One half of American households hold more debt than assets. That is correct - they have a negative net worth! I don’t know about you but as a retired financial guy I’m having a tough time wrapping my head around this most basic of balance sheet statistics. Holy moly - one freakn' half. Stunning. Who knew?
The blue line (top 10% of the population) holds 73.2% of America’s wealth while the red line (bottom 50% of the population) holds -.5%. If you look at the trend line the wealthy are wealthier than any time since before the Second World War.
Sure, I know I've spent a career working in relatively rarified atmosphere as those with a negative net worth have little use for wealth management. I've always had a sense for these wealth inequalities lurking out there but hadn't paid attention to the scale. My sanitized experience has left me a bit unprepared for what the implications of this might be. Some economists have theorized that circumstances such as this constrain economic growth, restrict educational opportunity (which stunts potential wage growth) and may contribute to an increase in criminal behavior. It certainly has policy implications from a governance and social perspective.
What I know for sure is that Henry Ford paid his workers a better than average wage – not out of kindness – but because he wanted the guys who worked in his factories to be able to purchase the automobiles manufactured by Ford Motor Company. You would think Jeff Bezos would like that everyone had enough income and wealth to purchase all of the stuff sold thru Amazon, eh?
Far be it from me to suggest that everything should be equal as income and wealth inequality has existed from the time income and wealth became measurable and important to commerce. Naturally, some level of income inequality has to exist to incentivize innovation and entrepreneurism which leads to new products and services.
Nevertheless, it would appear that this trend is not likely to reverse and may in-fact experience a widening gap. Whether this will lead to social or political unrest is not known. Time will tell. If I had to hazard a guess - with the 2020 election looming on the horizon we’re likely to hear more about this subject in the months to come.
With that in mind be an informed voter and learn more about this topic at the World Inequality Database. This is an interactive database and you can build your own charts and graphs by means of checking the boxes to select specific key indicators.
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The answer to your problem is to intervene and spread the wealth around. The "market" is not going to sort this stuff out. More taxes for the wealthy, less for the poor. It is that simple. Somehow we have gotten to the point where asking if the ultra-wealthy simply have too much money is sacrilegious and un-American. We have to stop treating capitalism as a religion. Jeff Bezos has an immoral amount of money. If he isn't going to put it to good use, someone else should. The government is the only (feasible) game in town in this regard.
ReplyDeleteThe counter argument I always hear is "Where do you draw the line?", which is sort of scary because it implies that 1.) We haven't already drawn lines through our progressive tax, and 2.) That the act of drawing lines at all is somehow on the table?!
I'll give it to the GOP though, they have everyone convinced that the ultra-wealthy "deserve" what they have. As if they still would not be ultra-wealthy with a 50% tax on AGI over $1B, or that they would lose the appetite for innovation and growth.
From Motley Fool...
ReplyDeleteWhat's really surprising, however, is the role student debt has played in propelling so many households into negative-net-worth status. In fact, the Fed found that among households with the greatest negative net worth, the majority of debt comes in the form of student loans. And the more student debt a household has, the greater its negative net worth is likely to be. In fact, among households whose net worth measures negative-$12,500 to negative-$46,300, student loans represent 40% of total debt, compared with less than 10% for households that don't have negative net worth.
https://www.fool.com/retirement/2017/05/14/166-million-us-households-have-a-negative-net-wort.aspx
And don't leave out auto loan debt... A storm is a comin'
ReplyDeletehttps://seekingalpha.com/article/4174806-subprime-chaos-auto-bubbles-bursting-worse-2008