Most Important Measure of Fed’s Economy: My “Per-Household Wealth Effect Monitor” for Q1, Based on Fed Data

How the “Wealth Effect” benefits Americans individually: Peanuts & extra costs for the bottom 50%, wealth for the top 10%, billions for the few.

By Wolf Richter for WOLF STREET.

The Fed released its data on the wealth distribution through Q1 2021 today. It’s a testimony of the effectiveness of the Fed’s monetary policies in expanding the already unimaginably huge wealth disparity in America. The Fed’s data covers household wealth of the 1%, the next 9%, the next 40%, and the bottom 50%. The bottom 50% – half of the US population – are the have-nots and don’t even register on my “Per Household Wealth Effect Monitor” because they don’t have enough.

The 1% of 126 million US households – so 1.26 million households – are the prime beneficiaries of the Fed’s actions. At the end of Q1, their combined wealth was $41.5 trillion, for an average of $32.9 million per household. Over the past 12 months, their wealth increased by $7.9 million per household.

The “next 9%” of the wealthiest households, with an average wealth of $4.3 million, gained on $708,000 per household in 12 months. The “next 40%,” with an average wealth of $725,000 per household, gained $98,000 in wealth.

The 1% are spread across an enormous spectrum of wealth.

At the top are the 30 wealthiest American households, ranging from Bezos to Icahn, with Musk as #2. Combined, the 30 households have a wealth of $2.0 trillion, per Bloomberg Billionaires Index, with an average wealth per household of $67 billion. They’re the total hands-down-winners from the Fed’s monetary policies.

The bottom 50% are the have-nots in a universe of Fed-created wealth that is not for them.

The bottom 50% own essentially no stocks. And only a small portion of them own real estate, and they have very little equity in the real estate they own. But they have a lot of debts. The bottom 50% are not only bypassed by the Fed’s Wealth Effect – they have to pay for it in terms of higher costs.

Their average wealth of $42,000 per household includes durable goods, such as their cars and TVs and washing machines and cellphones. Their wealth gained just $10,000 over the past 12 months, much of it not from the Fed but from the government’s stimulus money, which they saved, paid down their credit cards with, or spent including on durable goods.

Among the bottom 50%, there are also large differences. At the top end are households perhaps with a modest house weighed down by a big mortgage they can barely pay for, a small 401k, plus nice cars and other durable goods, minus auto loans, student loans, and credit card debt. Those are the lucky ones among the bottom 50%. But that category also includes the poorest of the poor.

The chart below shows the wealth of the bottom 50% (red line) on the scale of “the Next 40%” (green line). This “wealth” of the bottom 50% has grown by only $14,000 in 20 years, not adjusted for inflation, of which $10,600 occurred over the past 12 months, thanks to the stimulus payments.

That “wealth” of the bottom 50% is composed of $122,500 in assets minus $81,000 in debt. Mortgage debt used to be the largest portion of the debt, but consumer debt – credit card debts, auto loans, and student loans – overtook mortgage debt in 2018:

The bottom half own nearly no stocks and little real estate.

Real estate at the bottom 50% is the largest asset at $61,500 per household (black line in the chart below), with $39,000 of mortgage debt against it, for a home equity of $22,500. What this means is that relatively few households in the bottom 50% own real estate. On average, those households gained $3,000 on their real estate.

When the Fed’s Wealth Effect policies inflate the housing market, most people in the bottom 50% don’t benefit at all because they don’t own a home. But they’re paying for the Wealth Effect because their costs, including rents, are rising.

Durable goods are the second largest category at the bottom 50%, at $24,000 per household, such as vehicles, appliances, and cellphones (green line), up by $2,500 over the past 12 months as people used their stimmies from the government to buy cars and other things.

Stocks and mutual funds, the smallest category of the assets, amount to only $1,356 per household (red line). The bottom 50% cannot at all benefit from the Fed’s efforts to inflate the stock market. That’s reserved for the top 10%:

The Fed’s Wealth Effect is designed for the top 10%.

