Today, the Federal Reserve released its triennial Survey of Consumer Finances (SCF) which collects information about family incomes, net worth, balance sheet components, credit use, and other financial outcomes. A superficial flip through the first few pages of the 2016 SCF as most will do, reveals “broad-based gains in income and net worth since the previous time the survey was conducted, in 2013” as the Fed puts it. Unfortunately, reading between the lines reveals that while net worth and income did increase in the past three years, it was exclusively for the “top 10%” of Americans. The “bottom 90%” got virtually nothing of this so-called recovery.
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First, here is the report’s summary, taken verbatim and meant to demonstrate just what a great job at “wealth creation” the Fed is doing:
- Between 2013 and 2016, median family income grew 10 percent, and mean family income grew 14 percent
- Families throughout the income distribution experienced gains in average real incomes between 2013 and 2016, reversing the trend from 2010 to 2013, when real incomes fell or remained stagnant for all but the top of the income distribution.
- Families without a high school diploma and nonwhite and Hispanic families experienced larger proportional gains in incomes than other families between 2013 and 2016, although more-educated families and white non-Hispanic families continue to have higher incomes than other families.
So far, so good. However, the next bullet is the first troubling admission that not all is well:
- Families at the top of the income distribution saw larger gains in income between 2013 and 2016 than other families, consistent with widening income inequality.
Considering that one of the longest-running themes on this website has been the destruction of the middle class by the Fed, and the unprecedented transfer of wealth from the lower and middle-classes to wealthiest as a result of trillions in global, coordinated QE, we decided to focus on the bolded bullet. Luckily, the Fed did most of the work for us, and as the report’s authors write in a sidebar titled “Recent Trends in the Distribution of Income and Wealth”, the Fed authors admit that “The distribution of income and wealth has grown increasingly unequal in recent years. The Survey of Consumer Finances (SCF) has played a crucial role in our understanding of these trends because the survey collects data on net worth in addition to income, and it pays particular attention to sampling affluent families.”
First, a look at the distribution of income by various wealth buckets, “indicates that the shares of income and wealth held by affluent families have reached historically high levels since the modern SCF began in 1989.”
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Something strange is going on in the financial system. And according to The Wall Street Journal, it’s causing some investors to move massive amounts of money out of the banking system.
In case this is unclear, this is the Fed admitting that the rich have never made more money than they do now.
As the following chart shows, the share of income received by the top 1% of families was 20.3% in 2013 and rose to 23.8% in 2016. The top 1% of families now receives nearly as large a share of total income as the next highest 9 percent of families combined (percentiles 91 through 99), who received 26.5 percent of all income. This share has remained fairly stable over the past quarter of a century. Correspondingly, the rising income share of the top 1 percent mirrors the declining income share of the bottom 90 percent of the distribution, which fell to 49.7 percent in 2016, the lowest on record.
But while income may be bad, wealth is worse. Much worse.
As the next chart below shows, the wealth share of the top 1% climbed from 36.3% in 2013 to 38.6% in 2016, a record high, and surpassing the wealth share of the next highest 9 percent of families
combined.
Meanwhile, as the super rich made more money and accumulated more wealth than ever, the merely “rich” have been left in the dust, and after rising over the second half of the 1990s and most of the 2000s, the wealth share of the “next highest 9%” of families has been falling since 2010, reaching 38.5% in 2016.
As for America’s peasantry, which the Fed defines as the “bottom 90%” of the population, and what some others may have once called the middle-class, it has been falling over most of the past 25 years, dropping from 33.2% in 1989 to 22.8% in 2016.
Said otherwise, the share of overall wealth held by the “top 1%” of Americans is 38.6%, while that held by the bottom 90% is 22.8%, which means that the wealthiest 1% of the US population is now 70% richer than the bottom 90%.
All of this is thanks to the Fed and the biggest asset bubble that 3 QEs worth of liquidity injections could buy. At least it is the Fed itself that provides the data, so it can’t complain that someone didn’t use the right seasonal adjustment to calculate the “mysterious”, “transitory” data.
* * *
And just in case readers are still not convinced what a bang up job the Fed has done to create the greatest wealth redistribution in history, here is a chart showing the mean net worth value of families over the past 10 triennial surveys, broken down by quintile and, in the case of the top 20%, by decile.
Here is the punchline: in the period 2007-2016, or since the peak of the last financial bubble, 80% of America has seen its net worth decline, except of course for the top 20%. As the Fed points out, when calculated in 2016 dollars, the net worth of families in the 80%-90% bucket has increased by roughly $65,700. But it’s the “top 10%” where the bulk of the wealth creation has gone, and as the chart below shows, while 80% of America has seen its worth shrink since the peak of the last financial crisis, the wealthiest 10% have seen a $710,000 growth in their net worth.
And yes, this is why America is angry, and why the Fed is so happy that the nation is divided in an ever more rancorous left-right split, instead of shifting its focus to the real culprit behind the devastation of the American middle class: the Federal Reserve.
Well no shit average middle class working people with trained skill sets and decades of experience were thrown under the bus by this nations actions over 40 years ago .
