Wealth in the U.S. continues to accumulate into fewer hands. A recent Congressional Budget Office report showed that the top 10% of U.S. families now control 76% of total wealth. That is a massive amount considering total family wealth is at $67 trillion. Wealth inequality continues to expand and is creating deeper divides in our political landscape. Consider the other side of the coin where half of U.S. families don’t even own one stock. Is it a good thing that wealth is concentrating in fewer hands? It depends on who you ask but wealth inequality of this level was last seen in the Roaring 20s right before entering into the Great Depression. People forget how quickly fortunes can turn. Yet many Americans today are already struggling deeply financially. The end result is a nation that is frustrated with the system since it doesn’t feel like it represents their needs.
The wealth divide
It is worth noting that having wealth inequality of this magnitude in the U.S. actually has never resulted in having a large middle class. The middle class occurred during a period when wealth inequality was much lower – it was also a rare point in history.
First, it is worth looking at a chart of wealth inequality in the U.S. over 100 years:
The Great Depression was horrible for a poor person. For the rich, many lost money and certainly had to live with less. What is interesting about our latest financial crisis is that the wealthiest in our country lost the least and regained most of their wealth the fastest. This is largely due to the bailouts targeting the asset classes that most have within large banking institutions.
The middle class and working class in this country continue to have a tough time as they are thrown into a system where debt is a way of life. You want to go to college? You will likely need student loans. Want to buy a home? You need a mortgage. Need a car? Take this auto loan. The days of being frugal and saving to even buy a car for example are long gone. The system is juiced with debt and most people are simply living day to day barely making enough to service their debt.
This growth in net worth has largely occurred for a small segment of society:
The bottom 60% saw no real gains to their net worth between 1983 and 2010. But look at the gains at the top. What is going on here? What has happened over the last generation is the slow dismantling of the middle class. When most of Congress is made up by millionaires, it should come as no surprise where their interests will be.
Most of the real gains in net worth occurred at the top 10 percent of the spectrum. And with fewer people owning homes thanks to big investors buying properties, the one vehicle for building wealth for most Americans is now too expensive.
This almost ensures that this pattern is going to continue short of some kind of deep change in the system. At least we know where the gains are going.