The doctrine of the “Wealth Effect” — make the wealthy even wealthier so that they spend a little more, the ultimate of trickle-down economics — has long formed the official foundation for the monetary policies of the Federal Reserve and has appeared in numerous Fed papers, including by Janet Yellen when she was president of the San Francisco Fed. In 2010, Ben Bernanke, as Chairman of the Fed, explained the concept to the American people in a Washington Post editorial. In March 2020, Fed Chair Jerome Powell, who wisely chose not to use the term “Wealth Effect” and instead came up with his own terms, took the wealth effect to the most fabulous level ever, as you can see with the green line in the first chart.

The US population has grown over the years. In Q1, there were 126 million households in the US, according to the Census Bureau, up from 105 million households in 2000. By definition, all categories have grown over those two decades. So yes, the 1% have grown by 210,000 households over those years, hallelujah. But the bottom 50% – the have-nots – have grown by 10.5 million households.

Wealth Disparity balloons.

Over the 12 months through Q1, the wealth of the 1% surged by $7.9 million per household. The wealth of the bottom 50% increased by $10,600. And the wealth disparity between them ballooned by $7.9 billion.

Over the past three decades, the wealth disparity between the 1% and the bottom 50% has multiplied by a factor of 6, from $5 million per household in 1990 to nearly $33 million now, with a huge chunk of it over the past 12 months, thanks to the Fed’s assiduous policies:

This is an astounding but totally-taken-for-granted and totally accepted result of the Fed’s monetary policies. No one is even allowed to question it. It’s accepted because the top 10% like it that way, including Members of Congress who could actually do something about it, and because the bottom 50% don’t know about it, and don’t understand what the Fed is doing to them, and are too busy trying to survive in this disparity nightmare.

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  266 comments for “Most Important Measure of Fed’s Economy: My “Per-Household Wealth Effect Monitor” for Q1, Based on Fed Data

  1. OutWest says:

    Is this trend the future of the country? Let’s hope not.

    • Cem says:

      …really?

      Not really a trend when it’s happened YoY for the past 20+ years is it?

      “Here’s evidence the game is rigged and even if you work 26 hours a day and eat nothing but ramen and water you still cannot even come close to this sort of growth to your personal wealth”

      “That can’t be right”

      • historicus says:

        And the Fed has REMOVED the ability of people to SAVE their way to some sort of financial stability…which is typically the first step.
        To save is to go backwards, since 2009….
        This is outrageous!
        To Save is out
        To own a first house becomes a remote possibility
        To invest in reasonably priced equities …..?
        The Fed has skewed everything they touch….

        • historicus, interest rates should be north of 5% at this time in history, because any investor or saver with half a brain knows that over time he or she must beat the annual rates of inflation to get truly AHEAD. When a renegade branch of Government is allowed to artificially set interest rates well below the REAL rate of inflation, add 30% minimum to the reported CPI to get closer, then all types of disparities develop in the U.S. economy.

          When anyone with an accounting background looks at the data and charts above, he or she recognizes the softness in the Fed’s numbers from the get-go. Alleged assets such as real estate and stocks/bonds are not locked in price, but vary considerably with the ebbs and flows of the respective markets. I have always said that when looking at net-worth, these variable assets need to receive hair-cuts to reflect their abilities to head South as well as North.

          On a like note, cars, appliances, and cellphones are depreciating assets that can only be priced at current market values and not costs.

          Ah, but the Liability Side of the net worth equation, that combination of mortgages, auto loans, personal loans, student loans, and credit card debt is a sum that is a sum certain. It is not going away, forget this illegal debt payment moratorium bull crap just experienced, WHEN THE ASSET SIDE OF THE EQUATION REVERTS TO ITS HISTORICAL MEAN RATE OF PRICE APPRECIATION (via Bear markets or for this one, CRASH).

          Bubbles always pop. When the last sucker has shot his or her wad in the Powell Casino, then the rest of the players inevitably start pushing the SELL BUTTON and metaphorically RUSH TO THE EXITS. Bitcoin and other Crypto-Cruds are perfect examples of exhausted buying at highly inflated prices.

        • Anyone with ten bucks can buy stock commission free. Even with gains of 8 or 10% a year, the blue collar investor barely keeps up with inflation. Inflation is different for the 50% who own no assets. If you are salting away equity in this RE market you are doing pretty well for yourself. RE is still the real wealth effect for the masses, and that is doing just fine. The Fed is doing an advertisement for capitalism so the US can continue to brain drain the world. If we aren’t brain draining China right now something is wrong. Next we have a little war, and the next thing you know all the best Chinese scientists are in our labs. Meanwhile the paranoid rich are ready to bug out for NZ, or Singapore, from which they write poison pen letters home. They are absolutely positive the US will turn into Scandinavia. Once you get rich in America nobody bothers you. They never noticed the revolving door only goes one way but they recognize that patriotism is for the poor. Then every now and then the poor shake things up.

      • Michael Gorback says:

        20+ years? Another fine product of the American school system.

        Astor, Vanderbilt, Morgan, Rockefeller, Carnegie, Frick, Fisk, Cooke, Duke, Hearst, Mellon, to name a few.

        The only time I can think of where rich people put country before their own self interest was in the Founding era. Washington, Jefferson, Madison, Hancock, Adams, Franklin, etc were wealthy men who risked both life and wealth.

        It didn’t last long. The new Republic needed funding. It needed investors to buy its bonds. Thanks to the efforts of Hamilton the US financial sector became popular with foreign investors. But surprise, surprise, surprise as the great Gomer Pyle often said, the people who got to the market first and who had demonstrable wealth got the goods, especially in the northeast. There was tremendous favoritism and the favoritism was directed toward the wealthy cronies. Kind of makes you root for Aaron Burr.

        Nothing ever changes because human nature doesn’t change.

        • MiTurn says:

          “Nothing ever changes because human nature doesn’t change.”

          THAT is the essential truth of history. All disruptions return to the standard pattern over time.

        • Anon1970 says:

          As far as I know, none of the descendants of the families you noted are billionaires. You also won’t find any Duponts or auto Fords on the Forbes 400 list. In fact, many of the wealthiest people in the country today had rather modest middle class backgrounds but took advantage of the opportunities that were available. Some were downright poor. One of my classmates in business school used to wear his army fatigues to almost every class. He retired with a fortune of hundreds of millions of dollars.

        • Yes but they had slave labor

        • BrianC - PDX says:

          We had leaders from elite families that put country first as recently as WW II. Check out this member of the Roosevelt family:

          https://www.historynet.com/teddy-roosevelt-jr-the-officer-who-stormed-normandy-with-nothing-but-a-cane-and-a-pistol.htm

          Can you imagine anyone from *any* of the families of our business or political elite landing at Normandy?

          No – I can’t either.

          Our elites are venal, mendacious and corrupt as a class.

        • nick kelly says:

          Wasn’t Hancock the guy behind the Boston Tea Party, all because the shipment would compete with his tea?

        • Cem says:

          I don’t disagree with the education system BUT I’m using figures Wolf provided.

          I agree though, been happening since the beginning of time.

        • NBay says:

          @ Nick Kelly-

          Along with your point, why aren’t there any statues of Thomas Paine? And why was his name turned to dirt, after he convinced the poor that things would be different and encouraged them to fight, suffer, and die for that difference

          We didn’t have a “revolution”, we just swapped management.
          I seriously doubt Hancock was around for much of the tea chucking, that’s how some rich people are. Seeking opportunities for even more wealth, like Anon 1970 described so well…hundreds of millions, eh? This wasn’t the article to dump that load of crap in, I don’t think.

          I wish I could find your comment on our “chosen organization of government”. It was excellent, and relevant.

        • NBay says:

          “Nothing ever changes because human nature doesn’t change”, as the ESSENTIAL TRUTH of history?

          How ignorant and shallow that is! HISTORY (and historiography, I might add…) is just one of the MANY disciplines we study in our effort to figure out life’s many problems/questions/mysteries, including the VERY general concept of “human nature” (although I doubt there is a class in it…too vague). Cultural beliefs/values/ethics or our own hominid Biology? The EVER evasive “nature/nurture problem! Some just can’t mentally take unknowns and go with someone else’s diety pleasing instructions, sadly, or are taught that long before they have a say in their own life.

          The statement does kinda imply being pretty ok with your own spot in the status quo, the pecking order, Wolf’s charts, etc, though……

          The Ancient Greeks (where most of our core “thinking” comes from) endlessly debated, “What is the Good Life”. They didn’t believe any “human nature” was fixed, why should we?

          That aside, the real point is, are Wolf’s charts ok with you or not?

          Put me in the NOT column, with the people on the bottom, even though I’m not as bad off as most. It HAS to be dealt with, just like climate change and our present definition of the “good life”.

    • Nacho Libre says:

      “Peanuts & extra costs for the bottom 50%, wealth for the top 10%, billions for the few.”

      That’s precisely how inflation works. Hurts the poor the most. Benefits asset owners the most.

      Thanks Fed and all the 1%ers in the Congress.

      • historicus says:

        Get long pitchforks, torches and plywood

        • Bobber says:

          I’m considering a barbell strategy – long pitchforks and nooses on one end; shackles and white bread on the other. You don’t know which path we’ll head down, but we know it will be extreme.

      • Island Teal says:

        Great comments on this entire article.

        Still have a problem that a cell phone is listed as an asset and is considered part of personal wealth. It’s a phone ??

      • NBay says:

        Why do you blame these nasty inequality stats on only “the 1%ers in Congress” and not on the much larger majority of them?
        Or was it just a longish typo?

    • cdr says:

      Yes, it is a trend. But it’s not entirely the Fed’s fault.

      Normal everyday life, for the past decade or two, has been a quest for the lowest costs possible. Globalism was the cause. The cheapest imports possible combined with the cheapest labor possible from overseas helped cause a decline in the wealth of the lower 50%.

      Higher Education in the US has become an oxymoron. Multitudes of news reports state indoctrination has replaced education to a large degree. I have personal experience in community college classes in recent years where teachers were phoning it in while retaliating against students who expected more. I had to become responsible for my own learning and use the school only as a means to accumulate credits for classes, assuming it wasn’t so bad I felt better dropping the class.

      Now, today, education has been politicized beyond recognition. In Illinois, teaching Critical Race Theory is an Illinois State Law. Politics is crowding out education at an increasing rate.

      To some extent, Globalists were acting rationally because many of those who graduated from high education were and still are incapable of performing at the same level as cheaper imported people.

      Thus, blaming the Fed is the easy and always approved complaint. In reality, they are the band aid that compensates for a population that’s in decline economically due to its own efforts.

      • 728huey says:

        Educating students about the evils of slavery, particularly the rather evil, atrocious negative effects it had on African Americans and how it still affects them to this day is not indoctrination. It’s you not wanting to know the entire truth of American history.

        • cdr says:

          You are personally free to believe anything you want.

          Society as a whole suffers negative economic benefits when made up nonsense becomes what people are forced to learn and act as if they believe it.

        • cdr says:

          To continue, I don’t recall East Germany being an economic powerhouse. Life in the US today is emulating much of their former way of life. Or at least it’s dug in and spreading like an infection.

        • c smith says:

          There is a dramatic difference between teaching the “evils of slavery” (which our society determinedly ended 150 years ago) and teaching young children that their skin color makes them inherently evil.

        • Michael Gorback says:

          https://youtu.be/fB9KVYAdYwg

          Watch it and weep. We have made tremendous progress without this reverse racist propaganda. Still room for progress but many people are either too young or too stupid to recognize how much has changed.

          I remember the 60s with Freedom Riders, signs at the NC border saying “Welcome to Klan Country” and segregated drinking fountains.

          I remember going to look at houses with my father and being told that we “wouldn’t be happy” in this neighborhood.

          I also remember moving to NC 20 years later and seeing blacks and whites sitting together in bars and restaurants.

          Wolf has discussed the fact that not so long ago he could not have married his Japanese wife.

          CRT is more divisive than constructive. The more I have my nose rubbed in it the more antipathy I feel.

          I also can’t help but notice the selective aspects. Asians are being attacked but no one seems to mention the vast majority of assailants are black.

          CRT is a nice theory but in practice it’s a reverse-racist tool and I commend it to the same pit as Social Darwinism , Malthusian Theory, Eugenic, and all the other racial claptrap.

        • NBay says:

          “…..but no one seems to mention the vast majority of assailants are black.”
          Read it and weep.

      • Harrold says:

        Confederate monuments are critical race theory in stone format instead of paper.

      • cdr, the Fed is just another MAJOR element to what has cascaded America along the path to a repeat of the DECLINE OF THE ROMAN EMPIRE. Many cogs in the Wheel to Ruin.

        • cdr says:

          “Many cogs in the Wheel to Ruin.”

          Spot on correct.

          Yet weirdly, the Fed has migrated from the root of many problems to the glue that’s holding everything together.

          If QE and ZIRP were to stop then Wall Street would revolt openly. Savings of the majority would be at risk. Main Street would suffer from banks refusing to extend loans to small business thanks to being afraid old loans to high flyers won’t be repaid. Jobs would evaporate from this. A cascade of horribles would result.

          QE and ZIRP strongly supported a culture of Globalism, which made the lower classes feel the need to stick it to the man. This morphed into the mess of today.

          As mentioned above, the dismal education system provides no reason to expend personal effort to make things better. Just let the Fed monetize everything and you can finance any strange system you desire. And if you try to make things better and go against the majority, you will be ostracized in severe ways.

          So, the Fed certainly caused a lot of the rot of today. Yet, if QE and ZIRP disappeared today, the country would be chaos in the worst sense. In all respects.

          So, to a large extent, they are holding back the flood of bad things that would tear through society. The Fed didn’t create the bad things, they only financed them.

        • p coyle says:

          “The Fed didn’t create the bad things, they only financed them.”

          that’s some food for thought there, cdr.

      • Kurtismayfield says:

        “You are personally free to believe anything you want.”

        This sums up every one of your posts. If you believe for one second that the poor and middle class have any responsibility for Fed policy or the financial system we have today, then yes you are personally free to believe anything you want.

      • Lisa says:

        What are you talking about? Race theory is a very important part of education. Maybe you would prefer racism to be taught as part of a curriculum.

      • Random1 says:

        I agree that its a trend… But one needs to look at how the effects of keeping interest rates artificially low actually impacts the corporate world, pensioners, and the political landscape.
        “Too big to fail” says it all and that mentality has morphed into an attitude that allows zombie companies to exist on low interest rates. There are clear winners and losers in this environment.

    • Gerry says:

      Aside from asset inflation due to Fed money printing, what was the source of most of this wealth? Look at AT&T, which lost over $50 billion on its purchase of DirecTV in 2013. DirecTV, like Tesla and most high tech companies, was overvalued. Thanks to share buybacks, legalized by the Reagan administration 40 years ago, how much corporations can borrow most determines their share prices. The U.S. National Debt borrowing since Reagan has provided almost all the money to create the thousands of American billionaires we have today. Most of whom, like Trump, pay little or no income taxes. Since the multi-billionaire class control the media, there is no widespread reporting of how corrupt the system is.
      But, if Drudge Report is an indication, it is okay to get plastered with photos of ugly guys who are allegedly now the first trans Olympic athlete and gay NFL player (both claims wrong). As DirecTV shows, most of this great technology is crap, designed to fleece those Americans not already driven to poverty by high medical bills, job losses from factory closures and wages that do not keep up with the real inflation rate.
      3March2021: Last week, AT&T announced it would be spinning off its TV business — including DirecTV, AT&T TV, and U-verse — in a deal it claimed would greatly benefit the company’s customers, employees, and shareholders. The deal provides AT&T with a $7.8 billion cash infusion to pay down debt and recent wireless spectrum purchases, and a 70 percent stake in the “new” DirecTV. But it also values the entire operation at around $16.25 billion, a massive loss from the $67 billion AT&T paid just a few years earlier for just DirecTV alone.
      https://www.theverge.com/2021/3/3/22310994/att-directv-uverse-spinoff-sale-television-hbo-max-deal

      • Anon1970 says:

        If you want to cut your TV watching costs down dramatically, get an Amazon Firestick and learn how to program it. There is lots of programming out there that is accessible with the Firestick at little or no cost. I would not be surprised if AT&T goes the way of the old Eastman Kodak and Xerox.

        I was a customer of AT&T and Pacific Bell for over 35 years before I decided to take a chance and go with a small Bay area Internet provider called Sonic, on the recommendation of a friend. Now more than 7 years later, I am still paying less to Sonic than I was to AT&T and getting far more benefits, even though Sonic uses AT&T lines in my area.

        • p coyle says:

          if you want to keep your teevee watching down, just don’t have one. saves all sorts or money. lowers your carbon footprint too, if you care about that kind of thing,

      • NBay says:

        Buying back shares is market manipulation….and therefore illegal in a “free market”……..PERIOD.

    • Long Time Retiree says:

      I guess I have a different attitude than most of the commenters on here.

      We are a ‘median’ – based on retirement income and household wealth – retired couple. We live, I feel, a very comfortable life. See the kids and grandkids often. And now … IN PERSON.

      I really don’t care if others have way more income and/or wealth than we do. Good for them! They likely worked really hard for it and deserve to have it and spend it the way they want. Trying to ‘keep up with the Jones’ has never been our thing.

      We have enough to eat. A solid roof over our heads. And a great family. We’re fortunate – or lucky enough – that we’ve been able to donate small amounts to local homeless shelters and food pantries.

      More ‘stuff’ to own would be a curse and definitely NOT a blessing.

      • Davidtoo says:

        Well LTR, you know what they say, it’s not what you own but what you spend, and often what you own, owns you.

    • Old School says:

      Just saw the numbers. NC received $81 billion in pandemic aid. Our total state budget is around $26 billion. That gives you an indication of how massive the borrow and spend was by the Federal government.

      The state is actually flush with money now and you can be sure it’s going to be passed out to those politically connected. I think Fed’s bought a little time, but don’t get sucked in that economy is all that good. It’s borrowed from your future.

  2. Apple says:

    The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.

    -Will Rogers

  3. J-Pow!!! says:

    My man Wolf Ric
    Got the graphs so slick
    And now we all know about
    That Fed man’s trick!

  4. Bob Hoye says:

    Outstanding charts!
    Clearly presents the story.

  5. Angel says:

    Stupid question – In the US what is considered the criteria to be part of the top 10% and the top 1%? How widely accepted is that definition?

    • Antwan says:

      Roughly speaking, at the minimum…

      Top 1%: $400k+ household income, $10M+ net worth
      Top 10%: $175k+ household income, $1.5M+ net worth

      A lot obviously depends on where you live. $2M is barely more than a SFH in some cities but a lot of money in Arkansas.

      Another way to look at it is socioeconomically…

      Top 1%: Successful business owners, top management, successful athletes and entertainers, highly skilled professionals

      Top 10%: White collar workers, well paid tradespeople, government employees

      • Angel says:

        Thank you Antwan. Curious – is this the general understanding outside the financial circles (i.e Joe Blow) &/or is the anger being increasingly dispersed across a much wider % of the population?

        There are lots of folks in Canada who make $400K a year but aren’t able to claim 10M+ in net worth and maybe not even be able to make the definition for the top 10%. Still they are business owners, top management, & athletes so by definition part of this grouping. Increasingly, it isn’t only the top 1% or even 10% that the anger or threat of action is being directed against. Is this also the case and is it happening in the US?

        • Brian says:

          The top 1% is HIGHLY skewed to the top and should be separated further to .1% and .01% but that is the data that is made available.

        • Nacho Libre says:

          A person can make 400k+ in income, but can have negative net worth (think a doctor in her thirties with a mountain of student debt).

          A retiree with 50k income can have a net worth of 3 million (someone who bought a house in silicon valley and didn’t move out).

          There is no one size fits all. But for ‘tax the rich’ mob, nuances are always lost.

        • Nicko2 says:

          On average, people are wealthier in Canada than the US; thanks to generous government programs (ie. universal healthcare, best public education system in the world, ect…). Also, RE in Canada is on fire.

        • Anon1970 says:

          If you make $400K a year but spend $410K a year, over many years you will accumulate a lot of debt. Having one or two ex-wives to whom you pay alimony every year does not help matters. Then there are the adult children who are not self supporting and expect handouts from Dad every month.

        • nick kelly says:

          Nicko: agree about health etc. but best ed in world??? You must be joking. I’m a former teacher and track ed. Basic literacy is disappearing fast. ‘Oh we don’t teach cursive’
          Like writing was Greek or Latin.
          Other day I’m behind a youth (18?) in Costco who is returning something. Clerk says: ‘OK sign here’ Kid can’t. Soon we’re back to ‘X his mark’.

          The anglo-sphere is unique in having Education as a separate faculty and discipline. Many, not all, teachers don’t actually know much about an actual subject.

          I know a very dedicated aid who works in a high school. There are no more ‘fails’ allowed and recently staff were told verbally not to record lates.

          There is a lot of comment about society bifurcating into upper and lower classes.
          The ed system is partly responsible. The test of an ed system is the job it does for the disadvantaged kid. It’s failing.

        • Sailor says:

          I know several Canadian teachers and students, across the country.
          The lack of subject expertise is widespread, and the system is not concerned with fixing that. The system wants existing teachers and administrators to keep their jobs as the #1 priority. The main subjects missing expert teachers are STEM.
          Do not think that just because the kids are well educated that the schools are responsible. On any given day, around a third of kids grades 8 and up will be absent from the school I know most about. It’s generally the clever ones or those working their way up in a trade. The clever ones are studying in their own time. Kids skip school for two main reasons, they are bored or bullied. They turn up for morning registration then disappear. The schools know they aren’t there and don’t care. If there happens to be a really good teacher, kids will come in just for that lesson.

      • Shells says:

        You forgot investment bankers, hedge fund managers, Law firm partners, and other people who work in finance-

        • Turtle says:

          …and a good portion of those in the industry of national politics. DC’s median income is out of proportion compared to the rest of the country. It’s especially telling when you consider how poor many parts of the city are.

      • David Hall says:

        Median net worth may be a better measure of wealth stratification than average net worth as a few multi-billionaires skew the data.

        In 2020 the U.S. median household net worth was $121,000 versus the average net worth of $746,000. The wealth of the 50 percentile household, the household in the middle, is not much. The median price of a home is about $350,000. The median age is about 38 years old.

    • RedRaider says:

      If you’re more concerned with capital gains rate than income tax rate you’re in the top 10%. If it’s a push you’re in the top 50%. If all you care about is the income tax rate, well, um, you ain’t doing so good.

      Just look at how people like Gates and Buffett have come out in favor of higher income taxes. What self serving nonsense! They’re in the 1%. They live/die by the capital gains rate. To show such callous disregard for your fellow human beings speaks of a psychologically damaged individual.

      • nick kelly says:

        Buffet said he was in favor of paying more. Specifically he noted his secretary paid at a higher rate than he did. He disapproved.
        Can you quote Buffet saying ‘leave cap gains alone’ or are you modifying his position to serve your argument?

  6. MCH says:

    You know what the country needs? A National gas tax to fight climate change, and a National sales tax to fight the lack of equity, or was it equality, I can never get those things straight. Oh and of course increase the income tax rate as well, especially for the top 1%. (But don’t worry about that 1%, they have an army of lawyers and accountants)

    This will help make things better. Honest. ?

    And California will once again lead the way by increasing the gas tax… again, oh I forgot, the adjustments are automatic now. