Tuesday, June 12, 2012

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.

June 12, 2012

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 thisWall 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:
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.

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