I Now Track the Most Important Measure of the Fed’s Economy: the “Wealth Effect” and How it Impacts Americans Individually

The Fed provides the data quarterly, I dissect it at the stunning per-capita level.

By Wolf Richter for WOLF STREET.

The Federal Reserve is pursuing monetary policies that are explicitly designed to inflate asset prices. The rationalization is that ballooning asset prices will create the “wealth effect.” This is a concept Janet Yellen, when she was still president of the San Francisco Fed, propagated in a paper. In 2010, Fed Chair Ben Bernanke explained the wealth effect to the American people in a Washington Post editorial. And in early 2020, Fed Chair Jerome Powell pushed the wealth effect all the way to miracle levels.

Today we will see the per-capita progress of that wealth effect – what it means and what it accomplishes – based on the Fed’s wealth distribution data through Q4 2020, and based on Census Bureau estimates for the US population over the years. Here are some key results. At the end of 2020, the per-capita wealth (assets minus debts) of:

  • The 1% = $11.7 million per person (green);
  • The next 9% = $1.6 million per person (blue);
  • The 50% to 90% = $263,016 per person (red line at the bottom).
  • The bottom 50% = $15,027 per person. That amount of wealth is so small it doesn’t show up on this per-capita chart that is on a scale of wealth that accommodates the 1%.

The total population in 2020, according to the Census Bureau, was 330 million people. The 1% amount to 3.3 million people. Back in 2000, the population was 283 million people, and the 1% amounted to 2.8 million people. So the 1% has grown by 473,000 people because the population has gotten larger. And the 50% – the have-nots, as we’ll see in a moment – have grown by 24 million people.

Among the bottom 50%, there are still large differences: The group ranges from the homeless and the desperately poor, to those at the upper levels of the bottom 50% that have a small-ish 401k and some equity in a house.

The chart below shows the wealth of the bottom 50% (purple line) on the scale of the 50%-90% (red line). At the end of 2020, the per-capita wealth of the bottom 50% was $15,027.  Note that this “wealth” of the bottom 50% has grown by only $5,000 in 20 years, as all other wealth levels, even the 50%-90%, have pulled away, thanks to the Fed’s policies of asset price inflation.

This “wealth,” if you can call it that, is not adjusted for inflation. In real terms, adjusted for inflation over the past 20 years, it looks a lot worse for the bottom 50%:

That wealth of the bottom 50% is composed of $45,866 in assets minus $30,383 in debts per capita.

Real estate is the largest category at $23,457 per person (black line in the chart below). What this means is that relatively few households in the bottom 50% own real estate.

So when the Fed inflates the housing market, most people in the bottom 50% don’t benefit because they don’t own a home. But they have to pay more to rent, and they get further locked out from buying a home.

The second largest category at the bottom 50% is durable goods of $8,899 per person, such as appliances, cars, and cellphones (green line). That amount ticked up over the last three quarters as folks used their stimmies from the government (not the Fed) to buy some durable goods.

Stocks and mutual funds, the smallest category of the assets, account for only $1,131 per person (red line). So when the Fed inflates the stock market, the bottom 50% don’t benefit at all. That’s reserved for the top 10%:

But the bottom 50% do have a lot of debt, relatively speaking, particularly consumer debt – auto loans, student loans, and revolving debt such as credit cards. In 2018, on a per-capita level, the amount in consumer debt and other debt surpassed mortgage debt and reached $15,990 per person at the end of 2020:

The wealth effect was designed for the top 10%. At the bottom 50%, their financial well-being got intentionally gutted by the higher costs of living that the Fed’s asset price inflation has caused.

In 2017, Fed Chair Yellen saw perhaps that the wealth effect had gone far enough and started backing off by reducing the balance sheet. And Fed Chair Jerome Powell continued backing off the wealth effect and reducing the balance sheet. But when stocks were spiraling down and long-term interest rates were surging, and mortgage rates hit 5%, and the housing market was starting to wobble, Trump, who’d taken ownership of the DOW, started lashing out at Powell amid rumors that he was discussing firing him. It didn’t take long for Powell to cave and do his infamous 180 in 2019.

And then in the spring of 2020, Powell showed his true colors as the wealthy suddenly found themselves a little less wealthy. All heck broke loose at the Fed to correct that oversight and push the wealth of the top 10% to new historic highs and thereby push the disparity between the top 10% and the rest of the Americans, and particularly the bottom 50%, into the stratosphere.

This is an effective way to tear a country apart.

Over the 12 months from the end of 2019 through the end of 2020, the wealth of the top 10% increased by $409,000 per person, thanks to the Fed.

Over the same period, the “wealth” of the bottom 50% increased by $3,152 per person, largely due the crumbs handed out by the government (not the Fed), including the stimmies.

And the wealth disparity between the top 10% and the bottom 50% soared by over $400,000 per person to a new historic high.

Not to speak of the wealth disparity between the 1% and the bottom 50% that ballooned by $1.1 million per person.

The Fed is trying to cover it up with its ludicrous rhetoric. Politicians in Washington of all stripes – who could stop the Fed’s policies with legislation – are fully on board with the wealth effect because they’re among the primary beneficiaries. And to heck with the bottom 50%.

Not even populists on the left and the right, whose base is getting hit over the head on a daily basis by the wealth effect, are decrying the Fed’s policies. On the contrary.

There is now one nuance of difference between the left and the right in terms of the wealth effect: Now the left wants the top 10% to surrender a few crumbs of the wealth effect to the bottom 50%, which has triggered an outcry on the right. But beyond the outcry over a few crumbs, they’re all singing wealth-effect hallelujah from the same page of the Fed’s song book.

In an op-ed, Powell rationalized and defended these policies. Gimmie a break, will ya? Read...Powell in WSJ Op-ed: “I Truly Believe that We [the Rich] Will Emerge from this Crisis Stronger and Better, as We [the Rich] Have Done so Often Before”

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  333 comments for “I Now Track the Most Important Measure of the Fed’s Economy: the “Wealth Effect” and How it Impacts Americans Individually

  1. VintageVNvet says:

    Thanks once again for the excellent reporting Wolf!
    My only question is, are these numbers means or medians per capita?
    I may have missed that detail, but it does seem relevant with these huge and getting more huge differences.

    • Wolf Richter says:

      VintageVNvet,

      Average (mean) per capita: dollars of that category divided by the number of people in that category.

      Since this is broken into levels (1%, next 9%, etc.), the differences (pros and cons) of median v average within each level are not as significant as they would be for the population overall where the 1% and the bottom 50% and everyone in between would be in the same bucket.

      • MCH says:

        To distill all of the down, we have over the last 20 years turned the US into What looks like a 3rd world country in terms of wealth inequality.

        Wonderful, this effect really accelerated since 2008 from the initial chart, but looks like it had its start in 2003 but has a bump in 2007 and 2008. Wonder what happened that year to start this process along. The bottom 50% really got whacked because of it. Or rather the Fed kept the bottom 50% down. One wonders how many people even realizes this.

        • ru82 says:

          Yep. Everything is becoming a monopoly. All the productive money leaves your community.

          Money would stay in the community if people would shop at their local mom and pop stores.

          Instead now you buy DIY at Home Depot. The profit leaves your community money goes to Atlanta and Wall Street

          You buy coffee at Starbucks or Dunkin Donutes it leaves your community.

          You buy junk at Walmart, Target, or Amazon, the profit leaves your community.

          You buy food at a chain resturant, the profits leave your community.

          I grew up in a small town that did not allow Pizza Hut, Walmart, McDonald to enter The small town kept the nice main street with local stores and shops. The upper middle class was the mom and pop business owners. They donated to the local community baseball teams, etc.

          The two town both 30 miles on each side allowed Walmart, Pizza Hut, and McDonalds to move in. Within two years after Walmart moved in the down towns were 60% boarded up. You could see the picket fences on the housed not being painted.

          It is time incentives for local community mom and pop stores are implemented. They need to do what they did for the internet online shopping and allow local stores to not charge sales tax.

        • twh says:

          This economic effect would also (partially) explain the increasingly 3rd-world-like politics in the U.S.

        • Jack says:

          MCH

          how to reverse the trend and really really make AMERICA great again?

          Read. (ru82)’s comment below.

        • ElbowWilham says:

          2003 – Peak conventional oil started to plateau.

        • Dirk says:

          ru82, speaking of money leaving the community, don’t forget that money spent locally through what’s called the MULTIPLIER EFFECT circulates and recirculates around Eight times, hiring people, being taxed, buying local things, before finally drifting away via big box store spending.

          What do you think the effect of immigrants, legal and illegal, sending hundreds of billions a year out of our local economies is?

          In 2016, $28.6 billion in remittances flowed to Mexico (up 9.3% from the previous year) – a total that accounted for over a third of remittances to all of Latin America and the Caribbean. After Mexico, Guatemala ($7.5 billion), the Dominican Republic ($5.5 billion) and Colombia ($4.9 billion) received the highest amounts of remittances in the Latin America and Caribbean region in 2016.

          Worldwide, Mexico ranks fourth in remittances sent by migrants, behind India ($62.7 billion), China ($61.0 billion) and the Philippines ($31.1 billion). Together, these four countries accounted for almost a third of all remittances sent in 2016.

          Gee, wonder why so many communities don’t have stores and are food deserts? The money to support them has left town and the country.

      • GR says:

        So these are not the upper bounds as I understand, just average.
        i.e. The guy at the 90th percentile doesn’t have $263k
        Its all the people between 50th and 90th percentile on an average have $263k. So if we assume an even distribution within the bracket, then its most likely that the person at 75% percentile is the one whose wealth is $263k. The person at the 90th is probably much higher.
        The same applies for other brackets. The average 1%-er has $11.7 million but thats the guy in the middle.. so the bar to enter the 1% is probably lower than that.

    • Morty Mc Mort says:

      One possible image for the “Trickle Down Effect” has been proposed by the underclasses as of late…
      A member of the 1% stands on a large Executive Type Desk…
      Gleefully Urinates on a pack of servile underlings…
      As they open their mouths and beg for a few more drops…

      THE TRICKLE DOWN EFFECT.

      There… that should help you..

      • historicus says:

        Curious that the Fed actually thinks a 1% or even 2% interest rate would harm employment.
        Ridiculous.
        Those incremental changes, those levels of borrowing likely have NOTHING to do with hiring.
        Lumber, copper and the soaring prices of other commodities likely put more people on the sidelines.

        Central Planners INTENTIONALLY assist one group at the EXPENSE of another…..Hayek.
        Its been 12 years now of the same being helped at the expense of the others. All by design, all to the harm of those who did nothing wrong but save their money. Shame on them, huh?

        • MiTurn says:

          “Curious that the Fed actually thinks a 1% or even 2% interest rate would harm employment.”

          Our dear leaders at the Fed need to take a course in high school economics.

          ‘Gentlemen, this is a football.’

      • Chris G says:

        Another version is how John Kenneth Galbraith put it:

        “The theory is that if you feed enough oats to the horses some will pass through to the sparrows along the way.”

  2. Depth Charge says:

    This is what happens when you reward speculation and not hard work. It used to be said that the FED’s job was to take away the punch bowl when the party got started. That has morphed into “all you can drink,” with a shooting gallery in the back room. Jerome Weimar Boy Powell is an economic terrorist and enemy of the American people.

    • Maximus Minimus says:

      When we personalize it, let’s not forget all the previous charlatans. This started some thirty years ago. Chairman Powell is just one not too smart or imaginative follower.

      • bungee says:

        right. this is systemic, not a personal failure. a fed chair isn’t going to risk power vacuums. anyone who would even think about thinking about doing so won’t be allowed near the controls. it’s the part of the cycle called the end. stay ice-cold through this and have a plan. blood-lust will bring you nothing but trouble. find people you can trust.

    • historicus says:

      Depth…
      Indeed.
      The providers of services, the workers of this nation are being poorly served by this Fed.
      Those who wake up and wonder how much the stock market will be up today, and how much money they will make without getting out of bed, well served.
      Now comes the eventual inflation that will crush and pound those working families.
      It will first be explained away…..shortages, etc.
      Next it will be described as a sign of healthy economic activity.
      Finally, it will be waved at by a slow moving Fed that will issue 1/4pt raises, well behind the curve.
      When the prices of pitchforks and torches soar, then the time to pay the devil.

    • Swamp Creature says:

      DC

      Well said

  3. Depth Charge says:

    Trickle down economics = trickle up poverty.

    • MonkeyBusiness says:

      Water flows down.
      Wealth flows up.

      • doug sweeney says:

        Great article But this article would bring the current financial state of the U.S. population ,into sharper focus, if the graphs were adjusted for inflation

        • Wolf Richter says:

          Yes, on a CPI adjusted basis (per BLS inflation calculator), the bottom 50% lost about $1,000 in wealth over the period of the charts. In other words, adjusted for CPI, they’re worse off today than in 1989.

        • WES says:

          Doug:

          Your request is easy to fulfill! Just tilt the “grafts” down to the right!

          The correct amount of tilt is reached when the top 1%’s slope becomes horizontal!

          Then all horizontal lines are nicely slope downward!

  4. Depth Charge says:

    Nancy Pelosi proudly proclaimed there was “a floor under the stock market” as she went on a stock buying spree herself. You get what you vote for.

    • Zantetsu says:

      Because the article already pointed out the fact that politicians across the board are prime causes of this problem, choosing a particular politician to single out, especially one that is so often made a target of derision by one party and so staunchly defended by the other, would seem to be politically motivated.

    • john says:

      So what do you do? It’s simple, Buy Stocks.

    • Jack says:

      Depth Charge

      Excellent point, that is painful to observe .

      I continue to hope against hope that the people, the citizens of this country;

      STOP self pity, cross the ( artificial divide that is imposed on them by the asinine politics of destruction by both sides of politics)

      and understand that if they don’t join forces and topple the current system of deep corruption,

      in a few years time they will have NO country to hand over to their children and grandchildren.

      • w says:

        Yep,actually many plebes know this Very well.Talk of International Amazon union movement is encouraging,though I think it may hasten the human demise in favor of more artificial workers who buy 0. Been saying for decades:but local and used if at all.Hire union members if possible.Hire Americans,your fellow citizens and taxpayers,english speakers.Stop sending $ to China,bigbox stores,wealthy overlords who get Insane taxbreak. while paying slave wages.

  5. Depth Charge says:

    “Regulatory capture.” It’s what’s for dinner.

  6. jrmcdowell says:

    One of the great drivers of the wealth effect being orchestrated by the Fed is quantitative easing. But the entire underlying concept of QE is completely ludicrous and makes a mockery of forthright debt issuance.

