits and this survey simply highlights what we already know with more concrete data.  The 40 percent drop in net worth simply reflects the survey in 2007 pulling data from the inflated housing bubble and currently measuring the bubble’s pop.

Contrary to the mainstream media, it is obvious the typical family is not participating in this Wall Street stock rally party.  Why?  First, many barely have enough to save to begin with.  1 out of 3 Americans do not have a cent for retirement.  We also have chronically high unemployment:

long-term unemployment

The above chart doesn’t highlight the entire picture because many people have flat out fallen off the unemployment radar as demonstrated by our civilian-participation ratio:

civilian pop ratio

So what gives with the long-term unemployment dropping?  A few things:

-People have given up looking for work

-Many have fallen off extended unemployment benefit programs

-Many are back in school to re-tool (many unfortunately are racking up student debt for worthless degrees from predatory schools)

-Many that lost good paying jobs are now “fully” employed with lower paying jobs

That is why overall household income has fallen in spite of the “raging” bull stock market since 2009:

chart-family-income.top

So the cycle continues and this story will likely garner an ADHD approved segment on the nightly news.  Even though this should be the main issue of the campaign, that is the health of our economy and our middle class, it will be filed away in the back pockets of mainstream media news rooms to make room for more car ads and advertising friendly shows to get Americans back on that consumption hamster wheel.  By the time people wake up from this slumber there will be no middle class.  The propaganda on the media tries to program people to feel guilty about having affordable quality education, access to healthcare, and the ability to purchase a home without going into hock for the rest of their lives.  Apparently what was once considered staples of the middle class is now washed away in the honor of “global competition” while major financial institutions are protected under the shield of government welfare and major paydays for CEOs.  Austerity for you and social welfare for those who know how to work the system.  As the net worth data highlights, not everyone is hurting from this new austerity world.

RSSIf you enjoyed this post click here to subscribe to a complete feed and stay up to date with today’s challenging market!

 

If you enjoyed this post click here to subscribe to a complete feed and stay up to date with today’s challenging market!
TAGS: , , , , ,




5 Comments on this post

Trackbacks

  1. Ken said:

    Capitalism as we know it is on it’s final legs, speculation, usury, monopolies and 10’s of thousands of odious laws. A central controlled economy with the biggest government the world has ever known, controlled by internationalists, in other words the New World Order as the controlling few put it, is rather well established.
    The bounty of our amazingly well organized world has been pillaged by a few powerful people leaving the overwhelmingly majority of people impoverished. This cannot last and is ultimately dangerous for every last human being on Earth and for many reasons.
    It is said that you judge a nation by the how the least of it’s people is treated. You could say the same for an Era. History may judge our time as a very dark period with so much untapped potential and so much abuse.
    Doing business should be easy and natural, find a need and fill it. The political class is by far, too large, too powerful, and too controlling and although it will be the last to be culled, it will be culled. Nothing lasts forever.
    Then maybe be can get back to the basics of doing business on a productive scale for everyone and be rid of predatory, speculative, criminal economic raiders.

    June 12th, 2012 at 9:12 am
  2. WASP said:

    But the politicans and wealthy elitists all got much richer. Ironic isn’t it.

    June 12th, 2012 at 11:57 am
  3. Hillary said:

    While not everyone has been affected, more than necessary has been. The thing that really gets me is that many people can’t even get hired even if they are over qualified. A lot of people are crying about large tax cuts for big business and the wealthy but if they don’t get them they can move elsewhere where they can get them and they are the ones who create jobs.

    June 13th, 2012 at 10:27 am
  4. Ulysses said:

    It is wrong to keep measuring the loss of “wealth” from the very peak of the real estate bubble because it was merely an illusion which never really existed.

    Also, in order to deserve a high-paying job, one must also have a commensurate 21st Century education and skill, both of which are lacking in the U.S. because of the atrocious quality of its education.

    As long as American kids stand among the last in math and science in international competitions and feel no shame about it while their Asian counterparts are literally killing themselves in order to excel in a highly competitive system, there is no way to prevent jobs from going overseas because that is where the necessary skills are.

    June 13th, 2012 at 2:12 pm
  5. chris said:

    I have to agree with Ulysses. We have grown lazy with a feeling of entitlement in this country. There is a lot of opportunity out there but you have to work for it and chase it. Success is not going to fall in your lap like it used to. I lost a big chunk of net worth during the recession, including stock in 2 banks that failed. There is no point in belly aching about it. Work harder and invest more money to try to recover.

    March 27th, 2013 at 5:08 am

LEAVE A COMMENT

Subscribe Form

Subscribe to Blog

Categories

Archives