Saturday, February 20, 2016

Percent of Total Wealth Owned in the United States: Bottom 40% control -0.9% Meaning Close to Half the Country has a Negative Net Worth.

MyBuget360
February 20, 2016

Wealth is an important measure of financial stability and success.  Being able to have enough set aside for a rainy day can make the difference between weathering a minor storm to being in full upheaval because of an unexpected expense.  Most Americans however live paycheck to paycheck.  There is no emergency fund.  It is troubling to see new data looking at the distribution of wealth in the United States because many Americans actually have a negative net worth.  New data looking at wealth distribution highlights a growing gulf between Americans.  Wealth inequality like that seen during the Gilded Age and the Roaring 20s led to massive disequilibrium that ended up in deep financial corrections.  We are very much in a situation that rivals that period only this time the public is able to go into negative net worth territory through items like college loans, auto debt, and credit cards.  The percent of total wealth owned in the United States might surprise you.
Wealth in the United States
Wealth inequality is at record levels in the United States.  Most people don’t have a clue as to the percentage breakdown of wealth owned in the country.  New data released highlights a troubling scenario where the bottom 40 percent of Americans are actually in a negative net worth situation.
Take a look at the wealth breakdown here:

Source:  Harvard Gazette
“(Harvard Gazette) The details show that real wages for most U.S. workers have been relatively stagnant since the 1970s, while those for the top 1 percent have increased 156 percent, and those for the top 0.1 percent have increased 362 percent, according to a report by the Economic Policy Institute.
Those trends resulted in the poorest 20 percent of Americans receiving just 3.6 percent of the national income in 2014, down from 5.7 percent in 1974. The upper 20 percent, meanwhile, received nearly half of U.S. income in 2014, up from about 40 percent in 1974, according to Census Bureau statistics.”
This is what happens when wage growth disappears and inflation continues to expand.  To keep up the pretense that the middle class was thriving debt products allowed people to spend money they don’t have.  This is how the bottom 40 percent of Americans actually own negative wealth.  They simply have more debt than assets.
The story of the last financial crisis was one of too much debt.  As it happens, we have now surpassed that point once again:

The economy has been revived by more debt in the form of college loans, auto debt (subprime as well), housing debt, and credit card debt.  All of these debt sectors are up.  What the new data on wealth distribution highlights is that most of the wealth is controlled by the top 20 percent (88.9 percent of all U.S. wealth).  The distribution is getting more heavily tilted.
Many people realize that debt is not wealth but many don’t make the distinction.  If you buy a $30,000 car and finance the entire purchase, after one year it is likely that you will owe more on the car than it is worth.  Forget about the financing charges going to the lender.  Or taking on too much student loan debt.  These are all ways many people fall into a negative net worth trap.  In the end, the wealth distribution highlights one glaring fact: those at the top are controlling more and more wealth and we have also seen the middle class now become a minority.

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