    Governments print money to buy their own debt in order to 1) lower interest rates, 2) lessen the debt burden by effectively eliminating interest payments on the monetized portion of debt, 3) depreciate the currency, 4) provide windfall gains to bond holders, and most importantly, 5) line the pockets of the rich through asset-price inflation.

    How in the world did this three-card monte scheme become the de facto financial policy of the entire globe?

    • Depth Charge says:

      The US and Great Britain peddled this scam to the entire world. But when you boil it all down, it’s really nothing different than we’ve seen throughout the history of mankind. It’s the wealthy controlling everybody else while they live like kings at society’s expense.

      • MiTurn says:

        Agreed. From a historical perspective — across time and cultures — what you described is the norm.

    • historicus says:

      jrm..

      Think of this upside down arrangement.
      The Fed pushes for 2-2.5% inflation. That rips 22 to 28% respectively off the dollar in ten years. (stable prices?)
      The Fed then runs out and buys federal paper at well under their inflation target. Five years at .5%, ten years at 1.65%, MBSs at under 3%.
      So the Fed is lending BELOW their inflation rate target. Why?
      We can suspect.
      The Fed is instructed by their mandates to FIGHT inflation, not to promote it! And not one Congressman has pointed this out.

  7. Wolf Richter says:

    Dear Readers and Commenters,

    As Peak Prosperity is getting spun off from the parent company, my interviews that used to be on Peak Prosperity are now on Wealthion which now has it own YouTube channel. This new YouTube channel where my future interviews – and those of other regulars — will appear is:

    https://www.youtube.com/c/Wealthion/videos

    To subscribe and be the first to see the interviews, go to Wealthion’s YouTube channel and click on the red “Subscribe” button. YouTube will then send you an email notification when a new video interview gets posted. Cheers.

    • Yancey Ward says:

      New bookmark installed.

    • Boomer says:

      Also enjoyed your 2 part discussion with Max and Stacy.

      • Auldyin says:

        So did I.
        I’ve followed Max&Stace on RT(UK) since they started years ago. That’s how I got to Wolfstreet.
        Wolf will choke them for that.
        Great show, never miss it.

    • Brant Lee says:

      I enjoyed your interview with Max Keiser. He uses your charts frequently.

  8. gorbachev says:

    Money has to come from somewhere. Either you
    print or you take from the poor or both. America has
    decided to do both. Since we won’t let the poor
    earn any real money-they can’t unionize, therefore
    have no benefits or pension-our only way out is universal basic income.

    • Tom S. says:

      Unions or no unions, if/when wages go up then temporary inflation has transitioned into permanent inflation.

      • Fat Chewer. says:

        Isn’t it funny how the rules of economics apply to the bottom 50%, not to the top 50%? The graph of debt vs income shows the official birth of the debt slave.

      • Wisdom Seeker says:

        Tom S – you’ve swallowed the brainwash. “Rising Wages = Inflation” is a false meme, or at least only true in limited circumstances.

        Wages went up for decades in the 1940s-1960s but there was little inflation because production was also going up.

        The emphasis should be on production not income. A people who are producing more become wealthier. So long as the distribution of that new wealth isn’t skewed, then everyone should benefit.

        Simply raising wages without increasing domestic production would be inflationary.

        Today’s economy doesn’t work well partly because the monopolies and grifters siphon off too much to the already-wealthy. Those doing the producing aren’t reaping enough of their output as income, so they can’t afford what they make. End result is that both demand and production stagnate and actually everyone ends up worse off.

        • Tom S. says:

          I do agree with you with regards to needing to be a producing nation. But, I think the scenario the white house and the fed are trying to avoid is if the inflation runs hot into 2022 then people will need raises to pay for gas and food and housing. Then we could enter this feedback loop where inflation expectations feed into higher prices and then interest rates can only do so much so quickly to tamp it down. Hence all the language about it being temporary.

          You are right that as production meets supply inflation should wane, and possibly quickly for example in automotive, but there are huge increases in raw material costs that haven’t made their way into final goods prices yet.

          Deeper still, where is the desire to produce? We are busy throwing cash into bitcoin and other nonsense because they’ve managed to kill the desire to innovate something useful. I’m no expert in economics, but I did read a neat white paper by Edmund Phelps about “dynamism” and it really makes me wonder what the next phase of American capitalism will bring.

      • historicus says:

        Wages wont be the driver unless the wages are set by government.
        Illegal immigration will otherwise damper wage increases.

  9. Yancey Ward says:

    As I have pointed out on several blogs, had the US government taken the extra $5 trillion it has appropriated and spent in the last year for COVID and simply written a check in the name of every individual resident of this country– 330 million people, it would amount to $15,100 per person. A family of four would have received $60,000 in the last year.

    How much did you get last year? I got $3,200 directly from the government, and I am a retired millionaire (in assets, not income). The question the citizens should be asking and aren’t, is where did the other $11,900 go? I, of course, received part of it as the increase in my stock and bond portfolio, but I am not the average or median citizen.

    • SpencerG says:

      Yeah, a big part of the problem here is that for the Great Recession you couldn’t get the Congress to spend the money necessary to boost the economy. What it did spend was largely misspent. It fell to the Fed to try to push the string and that has helped those who own assets but not the lower or middle classes.

      Sooner or later the Fed will take away the punch bowl and it will be interesting to see what happens then. My guess is that if Biden gets his infrastructure spending bill through then QT will not be far behind. All of that combined should shift these wealth effects a bit.

      • historicus says:

        “the Fed will take away the punch bowl ”

        Disagree. The punchbowl will be broken by too many drinking from it at the same time.
        The Fed will NEVER willfully take away the bowl. They may be forced to by inflation, but never to moderate that which they have set in motion. IMO
        Party on Jerome.

        • Jack says:

          historicus

          I agree!

          The will to do anything proactive to stymie the horrendous implications of the nuisance policies that have being prolific in the last 15 years in particular have all but disappeared.

          The key to solve a nation’s economic problems are in the hands of it’s legislators.

          Alas, with the kind of legislators that the country have elected in the last opportunity when given that hope have evaporated as well.

          There is going to be a shock that will be needed to awaken the dead.

          Otherwise it is a long long long night ahead.

      • Happy1 says:

        The problem is not ever “why didn’t the government spend more money “, this is not the function of government, you have bought into a false narrative. Recessions are necessary to allocate resources away from bubbles, the artificial suppression of recession is the problem.

    • MCH says:

      Stop asking these uncomfortable questions about where the money went. You just have to know it’s for the good of the people.

      🙄

      Remember it’s put to work paying off the hard working bosses in ways other than monetary compensation. If you have to ask, then you didn’t have the need to know

      🤪

      And yes, giving $60k to a family of four in the bottom 90% would have meant a great deal, but screw it, let’s give them something even better, price inflation. And by the way, still waiting for that awesome Mileage tax from Mayor Pete, cause that will help with inequality. Along with green credits for buying electric cars and increasing the gas tax cause you know, save the Earth.

      😝

      • polecat says:

        Were I to be endowed with telekinetic powers, I’d wish All the Banksters d##d. Tis a pity, thou ain’t ..

    • Zantetsu says:

      I got $0. Also I gave $15,000 of my stock market gains from last year to my mother and sister, who do not have enough money to invest in the stock market. It’s always an uncomfortable question to ask yourself how much of your own money is too much and should go to others, I’m not sure I got the answer right.

      On the one hand, I think the system we have is highly corrupted in favor of the rich. On the other hand, I think a large number of US citizens occupying that bottom 50% are not globally competitive because they are under-educated and under-disciplined. It is to some degree a vicious cycle.

      • Nate says:

        I figure that’s why so many of them are up in arms about cheap labor immigrants, it’s taking simple labor jobs opportunity away from them and what lifestyle they have managed to achieve. Retraining takes a lot of time and effort on all parties. I don’t know if our system is set up to be all that effective on that front. Don’t see it getting much better I gotta say.

      • Lisa says:

        They are scraping by. Not all uneducated. Just underpaid. Everyone has their talents and not all are respected or paid well. My husbands a teacher and ppl like to complain he’s overpaid. We both work and can’t afford to buy a house where we live and his job requires us to live in the City. Unless we want to live in a crime ridden neighborhood.

        • MiTurn says:

          Many are educated with worthless degrees; degrees for which there are few jobs available and little demand.

          Better said, perhaps a large percentage of our population is over-educated, in that there is no market for their ‘skills.’

    • Chris Herbert says:

      Neoliberal macro was designed specifically to protect and enhance the wealth of the already wealthy. It has done a magnificent job.

    • ElbowWilham says:

      My small business got $150,000 in PPP “loans.” I ended up not needing the money but it was forgiven anyway. I did not get any other stimulus as my reported income is too high.

      • Zantetsu says:

        Cripes how much more would you *expect* above and beyond $150,000 free money?

  10. Kurtismayfield says:

    I would love to see these charts divided into age groups to illustrate who is truly getting screwed by the Fed.

    The prospects for the under 40’s to live what was considered a middle class lifestyle must be dwindling fast.

    • Yancey Ward says:

      +1

    • josap says:

      All 3 of Hubby’s daughters are living a nice middle class to upper middle class life. The oldest is 42.

      • RightNYer says:

        Somehow, I suspect that the children of anyone on this board are not representative of America as a whole.

        • polecat says:

          THAT’$ for sure, RNYer!

          I’d bet all my sunken galleon quatloos that most folks are scrimpin and clawin they way down to third-world status. They just don’t quite grok it yet.

          When the propaganda finally fades, watch out!

          “Build better Backflips”

      • Kurtismayfield says:

        Anecdotes is not plural for data.

        • VintageVNvet says:

          That was formerly true for all kmf, but no longer:
          Around the middle of the 1970s, statisticians ”decided” that anecdotal information aggregated in the way they decided was correct WAS and IS data to be relied upon.
          ”And so it goes.” Per Kurt Vonnegut…
          Maybe that is what actually led to the apparent election of the ray gun guy, you know, that guy who was the POTUS who acted formerly for money, and ”ratted out” many of his colleagues for the fame,,
          and then kept acting to front for all those who wanted to start the process to steal the money from all WE the PEEDONS workers and give it to his rich and richer puppet masters…

        • 91B20 1stCav (AUS) says:

          aw, Kurtis-, you’re such a buzzkill…

          may we all find a better day.

    • Paulo says:

      It really depends on training and education….plus timing and location.

      My kids are doing great as well, oldest 41, youngest 37. But they are also educated/well trained and don’t carry debt.

      What I have really noticed is that there is virtually no opportunity for anyone without a foundation of skills and experience. For example, the job my father in law did throughout life, which saw him into retirement with a very good wage and pension, does not exist anymore. Many jobs are now automated or off-shored. Young people we know are floundering and there are scant good jobs for them to luck into. It takes a family effort to get kids on track and Lord help anyone who falls by the wayside for awhile. It is scary tough out there for anyone vulnerable without a family lifeline.

    • Brian says:

      If you go to the link Wolf gave out you can see the data like that. The baby boomers have significantly increased their share.

    • ctcarver says:

      I was thinking the same thing. There are bound to be people in the bottom 50% that are 0 to negative net worth due to being in school, or debt from school. And I assume the top 10% skews much older as it takes time to accumulate that kind of net worth unless you are born into it or get lucky at a startup.

      I have heard that a child born into the lowest income quartile in the US has only a 50% of reaching the second income quartile in their lifetime. I have also heard that near 50% of boomers have no retirement savings.

      It would be interesting to make comparisons with some measure of economic mobility included.

  11. Crush the Peasants! says:

    Growth of wealth percentiles can be impacted by immigration, procreation, and transition. Also, mortality on the exiting side. It might be nice to see the contribution of these factors to changes in the growth of the weallth percentiles. In my case, I have definitely transitioned, and can absolutely say that in the USA with hard work, persistence, stable family environment, and luck, you can certainly rise into higher wealth percentiles.

    • Wolf Richter says:

      Crush the Peasants!

      The bottom 50% cannot rise above the bottom 50%. That’s mathematically not possible. There will always be a bottom 50% in every society. But why does the Fed have to try so hard to enrich the top 10% to create this mind-boggling and destabilizing wealth inequality? That’s the issue here. So for just one minute, look beyond your own stocks and see what the Fed is doing.

      But hey, given your purposeful alias — “Crush the Peasants, exclamation mark” — that’s too much to ask obviously.

      • Swamp Creature says:

        Add to that, why did the last administration and Congress squander the opportunity to enact meaningful reforms and instead passed that ridiculous 2017 Tax cut and Jobs act which only increased the wealth inequality further. Pushed up asset prices and took away middle class tax deductions.

        • MCH says:

          Yep, give me back my SALT… that means you JB and KH.

          Seriously though, one impact of of the changes in deduction is that it probably helped the lower 90% more than the old code did.

        • Swamp Creature says:

          And give us back our personal exemptions, $8,400 for two which were taken away. What a con job that tax bill was, an no one is talking about it.

        • MCH says:

          It entirely depends on which state you live in and how much you make. I know this, I would be better off under the prior tax scheme since I live in CA. But I also know people who are better off under the new Trump tax scheme because of the standard 12k/24k deduction scheme. It helped out the middle of America, the coast, it depends who you ask.

        • A says:

          It’s not complicated who benefitted from the 2017 tax scam. Everyone in the 0.1% is laughing to the bank while the plebes argue about how they know a guy in a different state who might have come out ahead by $50.

        • Swamp Creature says:

          Let me say this. I’ve been doing my own taxes for 30+ years. The 2017 Tax cut screwed me and most middle class folks who have been paying their fair share and playing by the rules. I don’t care whether its a red state or blue state. One big medical bill from some illness in your family and you are SOL because you lost the medical deduction alone. Forget about the other lost deductions Forget about SALT. You’re screwed and don’t even know it.

        • Happy1 says:

          The 2017 reform largely benefitted the bottom 50% by enlarging the standard deduction and greatly simplified taxes for most people, more than 80% of returns now utilize the standard deduction.

          The 1% didn’t gain much because the Capital gains rate didn’t change and SALT elimination hurts the 1% disproportionately. The smaller part of the 1% that has regular income as the majority of earnings, like rent or bond income, did very well, as did those in zero income tax states. SALT is one of the most progressive taxes and it’s very telling that many in the left are not advocating for a return of that deduction because it benefits people like Buffet massively.

          The people who really got screwed are upper middle class and middle class people in high tax states, presume that is you based on your posts. People in this category should be looking to move to lower tax states, not advocating for the rest of us to subsidize their overly generous state pension funds.

      • MCH says:

        Wolf,

        CtP does have a point with regards to hard work and education. That’s what enables one to rise above, it doesn’t detract from your point at all.

        The Fed is supposed to act as a moderator of excesses, instead it has become the accelerant, under those circumstances, it’s not surprising that things went side ways. Now, the only way for the Fed to keep everything from crashing to keep pouring fuel onto the fire. That in turn makes it worse.

        But the problem is structural in nature, over the last thirty years, the fundamental education of the US citizenry has been systematically neglected, people pay lip service to STEM because it sounds good, but as that path for advancement gradually narrows to non-existence, so does the opportunity for social and financial mobility. How else could you explain a school board that for over a good part of last year prioritized changing school names over back in person instruction. I was talking to a friend in Austin, TX, not exactly conservative central there, and their kids have been in school since a little after Labor Day… that’s public school.

        None of this takes away from your point here, but it is literally a reminder that the only way to succeed in life is through hard work and education, the possibility of achieving success though is narrowing in part due to the poor education system and in part due to the fact that the Fed and the government is actively putting its thumb on the scale the other way.

      • Tim says:

        Crushing the peasants works for a while, but as Nick Hananauer warned, they’ll soon have people with pitchforks coming for them.

        • Swamp Creature says:

          Russia 1917, Algeria 1958 anyone

        • polecat says:

          I’ve got two. You can barrow one, if it suits you ..

        • Swamp Creature says:

          Good trivia question? Only 1 person in a thousand would ever get this right.

          What major or regional war (Civil or otherwise) started on August 1st and affected the income, assets and security of a large world power’s population.

        • Lune says:

          I forgot who said it but every nation has two choices: peacefully distribute wealth down, or violently distribute poverty up.

      • Michael Gorback says:

        What part of trickle down economics don’t you understand? As the rich get richer they will upgrade the washers and dryers at all of their 10 luxury homes plus all 3 of their yachts. They’ll buy new shoes and convert the carport into a den. They’ll dine at restaurants more often instead of just 7 days per week, and finally trade in their 2010 Prius for an Escalade. They’ll be able to afford vacations to Disney World and hire landscapers to fix up their yards.

        I can’t believe you don’t see the benefits. The only downside I see to making the rich richer is that the price of politicians would go up.

      • Zantetsu says:

        “Crush the Peasants!” always read to me as a tongue-in-cheek name. I think you missed the joke, Wolf.

        • Wolf Richter says:

          Zantetsu,

          That’s possible. I thought about that option early on, but then the comments kind kept falling into the same rut, similar to this.

        • Trinacria says:

          “Crush the Peasants!” … Joke or not joke, it’s just not funny and, only gets worse and more distasteful !
          I will repost one of my favorite quotes from Fredrick Douglas:
          “The life of the nation is secure only while the nation is honest, truthful, and virtuous.”
          Well folks, just where is the life of this nation when its heart seems to be mired in mindless consumption and doing on to others before they do unto you – just plain “bass awkwards”.
          In other words, NOT living simply so others simply CANNOT live.
          Remember, it’s usually the last place team with nothing to lose that often spoils the party for the team that must win for the division title.

      • Phoenix_Ikki says:

        Because Jerome Powell and the rest of the elites think let them eat crumbs is just a little too nice. Let them eat sawdust is about as much compassion these greedy poor excuse of human beings are able to spare at this time

        • historicus says:

          “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.” DeToqueville

        • historicus says:

          The Federal Reserve…
          an unelected body on which the citizenry has NO REPRESENTATION.
          The Federal Reserve that lays an inflation tax upon us….YET, we have no say, no REPRESENTATION on the Fed.
          Is that “Taxation without Representation?” Methinks so.
          Ring a Bell?
          The Federal Reserve, designed to provide liquidity to assuage banking events. Now, the minter of money. They digitally mint an M2 increase of 27% in less than a year. Is that permanent or temporary liquidity to meet an emergency? And by what power does the Fed “mint” money?
          Article I, Sect 8 gives Congress both those powers…to TAX and to MINT. Not an unelected body who answers to no one. Congressmen, at least, must answer to the voters.
          What we have is a circumventing of our form of government, and those who are allowing and promoting the circumvention are getting filthy rich.

        • wkevinw says:

          Phoenix Ikki- I honestly believe that a lot (all?) of these people believe their macro-economic theories that say “all trade is good”/”trade causes GDP increase”; “when GDP increases, all boats eventually get raised”/”social welfare is a fine long-term remedy to wealth and income inequality”. There are LOTS of academic papers that conclude these things.

          Example of fallacy: if you provide social welfare long enough, you remove some humanity from the recipients. They don’t know how to prepare for a job, (even have a resume’, communicate properly, etc.), and in addition they have no expectation of such.

          It’s unsustainable.

      • Crush the Peasants! says:

        Wolf, I have transitioned from the very bottom of the bottom 50% – no RE, no durable goods, no inherited family wealth, significant debt and technically bankrupt – to the 90-99 percentile. So I have been a crushed peasant. I am merely saying that transition is possible. And yes, the gaps between the percentiles are widening over time, but people have shot the gaps from the dregs of the bottom 50 in 1990 to 90-99% in 2020.

        Total Wealth (Federal Reserve Data)
        Percentile Q41990 Q42020 Change
        bottom 50 0.78 2.49 219%
        50-90 7.75 34.81 349%
        90-99 7.9 46.99 495%
        top 1 5.02 38.61 669%

        • Wolf Richter says:

          Crush the Peasants!

          Yes, sure, lots of people have these kinds of stories, even the 1%. I came with nothing but a backpack to this country many decades ago, and did well, and hugely benefited over the decades from asset price inflation and the Fed’s shenanigans.

          That doesn’t make me blind to what actually the Fed is doing, and how it is ripping off the bottom 50% that I left behind decades ago, and how it is tearing this country apart with its wealth effect policies. I could choose to think: “I got mine, so f**k the rest of the people.” But I don’t.

      • Artem says:

        The Fed is the contributing factor, but globalization is the main culprit. You can’t pull the global poor out of poverty without impacting the unskilled workers at home.

        • 91B20 1stCav (AUS) says:

          Artem-very well-said. In an effort to avoid the horrors of a WWIII the western Allies (okay, the U.S., as last nation standing) saw ‘pulling the world out of poverty’ as the answer. At the time, like most visionary goals, it had an appealing general sense, but has been steadily hobbled in seeing the long-term domestic effects by the inherent difficulties of even vaguely forecasting the future environmentally/demographically/technologically and culturally (do the the terms ‘hubris’ or ‘exceptionalism’ apply here?).

          (Perhaps the largest problem with this particular remedy is current legacy-most of those who suffered first-hand the experience of those earlier, unbelievably-bloody conflicts are gone, those of the subsequent generation who may have absorbed what had happened and the reasons for the remedy are leaving, and those who greatly-expanded numbers remain no longer have those conflicts as a direct relatable other than as what a few might absorb through the unfashionable study of history or the limited and distorted lens of a mass-entertainment observation…).

          Times change, and SWOT analysis, whatever your station, requires constant and robust implementation. Its lack leads to increasing frequencies of ‘bad luck’, otherwise known as ‘history’s wheel’.

          may we all find a better day.

    • MarMar says:

      There are also larger structural factors in the economy – the Fed isn’t the only factor behind worsening inequality in the US, and I wish that were clearer in this article. But I appreciate what Wolf lays out here.

    • Yort says:

      Crush the Peasants – I find your posting tag amusing, and I’m 70-90% confident it is in jest, especially because of the “!” mark as my dark humor finds that part the amusing part, and I’m a pretty empathetic individual deep down.

      As far as “hard work” to get ahead, that was from 1940s to 2000, as from 2000 to 2021 the biggest way to get ahead is front-run the Fed. “Stable family” might help, but yet I know a lot of successful people who are successful because they had anything but a stable family…it motivates kids to be independant early, and be nothing like the unstable family in which they came. Over the years I have learned bad can be good in the long run, no pain no gain in a sort of way. “Persistence” is definately required to get ahead. Yet the biggest factor that most wealthy people do not admit is luck plays the largest percentage reason of how they got rich…right place, with the right service/product, at the right time…that is luck. Yet to accept “luck” is to accept it was not “hard work” or “intellect”, and that allows negative guilt feelings when one drives their $300,000 car past a group of homeless people…thus many rich go with the “I worked harder” meme to not feel bad for those with much, much less. Many super wealthy also like to say the are running for President to fix everything, and then never run. That seems to be a common way to relieve perverse wealth guilt…HA

      I’m 80-90% confident Wolf is right that the Fed has created an economic nightmare for the bottom 90% of the population. So much so that I plan my future around the unintended future, yet predictable, consequences of a centrally planned economy. When you dig as deep into the data as I, or Wolf does on a daily basis, it really is a multi-decade mess in the making, with a less than predictable ending which is going to take years to decades to reverse the unintended consequences.

      Personally I think if we had 20-40 year olds in power, things would be different as all the 60-80 year olds making these poor long term economic decisions for the entire world know they will not be alive to deal with the consequences. J-Pow gets rich, lives his last 20 years in luxury, and someone else gets to clean up whe mess when J-Pow is not around anymore. 60-80 year old may be the most wise through experience, yet they simply do not have enough skin in the game on a long term 50-100 year horizon…

      No disrespect for 60-80 year olds, I’m hoping to get there someday myself and most of my good friends are decades older…yet I am surprised so many 80 year olds are running the country in Congress. Seems like age discrimination to require that a person has to be 35 years old to be president, yet can hold office at 120-150 years old (Biden age, right?)….=)

      • VintageVNvet says:

        TOTALLY AGREE Y:
        If I were king, prez between 35-55,,, senator b/t 30-60,,, federal representative b/t 25-50; and, most importantly, ALL Laws, rules and regs, etc., apply equally to ALL Fed folks, elected or appointed, and this includes medical, retirement systems, insider trading,,, etc., etc.
        Especially angered at what I see of folks my age, including present and last POTUS, really screwing the pup(s) of my grand children’s age…
        Now several younger ( than my kids ) family and friends telling me they will not have kids due to how screwed up our global situation has become the last few decades.
        So, perhaps the restitutions of ( especially the sw portion, ) many of the lands of USA will return some balances put out of whack by the theft of those lands; otherwise IMO, WE the PEEDONs are in for some serious serious social consequences.

      • Chris Herbert says:

        Aristotle pointed out that democracies eventually become oligarchies. So new bottles, same old wine. I bet some wise man said the same thing a thousand years before Aristotle. The cure for this mess? Tax the top end of town, beginning with Biden’s idea to reverse the 2017 tax cuts (partially, apparently). Then restore progressive rates applicable to all incomes, including the ‘unearned’ variety. Deleverage the markets. End derivatives. Invest in infrastructures and pass a national job guarantee–a real ‘right to work’ one. It’s ridiculously easy to see, but first you have to break the rich donor to Congress nexus.

        • RightNYer says:

          I don’t disagree with much of this (not all), but we also have to confront the fact that a large percentage of our population makes endemically bad decisions, generation after generation. We need a return to personal responsibility, from the low income people who have kids they can’t afford, all the way to the top, to the CEOs who constantly want bailouts when they make bad decisions.

        • Artem says:

          Right to work, or requirement to work? For many unskilled jobs, our entitlement programs have a higher “pay”

      • Crush the Peasants! says:

        Yes, Yort, luck certainly plays a part, but it cuts both ways, you know? And you are less likely to benefit from good luck if you do not put yourself into position to be able to. And that goes for bad luck as well.

        • Yort says:

          Like the saying goes, “luck is when preparation meets opportunity”…yet I’d suggest the opportunity part is based on a lot of “luck”…right place, at right time. Of course bad luck plays the reverse roll, yet can be as random as good luck seems to be…

        • 91B20 1stCav (AUS) says:

          Crush/Yort-‘Luck’ vs./with ‘Hard Work & Persistence’ really begs an honest discussion of Estate Taxes, doesn’t it?

          may we all find a better day.

    • Lisa_Hooker says:

      Yeah, me too. I bought 4 tickets, one won, and bam, wealthy as hell. Between the stock market, Bitcoin and the lotteries (only minor qualitative differences), Americans have come to believe in luck more than hard work.

  12. Smooth Operator says:

    This same Strategy is being executed around the world.

    In the UK the average person salary has a multiple of 10 times salary to purchase an average priced home.

    In London the multiple is 12!

    Wealthy from around the world bought £4 billion worth of property in prime London areas last year.

  13. George says:

    They never faced the music in 2008; put the whole system on emergency life support with the results being they can now never normalize. Not that normal was that great anyhow but at least a semblance of trust and faith existed.

    That trust being our debt would be paid and faith they wouldn’t over print the currency. I wonder if they even know how ridiculous it all has become.

    • Depth Charge says:

      Obama had a chance to put all these fraudsters in jail and reshape the entire financial system. Instead, he was bought off by Jamie Dimon and Co. Now he lives in an estate on Martha’s Vineyard. Obama is perhaps the most corrupt of all Presidents in history. He ran on a platform of “I’m not running for office to help out a bunch of fat-cat bankers,” and that’s EXACTLY what he did.

      • Bob says:

        It continues to astound me in the comments here and elsewhere how many people are mad at the wrong politicians. Obama was far from perfect, but he isn’t the one who pardoned a dozen people convicted of stealing from the government. The policies that got us in this mess and coverups that keep us here almost all come from the right side of the aisle.

        • Harrold says:

          No original thoughts. Some posters can only recite Tucker’s talking points.

        • Kerry says:

          It continues to astound me how people continue to fall for the Right vs Left paradigm. Divide and conquer works on cowardly people…

        • Lisa_Hooker says:

          @Bob – DC’s point was that Obama had 8 years to fix the problems that you incorrectly attribute. In fact, with 8 years, he fixed nothing and further screwed up healthcare insurance which was already bad.

        • Happy1 says:

          Tell us what this saintly person did regarding the Fed, which is the engine of 90% of our inequality problems?

      • Anthony A. says:

        It’s amazing how one can get to be President of the U.S. here with not much in the way of family “wealth” and come out a multi-millionaire on a salary of a couple hundred thousand dollars per year and end up with big houses in nice locations.

        This truly is a great country with lots of opportunity for all races and minorities. Since I am 100% Lithuanian and came from a dirt poor family, it can happen to me if I work hard at it too! (Maybe in 2024 I’ll give it a shot)

        • Harrold says:

          Get a deal with Netflix.

        • Nate says:

          I believe it was Bush Sr who took out the conflict of interest restrictions on the President due to national security or some other bullshit. That makes it legal to grift the world.

      • kurtismayfield says:

        I believe the quote was:

        “My administration,” the president added, “is the only thing between you and the pitchforks.”

        https://www.politico.com/story/2009/04/inside-obamas-bank-ceos-meeting-020871

        Don’t worry, they gave him $400k a speech after he left the Presidency. I believe the term is “The post-bribe”.

      • Zantetsu says:

        I think every president has had that chance, all have failed.

        I had high hopes for Bernie Sanders. But he’s swimming against a very strong tide in our corrupt government.

        • WES says:

          Bernie swam with the money current!