You cannot point a finger at just one section of the American economic framework , you must look at who controls what where and when and who benefits . Crony capitalism , the never ending circle jerk between Wall Street , K-Street and Capitol Street . The tax base has been hollowed out and now the public pension crisis , SURPRISE ! The circle jerk group bailed each other out and handed the bill (national debt including unfunded mandates) to the very people who were damaged the most by the previous 40 years of deliberate financial jury rigging in nearly every government office from local to fed . The best line I have heard recently is my life savings that has earned nothing and real property value that has been falsely run up in value are now considered by government at all levels as “untapped resources”!
You think these assholes are done LMAO !
The powers that be are about to tax us great unwashed into the street to pay salaries and retirement to the very people putting us in the street with nothing . Don’t worry they have their combined excuse all lined up . Sorry “I’m just doing my job” BOHICA
Good article and spot on.
Well I’m about ready to go in for my Bypass surgery today. Strange feeling . Only thing I’m really worried about is little bb.I love that cat for some reason.
God bless and keep you BB. These earthly shells can be hell to maintain. I pray that all goes smoothly, that you get a gifted doctor and recover quickly.
PS: Great article too–I think I’ll print half a dozen copies for the few liberal zealots and union dems I know who are always trying to tell me about the “Obama recovery”
Good luck BB.
I pray your surgery will be a great success and you will feel better soon.
I think Vilfredo Pareto discovered this phenomenon (80/20 rule aka Pareto principle) over 100 years ago.
https://en.wikipedia.org/wiki/Vilfredo_Pareto
Wonder how the bottom 90% compare to the world population in general?
The bottom 90% aren’t living in Bangladesh. They’re living in the U.S. with U.S. level expenses.
And a US lifestyle.
A lot of people – people with substantial six figure household incomes – choose to spend every last nickel they earn – and then some. They replace perfectly adequate working vehicles with new ones. They eat most of their meals from restaurants. They buy boats and snowmobiles and four-wheelers and RV’s. They take vacations in Cancun and the Caribbean. They renovate perfectly acceptable houses. They take their kids to Disneyworld. Seventeen years after they bought their house they owe twice as much against it as they’d initially paid. If their kids go to college, they actually get financial aid PRECISELY BECAUSE they hadn’t saved any money. I seriously do not give a single fuck about these people’s supposed woes.
There are a lot of people I have sympathy for – people with mental illnesses, people who are so goddamned stupid that they have no earthly idea how to make anything better.
The bottom half have zero. Including them in any comparison is pointless.
It does not matter what a person’s income gains are. What matters is what your income gain is compared to your neighbor’s.
Each of us is in competition with each other. If my income went up $20,000 per year but my neighbors income went up $100,000 per year, I lose because he can outbid me for anything or any asset.
This is the overall plan by the elite in my opinion.
The problems for the elite are 1) staying elite 2) ensuring their progeny has a seat at the elite table for all eternity 3) over population causing the elite great harm in that they have to share 4) white people since they/we have the best mix of intelligence, altruism and moral values.
Now, how do they solve these problems? In a short explanation I will say they will do with people as they have done with money. Bad money drives out good money. They are doing the same with people.
The unintelligent, immoral and gimme dats are having all the kids while the deplorables are drowning themselves out by trying to do the right things.
So, 1) get hard working, moral and intelligent women into the workforce. This has increased their power and economic control. 2) support the gimme dats with the welfare state. This increases the numbers of gimme dats. They are stupid and easily manipulated. This is, of course, very good for the elite. 3) having 2 wage earners may have helped at first but not anymore. You now have to have 2 wage earners just to get by. This is very good for the elite because the price of just about everything went up because of it. 4) now the final result will be the elite buy up everything possible and protect it with laws, fences, security forces etc. The gimme dats (bad money) replace the good money (unelite intelligent). The gimme dats will hang out and shoot each other at the trashcan deli. All the while the elite party on because they control anything worth a shit through money creation/manipulation and control over the top technology. Especially weapons technology.
Am I very far off?
Simple solution – END THE FED, ban all future central banking, abolish the criminal/fraudulent practice of fractional reserve banking, abolish ALL legal tender laws, allow ALL currencies to circulate freely and be documented in contracts, and abolish ALL taxes on gold/silver/platinum/palladium. The government has ONLY ONE FUNCTION with regards to money – to insure the accuracy of weights and to prosecute fraud (if they are to have any role whatsoever).
It’s all one big club and we ain’t in it. The problems are never solved because somewhere someone is making money off the problems. A long time ago (so don’t quote me) I read an article about the economically identified classes in America during the last of the 19th century, there were around a dozen or so. Wretched poor, working poor, lower class, middle lower class, upper lower class, lower middle class, middle class, upper middle class, upper class, rich, wealthy, independently wealthy and affluent; don’t know but I would guess we have lost a few categories along the way. A lot of people bemoan the loss of the middle class which I don’t disagree with but what bothers me is the loss of upward mobility. With the countless forms of taxes, the endless regulations, fractionalized banking and fiat currency how does a person advance economically? America is based on two things now, ignorance and conspicuous consumption; they want us smart enough to make a little money so we can buy stuff but stupid enough to define ourselves by what we purchase. Kennedy wanted to break the CIA into a thousand pieces and end the Federal Reserve, how did that work out for him? If they can kill a President and get away with it, what chance would the little people have of making lasting change? I am an old fart and remember when most houses didn’t have air conditioning, families had one car, one phone maybe a party-line, maybe one TV which quit broadcasting at night, few people were divorced and many families had one provider and those days are gone. We have become slaves to our possessions and credit cards. People are keeping up with the Joneses but the Joneses are broke and stupid. I used to work with a man who was an executive with a large health system and his wife was a lawyer, he told me the interest on their credit cards was $700 a month twenty years ago!! I think a person can still prosper nominally if he is purposeful but the odds are against him and he needs to turn his back on his peers.
There isn’t much meat left on the economic bone.
I have lost everything twice now. So I guess you could say 3rd time’s a charm. So on the third try I am going to hit the top 1% of earners this year. So stop whining get up off your ass and produce something of value that others want and you too can make into the top 1%.
With each failure I learned and have never stopped learning. The difference is I never stopped trying. I’ve listened, learned, studied and worked my ass off. There is a reason why most of the money ends up in the hands of 1%. It’s damn hard to get there and even harder to maintain. I venture to say most 1%’s work 80+ hours per week to keep things going.
I had one business that from the outside looked extremely successful, but it was all show and once I could no longer rob Peter to pay Paul things collapsed rather quickly. I tried again, but employed too many of the same principles that lead to to first failure.
This last time? I had $10,000 in the bank to live on for 4 months in Southern CA. I borrowed 12k at stupid interest to start the company. I fed and clothed my family, worked out favorable payment terms with customers, and ran a lean mean machine because I had no choice.
I continue to run a very lean company. I will have paid all previous debt by the end of the year and still hit the 1%. Is it for everyone? Can everyone take the risks I took and fail and get up and fail and get up again? No. It’s not for everyone and that’s why only 1% get there. But don’t whine to me about your lot in life. I’ve worked my ass off and taken many a risk to get here.
Life is never going to be fair. Are there inequities in life? You bet. I can either decide to be a victim or not. I can see inequities and choose to walk around them or I can sit and wallow in them. I face unfair regulations every day. Big business can afford a 6-figure salary employee or whole department to deal with the regulations. I can’t. I can stop and say “It’s just too hard”……. Or I can figure out a work around. I have to spend valuable time learning and studying how to comply and still get the job done.
Do I want to see things change so it is easier for me to compete? Absolutely, but I am not going to let that stop me. And that’s it folks. What is stopping you? If this isn’t the life for you that is fine. It is not right, wrong good or bad. It just is what it is.
OK, sounds like exactly what I was told many years ago and exactly what I told my kids.
So, what is the point in bitching about ANYTHING?
great post
Turd Durden strikes again, strikes out as always. Since when do rich people have to apologize for being rich? Should someone who makes fifty dollars and hour have to apologize to someone making minimum wage. No, they shouldn’t, and neither should billionaires have to apologize for their success. Poor people are poor because they are fucking idiots, it’s as simple as that. Idiots finance things, pay other people interest on borrowed money simply because the puke brains couldn’t wait to get what they wanted. So, instead they get what they deserved. The intentional poor in this country are so fucking addicted to buying ‘things’ that they can’t save a stinking dime. This morning at McDonalds, where I always go to get a senor cup of coffee, 64 cents, tax included, but nothing to eat for myself, and damned if there wasn’t a single mother in the line that ordered $17.89 worth of junk food breakfast for herself and three bastard kids. Guaranteed she was back at another drive through for lunch and supper. This financially self destructive shit multiplies itself millions upon millions of times each day in ‘too frigging lazy to stay home and cook’ Pofolkamerica. Another example is this male friend of mind, and no we don’t shower together, barely qualified for a $15,000 loan to purchase a small plot of land. The banker told him emphatically not to purchase anything else on credit, and not to even use his Visa or MasterCard until the loan was complete. I’ll be damned if he didn’t let the local ATV Dealership talk him into buying a $9000.00 dollar machine just because it was going to cost $600.00 to replace the starter clutch in the old one. And the idiot brags that his payment in only $250.00 a month (60 months). Oh, by the way, today his banker told him the loan was now being denied because of the new debt. And my friend wonders why. By the way, this 40 year old friend makes just short of $100,000.00 annually.People have ceased to have the most minimal amount of adulthood and responsibilities related thereof, and have morffed into nothing more than life support systems for dicks, pussies, egos and stomachs. And it is financially fucking terminal. thanks
I’m preeety sure you’d find many a billionaire who either didn’t earn it themselves (inheritance. I’m not making a judgement btw.) or greased the right palms or other unsavory things.
The Kennedys made their fortune running alcohol, correct? Correct me if I’m wrong.
Also, does money talk when a rich person finds themselves and/or friends in a bind? As in, if I break the law to make millions and then I only get fined thousands.