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.
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 qualitycollege 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 thetop 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:
At the same time the stock market has done this:
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.
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