        • MiTurn says:

          “Bernie swam with the money current!”

          I was shocked how quickly Bernie endorsed Joe B for president after he dropped out of the election. If the man had grit, he’d have abstained. He’s been assimilated.

        • polecat says:

          He also seems to be running neck-n-neck housing wise, with a certain vaunted BLMer …

    • Wisdom Seeker says:

      Keep in mind that 2008-2009 was entirely bipartisan. Presidency changed hands, Congress, you name it … only the Property Party was ever represented in Washington.

      “There is only one party in the United States, the Property Party … and it has two right wings: Republican and Democrat. … essentially, there is no difference between the two parties.”

      Gore Vidal said it, and it’s true. The partisan divide is mainly cosmetic, or theatrical posing. It’s the actions that matter, not the marketing, and on the issues that have financial substance the actions are pretty much the same regardless of whether the Property Party’s leadership wears a (D) or an (R).

      What the nation needs is a centrist-but-populist overhaul. Not the nuts on either side, and not the statist-corporatists.

  14. Need to see how much government support the bottom 50% gets. Government spending on bottom feeders is done on the back of deficit spending, no taxes needed! Government workers, in the middle, earn retirement benefits, and their pension fund buys stocks. The biggest disparity gap is between workers in private businesses and workers in government jobs, or businesses with government contracts, or subsidies. The pandemic really drove the split home. This is the 2/3s service industry. No goverment pension, no subsidized employment, and no home equity to cash in at retirement. That is probably the biggest shock here because home equity has always been the retirement nestegg.

    • Petunia says:

      I think the biggest thief of wealth on the bottom 50% is the medical industry. If you are in this group and a home owner, don’t get sick and don’t go into a nursing home, because you will die broke courtesy of the medicaid recovery scam.

      My inlaws had a small condo that went to medicaid when they died, because my MIL was in a hospice for a couple of years. The value of their small apt was around 50K and medicaid took it.

      I never wanted to grow old in NYC, like my parents, because it was a dismal down slide. Now I don’t want to be old in America, for the same reason. The entire system is rigged against working people.

      • wkevinw says:

        Petunia- yes. I do not have a good solution for the medical cost issue. However, I do have a few ideas to improve it. One is to change the pharmaceutical price protection regulations. Also, more competition is needed. However, if the current nationalization by way of Medicaid, Medicare, etc. doesn’t change significantly, the market competition will be thwarted, predictably.

        The other item that has completely gotten out of control is college education costs. I don’t know what fraction of the CPI this is, but probably not anywhere near enough.

        This is how you get “populism” as we have now (even though it is an inexact science in terms of defining that word).

        Also- the wealth effect has turned into the “poverty effect” in the past, e.g. during “financial crisis”. That scares the Fed (and elites) to death.

      • Dave says:

        I’ve been in exile for over 35 years. It’s really hard to do worse than the USA.

      • Even LTC terms out after a couple years. My mother had an inhome policy, and when the company went into receivership after GFC they capped the benefits. She had investments but after that the income dried up, and pretty soon she wasn’t making enough to pay taxes. This is what they do, they impoverish old people in this country, so you better put up something against the day.

        • wkevinw says:

          Ambrose Bierce- Yes. At end of life the (“they”) government doesn’t care whether a person is made completely broke. That’s the bargain that was made when Medicare happened. The difference is that now old people are not broke 20 years before they died (as it was in the ’60’s and before).

          Perfect example of “no free lunch”.

        • polecat says:

          Yeah, but for the Banksters … ANNNND CONgress, Brunch is 24/7.

    • lenert says:

      Forty years ago traditional pensions that could typically guarantee middle-income workers a middle-class standard of living in retirement have largely disappeared, especially in the private sector. If a worker hopes to maintain a middle-class standard of living in retirement, they have to accumulate assets in a 401(k) or some other retirement account.

      The money in a retirement account is included in standard calculations of wealth. Traditional pensions generally are not so a person with a 401(k) is much wealthier than a person with a traditional pension, even if they have no better prospects for retirement income.

    • historicus says:

      “home equity has always been the retirement nestegg.”

      Supported by the Fed buying MBSs at rates that are under the REAL inflation rate. How much longer?

  15. SpencerG says:

    It is a little bit interesting to see how the 1% were hurt the most by the Quantitative Tightening from 2016 to 2019. There will come a point at which the Fed has to do that again. Reminds me of the Alabama song lyrics…

    “Well somebody told us Wall Street fell
    But we were so poor that we couldn’t tell”

  16. roddy6667 says:

    According to the Fed, in McKay’s “Extraordinary Popular Delusions and the Madness of Crowds” the mania exhibited by groups of stupid people in large numbers was an example of the Wealth Effect.

    • Stephen C. says:

      Perhaps we should call it the Wealth Side Effect. QE and Covid Stimulus are some serious meds, but like most people I know who blindly take pharmaceuticals because their doctor said so, don’t even read the label. I’ve had some people tell me, “that’s the doctor’s job, to know what it says.”

  17. Micheal Engel says:

    1) TSR : Total Share Holders Return on capital gains and dividends.
    2) Thanks to the FANG, the top 1% unrealized net assets is $12M.
    3) The bottom 50% TSR is $15K. No AAPL’s for them
    4) In the next downturn thanks to SF & NYC RE a tarnished
    FANG the top 1% will flip to NR. US bonds are not dead.
    5) Fed assets will rise due to to the rise of their bonds and notes assets.
    6) Banks NPL will be balanced by the banks growing US treasuries assets.
    7) Brokers always make money on “slippage”.
    8) If u trade a $5K position 3x round trips a day, the broker slippage is
    3 x 2 round trips x$10 “slippage” = $60/ day.
    9) U might make money for a sandwich, but the broker make $60 on
    your $5K position, or 1.2%/day, on day traders.
    10) 1.2% x 5 days per week = 6%, without risk. Per year ==> 1.06^52 = 21%.
    11) The brokers also make 8% on each Trillion margin debt.
    12) Can a guppies beat that.

  18. Lou Mannheim says:

    Why did Caesar lead the 13th across the Rubicon? Patricians hoovered all the money and land and also switched to slaves, leaving much of Rome unemployed.

    • josap says:

      Bread and circuses.

      As long as the populace isn’t too hungry and isn’t too bored, it’s all good.

      • Kurtismayfield says:

        Caesar did not have big tech and the media propaganda dividing the lower classes in half .

        “I can hire one half of the farmers to shoot the other half”

        https://quoteinvestigator.com/2017/10/29/hire-half/

        It has been translated to workers, but I believe this was the origin of the quote.

      • WES says:

        In the end game, when the barbarians came knocking, there were no free Romans left to defend the elites, so the elites fled east!

    • Harrold says:

      Caesar crossed the Rubicon to become dictator, not to help the plebeians.

      • Lou Mannheim says:

        Oh, I didn’t mean he thought he was a liberator. But the patrician class gave him the opportunity, and the plebs welcomed him with open arms.

        • MiTurn says:

          There are marked parallels between the history of Rome and the modern West, certainly the US.

          But we have Central Americans, not Germans, storming our borders. And the Europeans have their own border challenges as well.

          And it will not end. There is no way to stop illegal immigration, especially when their home countries are effectively driving them out.

        • RightNYer says:

          With all due respect, the idea that there’s “no way to stop illegal immigration” is nonsense. Of course there is. It just requires political and moral will we don’t have, as too many “elites” benefit from it.

        • Lou Mannheim says:

          There are international protocols we must adhere to, just like our allies in Europe. I would not mind coordinating with the Central American countries to eliminate the mortal risks the immigrants face, maybe a plan to address MS-13?

  19. Memento mori says:

    The best indictment of the big theft by Wolf.
    I only wish the journalist who interviewed Powell on 60min showed him that chart.

    • MonkeyBusiness says:

      Our journos come out of the same schools that Powell and his ilk attended.

      And don’t forget they need access i.e. if they ask too many “hostile” questions, their access will be revoked.

      • Cilantro says:

        Well observed comment about journos. They understand the rules if the want to keep their corporate media job. Also note how many former journos work as public information officers in govt agencies and vice versa.

    • MCH says:

      Hahahahaha… 🤣

      Ok… getting serious for a minute… MUhahahahahahaha. 😂

      Ok, calming down now from the hilarity of the statement about journalists. The so called journalist today are nothing of the sort, at best they are a bunch of stooges because they know what’s good for them if they step out of line.

      The implication that today’s journalists, not just the financial ones are anything but the defenders of the status quo and will vigorously crush down any dissent is just laughable. They are there for the expressed purpose of making sure the bottom 99% are busy pointing fingers at each other and the top 1% and their supporters are not accountable.

    • Beardawg says:

      Speaking of the charts – Wolf references $8899 (green line) and $1131 (red line) in “Bottom 50% Assets” chart. Those numbers look to be significantly off from where the lines are reflected in the charts.

      Fantastic article though which gets down to the nitty gritty, as promised.

  20. GvsCfa says:

    Given that inflation is a regressive tax the bottom 50% didn’t record and real wealth increase during the central banks money printing bonanza but they are ones that will get brutalized when inflation goes from asset price inflation to consumer price inflation. They got screwed on the way up (no assets to inflate) and will get screwed on the way down (no increase in wealth to compensate them for consumer price inflation).

    • Chris Herbert says:

      The Japanese government owns 92% of all its public debt. Inflation is non existent and employment is far more stable than in other so-called developed nations. As for growth, it too is better than most developed nations. With the notable exception of China, which has had a 6% plus annual real growth rate for what? Twenty five years.

  21. Sound of the Suburbs says:

    The trouble is it’s just a “wealth effect”.
    At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth.
    1929 – Wakey, wakey time

    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn’t.
    It didn’t then, and it doesn’t now.
    This generation would never believe in the markets again, but a new generation came along that didn’t have those painful memories.

    • Petunia says:

      I’m a boomer, worked in finance and banking, and I haven’t believed in the markets since the 1990’s. The markets didn’t reflect reality back then, they surely don’t now. I really have no sympathy for anybody who loses money speculating.

      • Lou Mannheim says:

        It was over for me when Clinton took Greenspan to the woodshed over the “irrational exuberance” quip in 1996 (although I think the S&P was up 44% the prior year, which was extreme). Two years later LTCM and Russia implode and the Fed Put became real.

        I was trading tech at a hedge fund in 2000, nothing made sense, we kept hearing “new paradigm” but nobody could define it.

        401(k)s, Information Technology, Globalization. They seem to drive or explain a lot, but all I see is a smash and grab on the defenseless.

        • cb says:

          I agree with your drivers, but you forgot deficit spending, trade deficits, interest rate suppression and funny money creation.

        • cb says:

          and, perhaps immigration policy, legal and illegal

    • PNWGUY says:

      Nailed it.

      Current incomes & cash flows don’t support current asset prices at any interest rate above zero.

      To me, we have 2 possible outcomes from here, and they both lead to higher interest rates…

      1) Zero/negative interest rates enforced until a currency crisis forces interest rates up…

      2) The populous realizes that a low interest rate devalues their labor, and elects leaders that will raise interest rates…

      There will be strange stop-gap measures along the way (e.g., wealth redistribution via yellen’s global corporate tax rates). But eventually interest rates are going to rise. And there will be bag holders.

      History will not be kind to the central bankers of the past 30 years.

    • Depth Charge says:

      The difference between 1929 and now is that the central banks have gone apesh!t printing money. Bird-brained Bernanke, a so-called “student” of the Great Depression, has gone on record saying the Great Depression was a result of the FED not printing enough. So now they think they can just print to eternity to prevent any sort of redux, and central bankers are “all in,” now. We shall see how that turns out.

      • WES says:

        Yes, … but money printing is the only thing he knows how to do!

        Every problem is solved by printing money!

      • Chris Herbert says:

        An observation. The Treasury and the Fed, with the Congress compliant, attempt to replace the ‘gap’ in spending created by the pandemic infused recession. Fundamentally not a radical idea. What is missing is spending directed at increasing employment (jobs). It’s the composition, stupid. Spend money down to the bottom half. It will get spent. Tax money away from the top. It will reduce asset inflation. Do infrastructures. Creates jobs. It’s incredibly simple. But the One Percent loves its socialism so the politics don’t line up.

        • RightNYer says:

          Few problems with their plan. First, they replaced 4 times the economic activity that was lost, leading to the overshoot Wolf wrote about.

          Second, most of the spending was not productive, as it went to durable goods that benefited China, not us.

        • Swamp Creature says:

          The plan was a failure. It gave money to a lot of businesses that were not eligible, and left out a lot of ones that really needed it. The Treasury Secretary Mcuchian oversaw the debacle. Banks like JPM and Wells Fargo milked the program for every dime they could and got away with it. People should be going to prison. They were fired, that’s all. I’m still waiting for a list of all the firms that defrauded the PPP program. I intend to boycott every single product and service from them. Also what about the additional debt that has been left for the next generation to pay back. Who’s speaking for them! NO ONE!!!

          Take a drive down the main commercial strip here in the most affluent county in the country and I’ll show you 80% of the businesses CLOSED. Looks like all that money printing didn’t save anything but make the top 1% richer and the Wall Street crooks salivating.

        • otishertz says:

          100%, the politicians in their deference to the banking-insurance controlled medico-pharmaceutical industry cratered the economy and filled the hole with money while making it rain all over themselves.

          What will the effect be of pulling all this consumer demand forward in such a massive way? Reduced future demand is deflationary and negative for future corporate earnings. This epic spending spree of pandemic jubilee money is going to lead to a big hangover.

  22. timbers says:

    I’ll fix this for you….”There is now NOT one nuance of difference between the left and the right in terms of the wealth effect…” And all other major issues. A few marginal 2nd & 3td tier issues of little to no consequence to the ruling class are throw about to maintain the illusion that the 2 parties are different and pretending to oppose each other.

    • Petunia says:

      And the longer they have been in the swamp, the more responsible they are for the dysfunctional system we now have.

      • Depth Charge says:

        Nancy Pelosi is an 81 year old career politician who has presided over the entire thing. She is one of many responsible for this whole mess, yet she thinks she can dupe the American public into thinking she has some sort of answers. She should be in prison, along with many others.

        • Harrold says:

          Chuck Grassley is an 88 year old career politician who has presided over the entire thing. He is one of many responsible for this whole mess, yet he thinks he can dupe the American public into thinking he has some sort of answers. He should be in prison, along with many others.

        • Depth Charge says:

          That’s called “deflection,” Harrold.

        • historicus says:

          Harrold..
          Has Grassely pushed unread TRILLION dollar bills through Congress?
          That’s the point. Your response please.

    • Lou Mannheim says:

      I’d love to see the real Venn diagram of the parties. This has happened on both watches and, after 40 years, it may be time to consider the inequality is not a fluke. But guns! And gay marriage!

    • MonkeyBusiness says:

      I’ve said this since 2005, and I was always told “you are blind.”

      ROFL. If the outcome’s the same no matter who’s in power, then by definition there’s no difference between the two.

  23. Dan Romig says:

    Dallas Fed President Richard Fisher, speaking on Monday, 24 March 2014, at the London School of Economics,”I don’t think there is any doubt that quantitative easing enabled the rich and quick. It was a massive gift.”

    “Our massive monetary accommodation will not have the effect we would like it to have, …” he added.

    But as candid as Mr Fisher was about the Fed & QE; the Fed’s announced effects were to lift GDP growth. However, the real mission was to fuel the bond market with low interest rates, juice stock prices with easy share buy backs, and most importantly, make the top 1% even richer.

    Seven years later, Mission accomplished!

    As always, thank you Wolf for telling like it is.

    I would urge readers to remember that in 1913, the Fed was created with a twenty year charter. Had Congress not intervened in 1927 with the McFadden-Act to have the Fed continue in perpetuity, it would have needed to have its charter renewed or it would have been abolished – like the first two central banks of the USA were.

  24. Micheal Engel says:

    1) If u are a small importer and u bring $10M of gadgets from China,
    in a container ship, the bank will finance most of it, if they trust u,
    along with the insurance co. and your custom agent.
    2) If your capital is relatively small, the bank will finance 80% of each transaction, several transactions per year.
    3) Suppose u import a total of $50M from China and every time u
    are sold out. Nothing left because your customers love u.
    5) Your bank make about 5% between order and due day, x5 times
    a year,because u never pay late fees.
    6) The bank make = 0.05 on interest x 10M each transaction x 0.80 loan x 5 times/year = $2M, without pain.
    7) Your bankers and insurance broker will be your best friends, until
    the music stop.

  25. Benito says:

    The richest “individuals” are now the big corporations. Considered “persons” by the Fed.
    Fascism: the fusion of state and corporate.
    Against We the People.
    That was the plan.
    Now delivered.
    The next step is to physically remove the serfs.
    I have an idea….

    • Andre says:

      History will show that the serfs can only be pushed so far by a greater wealth disparity. Remember what happened to the Russian Czar Nicholas and Louis XIV of France. The 50% outnumber the !% 50 to 1

      • marc says:

        I guess you confuse 14 and 16.
        14 died of old age and gout.
        But that didn’t happen before he bled the country dry.
        I won’t even mention the commie countries who are still in the hands of the happy few (with enormous accounts overseas).

    • Chris Herbert says:

      Be Careful Benito. Mussolini and his wife were chased down by a mob and strung up in the street.

  26. Depth Charge says:

    When you give a pig the lever to his slop, you get 2,000 lb porkers for days. That’s what we’ve got going on. The FED is in charge of its own slop. We will find out if they eat themselves to death, because clearly this is not a sustainable path.

    It seems to me they think endless stimulus and MMT is going to cover up their egregious sins. It can’t work. It’s a faulty model. The only reason it’s lasted this long is because we are the world’s reserve currency and so all the other governments allow this currency debasement, as they operate in lockstep with their own currencies.

    Note how, when asked about the low inflation over the past 40 years after the high rates of the 80s, Powell cites globalization and the inability of workers to demand higher wages. They have invented a model which creates enormous asset price values, yet suppresses labor rates and destroys living standards for the masses.

    And you wonder why these globalists are doing everything in their power to snuff out populism within the US, pitting the people against each other? They are desperate to keep the ripoff going. This system is rigged from top to bottom, by the wealthy, for the wealthy.

    • historicus says:

      Depth.
      Dead on point.
      We have been importing deflation from the pacific rim for decades.
      Now, suddenly, shortages. Semi conductors and chips at first. Next will be lightbulbs, spark plugs, etc.
      Then we will wake are realized we dont make anything here and are in the back pocket of the Chinese.

    • MiTurn says:

      “And you wonder why these globalists are doing everything in their power to snuff out populism within the US, pitting the people against each other?”

      And in a larger but similar context, why is the US insistent on provoking other nations into war? Seems like the US would love an armed conflict with Russia (via Ukraine) and China (via Taiwan). And through the endless war in Afghanistan and elsewhere. Are the elites trying to destroy this country ?

  27. HB Guy says:

    Wolf, a very interesting analysis as usual. I wonder what your first chart would look like if it extended back to 1971 instead of 1999, when gold convertibility of the fiat Fed note ended?

    • Wolf Richter says:

      HB Guy,

      The data goes back only to 1989. Yes, it would be interesting to see. There was also a lot of inflation during the 70s and 80s, and it would be interesting to see what that did to the disparity in wealth levels.

      All I have goes back to 1989. So here the chart with the extra 10 years. Same trends already underway:

      • Petunia says:

        It goes back to 1989 because that was the year the Nikkei crashed by 50%. The fed probably wanted to track the US v Japan to see how bad things could/would get.

  28. Yozíme Río says:

    I have a hypothesis, a Classical, even Marxian one: American capitalism has reached the point when real profits are so meager that the “real economy” is no longer worthy for capitalists, I mean, capitalists, the owners of capital, the real rulers. In order to avoid soup lines, and what could perfectly end up being a revolution after the closing of businesses and whatever factories are left, the capitalist class must be kept happy. Let’s allow them to see their accounts inflate and inflate in the stock market for which they have to keep the doors of the businesses and factories open. That way the workers keep clocking in and clocking out, and everybody “happy”. The FED cannot let the market crash. This, of course, is a self-fulfilling vicious cycle where the “happy slaves” will be poorer and poorer, but again, while the doors of the businesses are opened they will keep thanking God for having a job.

  29. David Hall says:

    Inflation robs people of their savings. Not having money in savings put people in danger of borrowing with their credit cards at outrageous interest rates.

    Through most intervals the stock market outperformed real estate as an investment.

    I read a Forbes article about Chinese housing. The price of a home in China nearly quadrupled in 20 years. That means the value of their currency dropped in value relative to housing prices.

    The largest asset most people will own is their home. 65.8% of Americans own a home (Statista).

    • Yort says:

      CNBC today showed that 53-62% owned their own home in America last year (depending on age), as it looks like that “65.8%” percentage may have went down somewhat over the last few years.

      Per CNBC:

      Last year, the homeownership rate among older millennials ages 33 to 39 was 53.8%, according to an Apartment List report, which uses calculations based on an analysis of the Census Bureau’s Current Population Survey. By comparison, about 60% of Gen X owned homes at the same age and 62% of baby boomers.

      ———————————————-
      So not only does the Fed create a house asset wealth effect for only 60% of the population, most of that wealth is for homeowners that own multiple and expensive houses. Making 10% on a $350,000 home is $35,000. Making 10% on seven houses that total $100,0000,000 is $10,000,000. Feeling trickled down on yet???

      Same goes with stocks. The top 10% own about 84% of financial assets, and the top 1% own about 38%. Sprinkle 16% of total assets on the bottom 90%…nothing but crumbs trickling down from Fed Heaven…

      Wolf and company needs to start up that old commercial where they zoomed into an egg splattering grease while cooking in a cast iron skillet… and state “This is your brain on drugs”. I’d change it to state “this is your brain on Fed”.

      Want an example of your “brain on Fed”…Sunday J-Pow said the following on CBS “60 Minutes”:

      “there are people who think that the stock market is not over-valued, or it wouldn’t be at this level”.

      So the most powerful human on Earth, J-Pow, believes in “effect and cause” versus “cause and effect”. Vudoo economics at best, I really would like to know if the Fed is as stupid as he acts, or just playing dumb on purpose…kind of think both. So does the Fed believe the Fed prints money because the stock market is up??? Bizarre…

      I do believe the Fed is “bizarre” enough to enact negative rates someday, which will convert debt into assets…thus at that moment in time get all the debt you can handle, as the old rules are “fried”.

      I do believe the Fed is “Bizarre” enough to buy stock ETFs like Japan if the market drops more than 20-30%, just like Treasury Grandma Yellen proposed in the MSM on Sept 29, 2016 (Search “Yellen says Fed purchases of stocks, corporate bonds could help in a downturn”)…thus at that moment in time get all the stock ETFs you can handle, as the old rules are “fried”.

      “Bizarrely”, the best we can do is front run the Fed’s monetary meth, side-step the future tax steam-roller, and lap up all the free fiscal gravey, without remorese, from Uncle Sammy…as the old rules are “fried”…

      And as the Fed would “Bizarrely” say “there are people who think that the ‘Top 10%’ is not over-valued, or it wouldn’t be at this level”! So basically the Fed is either super genius or special needs…so place your bets accordingly as bizarrely the Fed is placing his bets for the entire world right now…

    • Crush the Peasants! says:

      That may not be exactly true. The Federal Reserve’s Distribution of Household Wealth in the U.S. since 1989 data reveals this about RE as a percent of total assets by wealth percentile:

      1: 11.71%
      90-99: 19.35%
      50-90: 33.06%
      Bottom 50: 51.12%

      • Yort says:

        Crush the Pleasant – Do note that 40% of all Americans own no home, thus your stated “Bottom 50%” is in truth the “bottom 50% of the top 60%”.

        Thus 40% of Americans households rent a “household”…therefore; they have missed the Fed housing transitory “Wealth Effect” (Fed said inflation increases would be transitory, correct, predicting the future failure of said “Wealth Effect” experimento grandes, no bueno, sí …???)

        Look, the Fed can play Pinocchio paradox all day long with word games, but the truth language of the universe is math, and the math shows the Fed is making the rich more rich, and the poor more poor, and as a Gen Z would say, the fed is “SuS”…

        • Crush the Peasants! says:

          Home ownership in 2020 is about 65%. In 1960, home ownership was about 63%, according to the US Census Bureau.

          80% of folks 65 and older own homes. (Statista). Median net worth of folks 65-69 is $272,000. (dqydj).

          76% of folks 55-64 years of age own homes. Median net worth is $193,000 to $229,000.

          The median sales price for a home in 2020 is $346,800. Average is not that much different, $393,300.

          It is unavoidable that the more you own of an asset that increases in price, the more your wealth increases. For those Americans who were able to own assets through hard work, preseverance, sacrifice, and luck, why shouldn’t they benefit from the increase in the price of those assets more than someone who worked less hard, sacrificed less, was less lucky, and gave up?

          You may be familiar with the Grasshopper and the Ant, one of Aesop’s instructive fables? This is a theme repeated in Western literature throughout the ages.

  30. Willis says:

    According to William Jennings Bryan:

    “There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.”

  31. kk says:

    50 million more mouths to feed, educate, house and find work in 20 years. That is a large European country’s worth of people. There must be a limit?

    • MiTurn says:

      “50 million more mouths to feed, educate, house and find work in 20 years.”

      Plus the folks crossing the border…

    • taxpayer says:

      Would these be people who could make useful things or perform services the rest of us desire? Would these be people who pay taxes?

  32. Poor like you says:

    My own username makes me even sadder now.

  33. sunny129 says:

    This ‘inverse’ wealth effect started and is going on, the day Fed put free mkt capitalism to death in the March of ’09.

    As I have repeated here and else where, there is one economy for the top 10% and another for the rest. They are very distinct! When i read a report or a data, I always wonder which economy one is talking?

    Now there is talk of ‘asset’ velocity of money vs the usual velocity of money in the economy! All the Fed’s policies channelled towards asset bubble – asset velocity and NOT into economy!

    There is no hint of any possible change by the policy makers.

  34. This is what I’ve been waiting for. The Media Mogul Empire’s Fancy Schmancy Wealth-Effect-O-Meter has arrived.

    • Wolf Richter says:

      Yes, will be updated quarterly until the Fed stabs it in the back, like it stabbed the Fancy Schmancy Hawk-o-Meter in the back after a few quarters :-]

      • MiTurn says:

        “Yes, will be updated quarterly until the Fed stabs it in the back”

        Utterly amazing. When facts become uncomfortable, they disappear.

        Top-down disinformation, abetted by the media.

        Keep swinging, Wolf!

  35. DR DOOM says:

    As long as we can get stuff to consume from producing countries for our debt this show continues. The forced to be bottom feeders in Ponzi America need lots of booze ,drugs and entertainment . Yellen and Jerry must make sure the supply stay plentiful while the bottom feeders are being harvested by the Empire. The Empire needs the bottom feeders in order to legitimize by political fiat the theft by the MIC and other Oligarch schemes that strip mine America.There is a huge demand for any video content due to binge watching while we consume our share of the 70B trade deficit. Old long running tv shows like the Andy Griffith Show are a must have. Ownership of a home or a bank that pays interest in a community and going to bed with your doors unlocked can be voyuered from watching re-runs of Andy Griffith.” I love it when a plan comes together” retorts Hannibal of the A-Team. Jerry and Yellen agree.

    • Michael Gorback says:

      Hey not all of us into booze, drugs, and entertainment are bottom feeders. Some us are the son of a a US President.

  36. Nacho Libre says:

    Decades of Fed irresponsibility and yet you found a way to pin it to the orange man.

    His predecessor had an entire term of near zero interest rate, expanding Fed balance sheet and only a sluggish growth to show for it.

    Orange man got economy take off with business and taxpayer friendly policies. Fed finally found some fiscal support and 1. Raised the rates 2. Reduced balance sheet – both quite rapidly.

    Anyone would wonder about the the timing. A whole decade of ultra-dovism and a sudden ultra-hawkishness.

    It’s sad none of the elected the leaders show any responsibility and continue to spend by borrowing from the future, but pin all that on one person?

    • Wolf Richter says:

      Read it again. I didn’t pin Fed irresponsibility on Trump. Trump wasn’t even in office during the Financial Crisis when QE started. But I said Powell caved to Trump, which was a big drama that Trump played out publicly on Twitter for months.

      • Yozíme Río says:

        There’s no revolutionary force in America. There’s the 1% and the 99% who dream to be part of the 1%. As with sugar-coated pills: swallow whole.

        • Uncle Salty says:

          “There’s no revolutionary force in America…”
          That you know of.

        • MiTurn says:

          “There’s no revolutionary force in America.”

          But one appears to be currently in its early stages…

          And I’m not talking about the stunts of our current big-city window breakers and street painters.

      • OutWest says:

        Trump won that battle – the interest on my savings dropped to zero almost overnight along with every other saver in the US. Winning.

        I didn’t expect Powel to cave.

        • Nacho Libre says:

          1. Rates are determined by FOMC, not by the Fed chair unilaterally.

          2. Previous admin was rewarded by the Fed with near zero interest rate for 8 years of sluggish growth – I don’t see anyone complain about that.

          3. Orange man got the economy roaring and Fed rewarded that by raising rates from 0.5 to 2.5 within 2 years and by reducing balance sheet constantly.

          4. I am not saying Fed should interfere at all, but the contrast of its actions during the admins couldn’t be clearer.

          Apologies Wolf – I possibly misinterpreted the blame.

        • Wolf Richter says:

          #2. Ever since this site and its predecessor site came into existence in 2011, we have loudly bitched about the Fed’s policies. Lots of people have, same as now. You have to get it out of your mind that this is political. It’s not.

          BTW, please call Trump “Trump” – thank you!

        • Nacho Libre says:

          Thank you, noted.

          For the benefit of other readers…

          1. Powell single handedly couldn’t have changed the rates. It’s a big committee of elites that determines rates, not just one person.

          2. Trump applied pressure very loudly and transparently. Obama people did so behind the scenes. Hard to believe there wasn’t government pressure on the Fed to keep rates near zero for eight long years.

      • Swamp Creature says:

        Got my quarterly report on my BNY Treasury Bond Fund. For the 3 month period Jan through Mar 31st 2021. On an investment of 56K, I received $1.57 in interest total YTD on the fund. That will have to be reported to the IRS, which means I will net about $1. This interest will not even pay for a cup of coffee at Duncan Donuts which runs at $1.50.

        Thanks JP & JY

        • Lisa_Hooker says:

          @SC – most of my banks are now paying 0.05% on $100k+ accounts. This is undoubtedly a nefarious plot. Screw TINA. I don’t like to be pushed. Fortunately I can afford it. Many can’t.

        • Lisa_Hooker says:

          I’m wondering if the goal is to run down the boomers principal, and to prevent younger generations from accumulating any at all.

        • p coyle says:

          L_H: we need a plan so crazy it just might work

      • Entirely accurate and the (financial) media did nothing to blow the whistle on that con. Would like to be a fly on the wall in some of those Fed meetings. You could always tell when Powell was under pressure. One reason Yellen was put in charge. She could step back into the role, and they could bring a financial guy into Treasury. Right now it’s all stock market all the time, and the challenge is getting the public (media) to recognize what they are trying to do in the broader economy.

      • SpencerG says:

        LOL… it is funny what people blame you for Wolf. I have to guard against it myself sometimes. Thank you for keeping us all honest.

        In point of fact the Fed announced prior to Trump even being elected that it was going to start QT. Specifically Janet Yellen in her opening speech to the FOMC Jackson Hole meeting on August 26, 2016 made that announcement about Balance Sheet Reduction (although the specifics of the plan were developed and announced in stages over the following year). I looked it up and the week of Yellen’s speech, most of the elections prognosticators were rating Hillary Clinton’s chances of winning the Presidency between 85% (538), 89% (NYTimes), and 96% (Princeton Consortium).

        So the Fed wasn’t creating a plan for Balance Sheet Reduction due to an impending TRUMP presidency… but rather an impending HILLARY presidency… if they were taking that into account at all. Nor were they taking into account the stock market… which at that point had been stuck in a trading range since November 2014. And they had plenty of critics… Ben Bernanke for one thought they should hold off on Balance Sheet Reduction until interest rates had gone up.

        But IMHO the one thing the Fed absolutely CAN be criticized for is jacking up the Fed Funds Rate from 0.5% to 2.5% in the two years following Trump’s election. Unlike the Balance Sheet Reduction, THAT was neither well thought out nor announced in advance…. it was much more Ad Hoc. If they had done that more slowly then they might could have gotten their Balance Sheet reduced by a third to a half… instead of the 20% they reduced before the markets (and Trump) went crazy and they had to call it off.

        I know we all want to THINK we can walk and chew gum at the same time. But often, if we (or the government) have never done it before it is best to focus on one or the other. Particularly if it is important to do it right. Extra variables often interact in ways we haven’t planned for.

  37. Ronald A Mayo says:

    And when anyone talks about social equality and making concrete changes to level the playing field, they are called a ‘socialist’.

    • Yozíme Río says:

      Of course, the “American dream” and all associated fetishism makes everyone a believer… I also want to be a billionaire.

      • Yozíme Río says:

        They call you a “socialist” even though they don’t know what the f… they’re talking about. Ironically, many of them would have done much better in Soviet Russia than in individualist America: lossers are everywhere.

  38. c1ue says:

    Wolf,
    Thank you for writing this article.
    I have been talking about this for years.
    “Trickle down” theory, “wealth effect”, whatever bullcrap name is put to it is nothing more than an excuse for the oligarchy to enrich themselves.
    The economists are no better. Somehow they cannot seem to understand that most of the population having moderate wealth, consuming and paying taxes is better for everyone and everything than 1 out of 100 reaping 90%+ of the wealth and sitting on it.

  39. MM says:

    Naive but serious question: what would happen if the Fed just stopped buying treasuries? Can anyone model out the immediate consequences and side effects of that in the short and medium term?

    • eastern bunny says:

      Here is some speculation, interest rates will shoot to 5 to 8% (remember the repo rate two years ago when rates shot 10%, before Powell went berserk ), asset prices will crash to levels supported by cash flows (which is about 80% below where they are now), bankruptcy lawyers will get busy and rich, and if we manage to resist to everyday “world is about to end ” media assault and fear porn the economy might start on a healthy foot within a year we would be on our road to recovery. (provided government and Fed are prevented from trying to fix things, which is impossible nowdays)

    • Wolf Richter says:

      MM,

      “what would happen if the Fed just stopped buying treasuries?”

      Good question.

      The Fed is going to do that anyway. But not “just” now. The Fed already went through this process in 2014. And the economy survived just fine.

      If it just did that today, the wealth inequality would shrink a little. And that’s about it.

      If the Fed also started to raise short-term interest rates over the next 12 months to the rate of CPI, and started reducing its balance sheet two months later, the wealth inequality would shrink a little further.

      But you know, not much changes for a person who has $10 million, and then he has $5 million. He can still eat. The economy can weather a sell-off just fine because the wealthy are just a small number of people, relative to the overall economy — the 1%, you know. And lower home prices do wonders for the rest of the economy that’s not tangled up in finance, insurance, and real estate.

      And if it entails a 50% sell-off in the stock market and a wave of corporate defaults, then there might be a mild recession during which the debt overhand could be removed in bankruptcy courts around the country to allow the economy to emerge fresh and in better shape.

      • Depth Charge says:

        I nominate Wolf for President.

      • MCH says:

        Let’s assume a 50% sell off in the stock market, what would prevent PE firms from jumping in as they start swooping up bargains to be chopped, sliced, and diced? That’s literally what happened to Sears, and a whole bunch of others, right?

        Most of them didn’t survive after that, and the people on the bottom got squished. In the mild recession, the people who gets hurt are still the ones on the lowest 50%, right?

        But would we ever even get there? Everyone from JP to JB to JY (holy crap, we have a cast of Js, only if we can change KH to JH somehow) would be pumping money and stimulus in hand over fist to make sure we never get that far. I would think letting nature run its course that way would still maintain a gigantic income inequality unless you find some way to really siphon off the assets from top guys like Bezos, Buffet, and hmmmm, Bill (the B team) who are tilting the averages. Let’s face it, that top 0.1% has accrued far more than anyone else in the last decade, and by themselves, they’ve pulled up the average significantly right?

        Would be curious to see what happens to that top 10% if you happen to exclude the billionaries in from the average. How much would that top 9.9999% be compared to the rest.

        • RightNYer says:

          MCH, if a store like Sears doesn’t survive in the end, it’s not because it was chopped, sliced and diced by PE funds, but because its business model is not viable. If a company/store has a viable business model, someone will purchase its assets, retain its employees, and operate it as such.

    • Chris Herbert says:

      The Fed normally sells Treasuries. But it buys them if it wants to lower interest rates. This buying creates demand that raises bond prices, which lowers their effective interest rates. Japan just buys all the Treasuries it creates (about 92%). That means Japan injects liquidity directly because it doesn’t sell the bonds into the market. Left pocket, right pocket, same pants type of transaction. Who gets the injection is distribution, which is as important as the aggregate distributed. I wonder what would happen if the Fed issued 5 year bonds at 4%. They’d all be snapped up because that’s a lot higher than what the current 5 year pays out.

      • Wolf Richter says:

        Chris Herbert,

        The Fed rarely if ever “sells” Treasury securities except as part of reverse repurchase agreements, which it has to buy back when the reverse repo matures. Even during the balance sheet reduction in 2017-2019, the Fed just let Treasuries mature, and didn’t sell any of them.

        However, the US Dept of the Treasury sells Treasury securities, tons of them, and the Fed buys some of them as part of QE.

        • cb says:

          @ Wolf –
          Chris Herbert also said: “I wonder what would happen if the Fed issued 5 year bonds at 4%. They’d all be snapped up because that’s a lot higher than what the current 5 year pays out.”
          ________________________________

          The FED does not issue bonds.

        • Auldyin says:

          Wolf
          Is your Fed allowed to buy debt straight from your Treasury window?
          I ask because that is ‘taboo’ for Uk BoE and is the whole reason they have to indulge in the smoke and mirrors of QE.
          BoE can have Treasuries on their balance sheet but only if they acquired them from a third party institution which then ‘magically’ has the cash to go into the ‘open’ market and buy fresh issue treasuries the Govt was having difficulty ‘getting away’ at prevailing low rates without the extra cash being made available . We’re supposed to believe it’s all done at arm’s length but it can’t be and that’s where they are legally vulnerable.
          Relates to my other post further down.

        • Wolf Richter says:

          The Fed buys from its primary dealers. However, when a bond matures, the Fed can roll it over directly with the Treasury Dept.

  40. Escierto says:

    This is wonderful news. Americans are morons who deserve the royal screwing they are getting. In fact when asked, they all volunteer for more screwing as their patriotic duty to the “greatest nation on earth”. Keep drinking the Kool-Aid, gang!

  41. Micheal Engel says:

    1) If u are old u are likely to have zero student debt.
    2) If u are old and own a house, u are likely to have low or zero mortgage
    debt.
    3) If u are old and smart, u might keep your old car, because u rarely drive.
    4) If u care about Chinese gadgets, that feed China, bankers, other mediators..u have a very low consumer debt.
    5) Your income might be low, your net worth might easily exceed > $1M, but with low consumer debt and low mortgage debt, ==> u belong to the horror bottom 50%.

    • eastern bunny says:

      actually that is the sweet spot to be, dont pay any taxes or very little, get subsidized healthcare and get to enjoy government dole which will be a frequent occurrence going forward. The middle to upper class are getting screwed big time and small business owners.

  42. Beardawg says:

    So on a percentage basis, the Bottom 50% went up approx 750% from 2010 to now ($2K to approx $15K) and the Top 1% went up about 100% ($6M to approx $12M).

    • Wolf Richter says:

      So the Bottom 50% came out ahead? 🤣🤣🤣

      Like the homeless guy, whose total financial assets jumped by 5,000% when I give him a 5-dollar bill. It’s like he knocked Warren Buffett off his throne.

      • Beardawg says:

        OK Wolf – that actually was funny. Poor Warren!!

        I guess I was just making a mathematical observation. Perhaps more interesting is the 50-90% who seem to have gone up about 50% in the past 10 years in assets vs 100% for the 1%.

        Vanishing Middle Class ?

        • Beardawg says:

          My bad, I meant “The Next 9% have gone up about 50% vs 100% for the Top 1%. There is probably a huge number of folks in the 50-90% with $500K to $1M in assets who have likely not gone up 100% in 10 years. That is more likely the vanishing Middle Class.

        • Petunia says:

          Bear,

          The vanishing middle class is me. Pre GFC I was comfortably in the over 50%. Now I’m not so comfortably under the 50%.

        • The distinctions are schizoid, there are people whose income puts them in the upper 50%, who have no assets, and people in the lower 50% with no income who have assets. Imagine if interest rates normalize, the real wealth disparity gap will explode. It would probably see the end of grifter America.

      • Swamp Creature says:

        I actually just did that a few days ago. Gave a poor dude $5 to get breakfast. He spent the money at a local Gas station food mart. I watched him go there. His financial assets were gone in 30 minutes but he stimulated the economy and helped boost GDP. He also got a meal and didn’t starve. Win Win Win!

  43. Micheal Engel says:

    5) You belong to the bottom 50% of income, but the next door millionaire.

    • Beardawg says:

      Michael Engel

      I think you nailed it for a huge number in the 50-90% crowd. We pay little / no taxes because our passive income is low (thus we are in a bottom 50% income range), yet the assets which spin off that income are significant ($1M+).

  44. Micheal Engel says:

    1) Dividends add to your income.
    2) A single mother why got two tranches gov stimulus, on top of snap,
    cash, housing support, electricity, internet, cell phone…
    whatever, with unemployment, might get a total of $60K last year.
    3) $60,000 from dividends income, before taxes, is $60,000 : 0.025 = $2,400,000 stocks portfolio.
    3) Did I miss other sweets of the bottom 10% of assets.
    4) Two decades of wealth explosion.
    5) In 2002 the stock markets collapse. The dotcom destroyed the top 1%.
    6) The to 1% recovered in the next decade and accumulate wealth
    7) 2009 was gift from haven.
    8) The results are the charts above.
    9) But when the stock markets will plunge, it will rectify the gap, without
    gov support.

  45. SocalJim says:

    Capitalism has winners and losers. So far, it is the greatest financial strategy ever thought up. The alternative is socialism which has always proven to be a mistake. Many on this board talk up the principles underlying socialism. Are you sure about that one?

    • RightNYer says:

      If you think what we currently have is capitalism, I’d love some of whatever you’ve been smoking.

    • MonkeyBusiness says:

      If capitalism is so great, then why are there supporters of socialism? And vice versa.

      Every system has winners and losers. The final solution is Skynet. The Capitalists are happy that socialism does not win and likewise the Socialists are happy that capitalists don’t get the last say. Perfect!!!

    • Alku says:

      Why this “Greatest financial strategy” results in the army of homeless and obscene inequality? Is it much better than the other extreme, communism?
      The truth should be somewhere in between I think – at least the Nordic countries very successfully combined the systems and avoided many drawbacks. No homeless is just one example.

    • Depth Charge says:

      We don’t have capitalism, we have crony capitalism. I want capitalism back, if we ever even had it. My entire adult life has been crony capitalism. In fact, it appears to have been the case since I was born. Let’s not call crony capitalism, capitalism. That’s insulting.

      • historicus says:

        Depth
        The Fed has and Central Bankers all over the world have suspended the fundamental of a free market…
        Supply/Demand price discovery.
        The discovery of the real price of mountains of new debt have been suspended by fake demand created by central bankers.
        All the pork and wasteful spending coming from Washington would be halted immediately if the appropriate costs were in play.
        The Fed funds all these Socialist programs, these vote buying antics, with their alleged economic stimulus monetary decisions which only feeds the stock markets. I suspect this is all intentional.

        • A says:

          Your comment seems very wise, but I think it’s important to remember that the rules and regulations that hamper actual supply and demand would have to end one way or another.

          Without massive subsidies and rules, you can’t get farmers to grow cheap, shitty, oversprayed and underpriced corn to feed hogs in another state when people need locally grown food that can sustain them (crops, meat, seasonal fruit). The hog farmers in another state wouldn’t pay enough. The land would have to be used more appropriately.

          There are proven models that work better and more traditionally in basically every culture than “pay people to grow field corn” (and support fertilizer businesses, monsanto, buy bigger and bigger farm machines while going deeper into debt and having one of the highest suicide rates as a profession). Those proven models don’t have huge fields in the hands of a few people and corporations, though. They involve things like permaculture, people raising a few chickens, a pig, maybe a cow…oh yeah, and all sorts of “food safety” laws not being implemented to keep small producers out of the game (while turning a blind eye to the corruption of food safety at a much higher level of production). (It would, for instance, be “unsafe” and illegal to raise your meat on your land and get it slaughtered locally – in many areas – meanwhile big corps managed to get ractopamine listed as “safe” and legal in the good ol’ USA. Food safety and laws for you, the consumer!! Not trying to kill ya at all!!!

          The same goes for housing and much more. Without so many laws that tell you where you can’t live, what you can’t built for yourself or with friends, and the like, there’s no monopoly on housing, and the rules of supply and demand would mean that basically everyone could have a home. Some would be poorly built and not last long…the way of all life till recently…but you wouldn’t have tents of homeless people getting torn down by the cops to protect the real estate value of shiny neighborhoods and huge empty office buildings that exist as investments, unused.

          Supply and demand would mean the racketeers couldn’t keep their power.

    • MM says:

      Privatize the fire department!

    • Random guy 62 says:

      The list of possible ways to arrange an economy that is harmonious with human nature and maximizes wellbeing is not that binary.

    • Lisa_Hooker says:

      According to the Parker Brothers rules, Monopoly money is theoretically unlimited; if the bank runs out of money it may issue as much as needed “by merely writing on any ordinary paper”. However, Hasbro’s published Monopoly rules make no mention of this.

  46. Hernando says:

    A bit off topic, but I see and feel what the fed is doing to my community and my family along with the congress in general. Throw in state government too.

    What happens if the dominoes start falling in other western nations like Canaduh and Australia? What happens if a region in Asia suddenly has a economic shock of some type? What are the outside risks to the United States economy from a world economy that seems even more vulnerable- in my opinion?

    • MiTurn says:

      “What are the outside risks to the United States economy from a world economy that seems even more vulnerable-”

      Could it be a reverse scenario? What outside risks does Fed policy, among other federal dysfunctionalism, pose to other western countries? This lack of confidence is what will dethrone the dollar as the world’s reserve currency.

  47. Les says:

    The economics of the Fed Put

    Since the mid-1990s, low stock returns predict accommodating policy by the Federal Reserve. This fact emerges because, over this period, negative stock returns comove with downgrades to the Fed’s growth expectations. Textual analysis of the FOMC documents reveals that policymakers pay attention to the stock market, and their negative stock-market mentions predict federal funds rate cuts. The primary mechanism why policymakers find the stock market informative is via its effect on consumption, with a smaller role for the market viewed as predicting the economy

    https://www.nber.org/system/files/working_papers/w26894/w26894.pdf

  48. John says:

    Wolf,
    I remember the federal reserve bank constantly telling congress that there was fiscal support needed, that monetary policy was not enough. Bernanke said it so did Yellen. Do you think it would have helped, and where would we be here now? Trillions in debt now, 28! I clearly remember congress being asked about a fiscal policy, which really never happened, and more political sideshows about the debt which is like five times as much now. Would Bernanke get any credence if they did, what they are doing now? Or is it really globalization?, companies and state or just the fed?

  49. polistra says:

    The most effective graphs in the world as usual.

    I was struck by your conclusion that the lower 50% doesn’t own any homes. Several years ago I took a detailed look at the 1940 Census, examining a couple of neighborhoods I knew personally. A white working-class area and the black part of town, both in Enid. Both areas were similar by the numbers, and both had 60% home ownership in 1940.

    In 80 years the bottom half has gone from majority ownership to zero ownership. The American Dream in action!

    • Wolf Richter says:

      polistra,

      Let me clarify the homeownership point. What I said was: “What this means is that relatively few households in the bottom 50% own real estate.” So they own homes but not in large numbers.

    • VintageVNvet says:

      Was that Enid, OK, or Enid, MS p?
      Curious because IIRC it was the same or very similar in what was the small town in SWFL where I was a kid up to 1960.
      Certainly, the houses in the black section were smaller and simpler, but they all had running water and electricity and the other basics of that time.
      But they were owned, usually outright, by the folks living there, similar to the houses of the rich folks at the waterfront. Most of the other homes, including ours, had mortgages, but most of those were under 50%, and payments were well within average earnings.

  50. Micheal Engel says:

    1) If TY US10Y Note Futures (price) will rise and form a Adam & Eve, the bank might survive, when SPX and IWM will plunge, at least for a while,
    2) The gap between the bottom and the top TSR will shrink,
    because the people at the bottom will cont to get gov support in order to muzzle them and make them obedience.
    3) The top 10 resistance leaders have to be chopped instead of neutralizing millions of their followers.
    4) Until the phony politicians will act BLM will be Agbar.

  51. FinePrintGuy says:

    Wolf, I advise using a logarithmic scale when charting the differences between the 1% and everyone else.

    • Wolf Richter says:

      FinePrintGuy,

      NEVER. Log scales in finance and economics are designed to HIDE reality and pull a bag over your head. But here, I prefer we check the bags at the door :-]

  52. Micheal Engel says:

    1) TY was falling since late 2017, because the upcoming Fed chair
    promised to save the world from NR.
    2) The plunge accelerated in Jan 2018, JP day one, with his inflation
    expectation fictions.
    3) The German 10Y didn’t care,
    4) In Oct 2018 there was a change of character the US10 bull run started.
    In Aug 2019 TY crossed the resistance line coming from big red Dec 1999. Jan and Feb 2020 bars are high quality green bars.
    5) In Mar 2020, TY made a new all time high, with a large selling tail,
    because JP saved the world from the next plunge.
    6) Instead of DOW 10,000 we got charts showing that the top 1% assets reached $12M.
    7) When there will be change of character everybody will blame the Fed.

  53. WES says:

    Yesterday, the serfs were sold with the land.
    Today, the serfs are sold with the dollar!

    • Micheal Engel says:

      Lenin extremely focused slogan during WWI : peace, bread, land.
      There was no reason for Muziks to fight in far away land, for the tsar and the aristocracy generals, when mother Russia land was offered to them, for free, if they join Lenin and Trotsky, and they will stop fighting the German and the Ottoman armies and start distributing confiscated assets, instead.

  54. Micheal Engel says:

    Today I almost shorted Merck, because Merck sit on the cloud flatbed, on a verge of plunge. Merck price is under the cloud head bump they got from a baseball bat on their extreme left, with a potential for growing viking horn, as reward to their 5 years history of phony behavior.

  55. wojtek says:

    Please forgive me Mr Richter, but I have a silly question. There is something I obviously don’t understand: According to the Fed’s data, the “50-90 percenters” have 14 times the accumulated wealth of the “bottom 50”, while obviously being 20% fewer of them. If that is the case how come their average per capita wealth is less than 3 times that of the “bottom 50”?

    • Old school says:

      One thing that should be considered is age. Most of us start adult life with net worth around zero. If you invest 10% of your earnings in SP500 for 30 years you probably will be OK even if you never make big money. That’s assuming you stay out of debt.

      But most Americans are not very good with math and don’t realize the big difference living on 90% of take home vs. living on 110% of it and how that determines your life later on.

      I made three or four pretty big investing mistakes in my life, but it turned out OK because I contributed 12 – 15% plus good company match for 15 years and that was good enough for a happy retirement.

      • RightNYer says:

        Old school, I hear this argument a lot, that all you have to do is invest in the S&P and all will be fine. The thing that people leave out, is that for the last 50 years, you were investing in a growing economy. Now, the only way we’ll have that type of growth in the stock indexes is through multiple expansion, as the economy is NOT growing.

  56. Lynn says:

    People *understood* full well that it was the Fed who was responsible for taking their properties in the1930’s.

    Except they didn’t call the Fed “the Fed”, they called the Fed “the Banks” and immediately thought of bigger banks and complexes. Although plural was used it was understood that it was a multi-headed hydra, a single large organism, rather than a crowd of different independently motivated entities.

    Two key words that enable connecting the dots for those who do not know what the Fed is. Throw the word “central” in there and it becomes confusing. The words “foreclosure victims” don’t really convey the same thing either, and place speculators in the same category as home owners, which doesn’t engender any sympathy.

  57. Andy says:

    No worries folks, we now have the council for inclusive capitalism headed by the Pope, all will be okay!

  58. Sea Creature says:

    I’m actually quite surprised that the 9% under the top 1% still have about $1.5M each (or ~$3M per married household).

    Thats 1 in 10 Americans and actually quite a lot more people than I would have expected (I don’t seem to know any of them :-) ).

    Most people around me, even in regular jobs or small businesses have nowhere at all near that amount of money saved up (or inherited or whatever)..

    Maybe I am reading the chart wrong..

    • Bobber says:

      The top 10% is largely concentrated in the age 45+ age group. Anybody who’s been working for a large corporation or service firm, making six figures or more for decades could have easily put themselves in the top 10% by investing $30k or more per year and watching it grow. The bulk of the wealth is stock market and RE gains.

      It’s a relatively small reward for sacrificing one’s life for benefit of shareholders and partners.

      • Sea Creature says:

        I did some research on this as that result was rather vexing, and it seems to be that at that end of the wealth range, the curve is very steeply sloped (ie. a few at the top have almost all the money), even within the 90%-99% band.

        So though the 90-99% band (between the $11M band above it and $42K band below it) may have $1.5M per capita, really, only the top few % of the people in the 90-99% band really have that much. The vast majority of the band are much closer to $42K, the next band below..

        That would more align with what I see on the ground as well.

        [Wolf correct me if I am wrong, but that is what it looks like :-) ]

        • JimB says:

          You are right – it is the same in the UK.
          If you look at Figure 4 on this page:
          https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2016tomarch2018

          Wealth in the UK is pretty much a power law – every decile you go up the people have x1.5 to x2 as much wealth

        • VintageVNvet says:

          Agree with you SC, and it is why I asked the question re mean v median to begin this comments section. It would be very interesting to see the ”spread” of wealth in one of Wolf’s great charts, for each section of the divisions given.
          Having worked for some of the self made rich folks born after WW2, it certainly seems to me that that generation – younger than I am — earned their money, mostly, IN SPITE of the various and sundry efforts by the oligarchy/REALLY rich folks.
          Knowing a dozen or so much younger folks, ( in their 30s and early 40s ) who are doing quite a bit better than I was at their age,,, ( along with some that age spending a lot of time and energy avoiding work ) ,,, I think the doom and gloom folks are only partially correct, and at least I hope younger folks with ideas and willing to work hard will continue to do so.

        • cb says:

          @ Sea Creature –

          If the average per capita wealth of the 50% to 90% band is $263,016 then there is no part of the 90% to 99% band that is close to $42,000.

      • historicus says:

        IF the under 45 age group only knew that their financial future is being carved out to “fluff” the present condition.

  59. Lawefa says:

    Great article Wolf. Yes, this is precisely how you destroy a nation. Calculated and intentional.

  60. Brian says:

    Great charts and great link Wolf!

    It’s interesting that in 1989 there was $20.42T in wealth and in 2020 we’re up to $122.90T! 6x growth over 31 years is a whole lot of wealth to reallocate.

    On another note, it’d be nice if the Fed broke down the 1% to .1% and .01%. I think that would show even further concentration of wealth, my guess is that group is heavily skewed to a small amount of people.

  61. Old school says:

    The Fed has created an illusion of wealth. The $20 T of wealth produced a reasonable amount of income as a % of assets in it’s day. The $120 T today is producing income that is very low, most under 2%. Sp500 div 1.4%, 10 year treasury 1.7%. Neither income stream is positive in real terms.

    • historicus says:

      Old School.
      Indeed.
      For the 20th Century until 2009, Fed Funds equaled or exceeded inflation.
      For 12 years now, the Fed has pushed rates below inflation. This removes an avenue for people to save their way to so level of financial stability.
      Instead we get desperation investing and yield chasing, upending risk return ratios.
      12 years and 20 Trillion later, only those who were substantially invested in stocks have done well.
      Those who bounce out of bed to go to work not so much.
      The wedges are clear
      The divides are widening.
      All by the actions of an unelected body THE FEDERAL RESERVE, who apparently serve some at the GREAT EXPENSE of others.

  62. YuShan says:

    In the mean time, Kinesis in partnership with the Indonesian government is introducing what is essentially a gold-backed parallel currency in Indonesia.

    With 70% of the (270 million) population currently un-banked or under-banked, this will bring them into the modern economy and allow them to save and transact in a stable currency that cannot be debased.

    It also cuts out rackets like Western Union, that charge extortionate fees when the millions of Indonesians that work abroad send money back to their families. This means literally billions of dollars that are saved and this benefits the poorest communities.

    Press conference about this is scheduled 16th April and official launch with government officials present will be in May.

    • historicus says:

      Central Bankers have so poorly treated the holders of currency that parallel, substitute forms of tender have been created.
      Isnt this a great topic of discussion for a “60 minutes” interview?
      The Davos crowd doesnt even see the destruction to the currency as a result of their convoluted schemes and antics disguised as monetary policy.
      12 years of serving the holders of stock at the EXPENSE of savers. First as an emergency measure….later as an extra innings love affair between the Fed and Wall st.

      • YuShan says:

        Yes, the majority of the population has no stake in the system anymore, so they are abandoning the obsolete fiat system now that the possibilities of doing so are opening up.

        A monetary system should benefit all stakeholders. If one group gets consistently f*cked, they will leave.

        It is interesting to see that at least one national government (and more to come) is now embracing sound money as a parallel currency too. Of course developing countries are in a very different situation than developed ones. They were never able to create “wealth” by cranking up the printing press.

        • Brian says:

          Unfortunately most people don’t understand what is going on and are cheering for more cure.

        • Chris Herbert says:

          Developing countries should have their own currency. If they don’t they are at the mercy of debt denominated in a foreign currency. Wealth is in natural monopolies like those of minerals, land, education, transportation and banking. If you are poor in these resources, then you need to identify where you can generate wealth. Education is a good one.

        • YuShan says:

          Brian, yes unfortunately you are right. But I feel that the tide is turning. For example, the subreddit WallstreetSilver has added thousands of new subscribers in the past week. Many (most?) of them are idiots, but at least they understand that they are getting screwed by the financial system. And most of them are young people. You know, the crowd that is prepared to riot at some point.

  63. historicus says:

    Central Bankers have so poorly treated the holders of currency that parallel, substitute forms of tender have been created.
    Isnt this a great topic of discussion for a “60 minutes” interview?
    The Davos crowd doesnt even see the destruction to the currency as a result of their convoluted schemes and antics disguised as monetary policy.
    12 years of serving the holders of stock at the EXPENSE of savers. First as an emergency measure….later as an extra innings love affair between the Fed and Wall st.

  64. Micheal Engel says:

    1) Repeat : there is inflation.
    2) When US 10Y interest rate range is between zero and 2%, every tiny
    change is a big lever in US 10Y price. Same for US Bonds.
    3) US is US 30 Year T Bond Futures price, log , bar chart :Mar 2020 had a huge selling tail that sent price back to a support line coming from : July 1984 low to Jan 2000 low.
    4) US line chart : the period between big green Mar 2015 to Mar 2021
    might (!) be an inverse H&S with a neckline between July 2016 and
    July 2020. This pattern incomplete and have to be confirmed.
    5) Mar 2015 to Mar 2021 might be accumulation zone.

    • Dan Romig says:

      Michael,

      3) In a few hours, there will be an auction for 30-year bond U.S. Treasury Securities.

      I’m curious to know the dollar amount sold, if the Fed will be a buyer of these long term bonds, and if the Fed has any influence over price/interest rate?

      As of market close yesterday, the Treasury Yield Curve Rate on the 30-year is 2.34%.

      • Micheal Engel says:

        If they buy, short silver & gold.
        If they buy, the 20Y and the 30Y might invert.

  65. Micheal Engel says:

    1) FRED : share of total net worth held by the top 1% :
    2) The top 1% were rising in stepping stones, in three humps, until today.
    3) They were rising sharply between 1990 low and Q4 1995 @28.4%.
    4) The trading range between Q4 1995 and Q1 2000 @28.5%, was followed by a plunge to 25% in Q1 2003.
    5) The next hump reached an all time high in Q3 2007 @29.5%.
    6) After a short plunge to Q1 2009 @27% the top 1% reached a Buying Climax in Q2 2015 @31.3%, peaking in Q2 2015 @31.5%.
    7) Thereafter ==> a 6 years trading range, producing lower highs and lower lows until the bottom in Q1 2020.
    8) The attempt to test the 2015 high failed, at this point.

  66. Micheal Engel says:

    9) The top 1% largest thrust was between 1990 and 1995. Thereafter a shortening the thrust.
    10) It might indicate a future change of character, when (if) NDX show large monthly supply bars, sending their wealth to NR .

  67. MiTurn says:

    Thank you, Wolf, for your work.

    You’re a bright light in the darkness.

  68. Kenn says:

    One mistake – The Fed charts are per Household, not per person. At 126 million households, the top 1% = 1.26 million, not the 3.3 million stated in your article.

    One comment – Age also has a lot to do with wealth. Young adults normally have student loans, car payments, and a rented apartment, therefore no or negative net worth. It takes decades to build wealth even with well paying jobs. The real question is; Are the ones at the bottom 50% stuck there, or are they starting up and have a path forward?

    I would look more up, but I have to get off this computer and get to work.

    • Wolf Richter says:

      Everything is “per capita” and “per person.” “Household” wasn’t even mentioned. so 330 million people. 1% = 3.3 million people.

      You can make the conversion to households for each category, if you wish, but then you get into the issue of household size, with many people being single and in a one-person household. When they combine into a two-person household, their wealth combines too but they didn’t get any wealthier, and now you’ve got to deal with that distortion. Hence “per capita” as common denominator, which is standard practice.

      • Kenn says:

        I looked again, and was mislead by the heading “Distribution of Household Wealth in the U.S. since 1989”
        A closer look also revealed that the data is from the “Distributional Financial Accounts” , which would probably exclude children, since they don’t generally have financial accounts in their name.
        I do fault the Fed for giving percentage statistics without clearly defining the population being measured. (At least I didn’t see it clearly identified … I could also be blind and miss the obvious.)

        This now begs the question; Does the data exclude real estate, which isn’t reflected in a financial account?
        However, there is no doubt, regardless of the specifics of the data, that the top 1% are getting richer. They went from 23.4% of measured wealth in 1989 to 31.4% in 2020.

        Finally, Thank You for reading the comments and correcting my mistakes. It is greatly appreciated.

  69. Brant Lee says:

    The dollar showdown is gearing up by design in the East. What could cripple dominant dollar status?

    Taiwan.

    Chinese warplanes are testing the little island’s air space increasingly, along with U.S. resolve. Will hot air U.S. politicians save the day? Do Americans have the stomach to defend? Heck no. But to back down shows weakness and loss of status to the world. Does the dollar inflate like a hot air balloon?

    • GW Bush told Taiwan to get ready to reunify with the mainland, that is GOP mantra, withdraw from all foreign entanglements. They are a party of isolationists using occasional displays of gun boat diplomacy. They put the US on a strategic only defense course back in the 80’s. Trump was orthodox in that regard, he wanted to expand the DOD budget, while withdrawing troops from overseas. Now that the GOP has lost leadership the direction of foreign policy is unclear. Without that compass the dollar could become the hot money market of the century.

    • SpencerG says:

      I am not sure how you get that! A Chinese invasion (attempt) of Taiwan would destroy CHINA’s economy… not ours.

      First off, an invasion of a democracy would end the argument in the West that doing business with China is benign.

      Secondly, it is not likely to go well. China is 110 miles from Taiwan across the Taiwan Strait… roughly the same as Normandy from England across the English Channel. But unlike the Germans, the Taiwanese have had seventy YEARS to prepare. Nor can the Chinese count on surprise… not in the day of satellite reconnaissance. Asking an army of two million peasants (that hasn’t fought anything besides border skirmishes since 1953) to conquer a mountainous island of 20 million modern people is absurd.

      Lastly, is it worth the cost to the CCP even if China were to succeed? That two million man army cannot strip the country’s borders bare in the hopes that India, Vietnam, and others won’t seize the opportunity to make “adjustments” more to their liking. Or leave the interior to its own devices for the people of Tibet, Hong Kong, or Xinjiang to make clear how little regard they have for CCP rule.

      I have no doubt that China’s PLA could ATTACK Taiwan tomorrow and do a LOT of damage… but CONQUER Taiwan??? That is much more difficult than the armchair pundits believe. I spent three decades in a Navy uniform and I can tell you that amphibious assaults are the most difficult military operation there is. Forget for a moment that the Chinese Navy doesn’t have any experience in that type of assault over the past THOUSAND years… they don’t currently have the ships, equipment, training, or troops to pull off an amphibious landing. And that is before the military of Taiwan (or America) fires a single bullet in response.

      Firing some missiles and sinking some ships is one thing… it would be a bloodbath no doubt. But there is no point in China doing that given the damage that would be done to their reputation and their future unless they can GUARANTEE the takeover of Taiwan. And that is nowhere near being the case… if it ever will be.

      • Auldyin says:

        SG
        For 1500yrs China was the dominant trading nation in the world but they did it predominantly overland. They were utterly unprepared for assault by sea from unfriendly maritime nations and suffered for years in consequence eg loss of Hong Kong Taiwan etc. It has taken them a massively long time to restore their pride and they will not lose it again lightly. Tamper with China militarily at your absolute peril. What should concern us all economically is that they are re-establishing their land trading links with Asia & Europe via the belt&road initiatives where they are planning high speed rail links which will integrate land transport between countries and undercut maritime transport costs rendering US west coast ports secondary. This year the EU officially became China’s largest export market and that’s mainly with ships going via vulnerable Suez canal at the moment. It’s not rocket science to realise what will happen with multiple HST’s every hour. China and Taiwan should make a gentleman’s agreement to trade and co-exist peacefully as one culture but they won’t until the chest-beaters all around stop posturing. They don’t go bombing people and telling them how to live.

  70. chris gould says:

    Wealth can be created in a number of ways – i do not know if i am wealthy but i do know i have $$ in the bank and equity in my house. My path has been to drive 20+ year old cars, not buy a new TV for 10 years, not pay $100+ for new shoes, etc. In short, wealth can be accumulated by not bowing to impulses and using what i already own. I learned from my parents (depression-era people) that being ostentatious is wasteful. My wife and i have also taught our children to enjoy life but not be wasteful – thus they all have “wealth” based on saving. My wife used to always say if you get a dollar – put 25 cents away for the future (and the day we were married we had exactly $100 between us – and have inherited nothing over the years). What we have ‘created’ as wealth was not based on government fiscal policy – we did it ourselves quietly and within our means. Maybe there should be a chart for those of us who patiently went through life and created our own wealth.

    • Auldyin says:

      Spot on CG
      If you live on half your income you can retire after 25yrs instead of 50yrs. Simple. Maybe even 20yrs if you get a steady real 5% on your savings.

  71. Swamp Creature says:

    Jerome Powell was on 60 minutes the other day and said flat out to Scott Pelly that if those blue collar workers in flyover country started asking for higher wages to compensate for inflation then their corporate bosses would just ship their jobs overseas. He said that this was just part of the new Globalization trend, and everyone needs to get over it.

    Steve Mnucian talked T into appointing this clown as Fed. The two worst appointments in the history of the USA. We will be suffering for the next 10 years as a result.

  72. Robert says:

    Great article Wolf. Now, if you could survey similar data for Boliva, Nicaragua, Mexico and Brazil, you would be able to definitively prove the US is a third world country. Just a few minutes work for the Wolfstreet economics team I’m sure. :)

  73. Swamp Creature says:

    One feature of the 2017 Tax Cut & Jobs act that was good was the small business deduction of 20%. Say you are a self employed landscaper making $100,000/yr. You got to deduct 20% off you total adjusted gross income. That’s 20k off your reported income. Not bad.

    But now the new administration wants to take that deduction away. So now you will lose that deduction along with all the others that were taken away in the 2017 tax bill and watch all the top 1% salivating over all the tax breaks they they got and which were made permanent. And don’t forget in 2024 all the tax rate reductions in the 2017 tax bill are set to expire, so if nothing is done look forward to being put back into the same tax brackets that you were in before the 2017 tax law was passed, while at the same time you’ve lost nearly all of of your itemized deductions. This is how they intend to pay for all this reckless spending and printing that is going on today.

    Enjoy

    • Chris Herbert says:

      Taxes are there to destroy currency. Trump gave you a tax break with the deduction. All good. Unfortunately the wealthy got an even better deal. They just added it to their savings. Not all good.

  74. Kerry says:

    I vote for currency backed by honest money. Sadly, most people will not understand and/or agree…

    • Chris Herbert says:

      The dishonesty comes via a corrupt tax code. The ‘honest’ in honest money comes from resources. The US has tremendous resources. It just wastes much of it.

  75. Tom says:

    Wolf…

    Thanks, and congrats for opening a topic that, with just today’s reading, should replace most of the college beginning econ classes. With just some time on the article and comments bring a better understanding of what is really going on…..and how we all are manipulated by our government. And, how that bottom few percent are being screwed by their protector government.

  76. Yort says:

    Speaking of “Wealth Effect”, does that work in reverse? For example, Bloomberg showed today that houses cost $24,000 more due to lumber costs soaring this last year. Lumber went from $2.51 April 1, 2020 to $11.84 today, so is that a 372% “Wealth Effect” in a single year? Is this a good thing now, 372% inflation on wood? I’d assume the trees like wood inflation, but how about people?

    So what happens to the “Wealth Effect” when, not if, lumber crashes down to Earth because as far as I can see, the trees are still alive and well on planet Earth.

    Do we get a “Poor Effect” when lumber crashed down? To ensure a lumber “Wealth Effect” forever, should we outlaw cutting trees if the price of lumber falls…otherwise; the “Wealth Effect” is nothing but a “Transitory Fantasy”…

  77. Bobber says:

    If the Federal Reserve harbored legitimate motivations within the limits of its capability, wouldn’t it be more transparent and consistent?

    I’ve heard several obvious falsehoods over the past decade:

    There are no bubbles.

    Fed policy does not impact wealth concentration.

    The Fed will normalize its balance sheet in the future.

    Fed policy does not impact LT interest rates.

    QE does not increase asset prices.

    Deficits should be reduced – shortly followed by – Deficits should be increased.

    The Fed is independent (despite a former Fed chair taking the reigns at Treasury).

    The Fed is independent (despite Powell caving to Trump’s demands).

    Growing US debt/GDP levels are not a financial stability risk.

    Housing prices are not a financial stability risk (2007 and now).

    We will not see a financial crisis in our lifetime.

    • Depth Charge says:

      These people are economic terrorists, destroying the financial lives of hundreds of millions of Americans.

  78. Here it comes says:

    Thank you for all the hard work and research in explaining this. Excellent article.

  79. Auldyin says:

    Excellent exposition as always.
    Could also be for the UK or Europe or any of the cabal.
    It’s beyond any doubt that is what happened but, to put culprits in jail, you have to show if anything was illegal about what they did. The bump and rise for the rich since 2008 shows that something substantial must have changed then.
    In UK the MPC and BoE are mandated to target 2% and minimise the “output gap”. The Treasury is mandated to run the country with “fiscal responsibility” ie to fund any debt in the ‘open’ financial markets.
    Debts have been massive for ten years so to claim you funded them legally in the open market stretches the historical imagination beyond belief. Traditionally the Govt selling lots of debt would push up interest rates by taking money out of the market. Enter QE. Quack Economics. Quantitative Easing ie removing restraint on quantity. Quantity of what? Why ‘money’ of course in that self same ‘open’ market.
    The BoE is meant to be “totally independent” of Govt and it is an “absolute taboo” for Govt to monetise ie buy it’s own debt. That is the current ‘official’ position and they claim they have legally funded their debt at the very low rates of the last ten years.
    A recent quote by the UK equiv of Treasury Secretary gives the game away. “For nominally independent institutions to co-ordinate their actions in a constructive way when the outcomes are beneficial is not a bad thing.” Or words to that effect, I have it on tape. Is that not the definition of collusion?

  80. Rubicon says:

    The Walmarts/Amazon/Corporatized Supermarkets/Diners:
    the list is endless.
    America is governed by Oligarchs just as you have in parts of Latin America/Elsewhere wherein the wealthy few thrive.

    American oligarchy & it’s supreme power is based on The Fire Sector:
    Financial Sector (banks/Wall Street, etc.) Real Estate Sector, and Insurance.
    End result: 3d World Status for a majority of Americans.
    There’s really nothing more to be said/discussed.

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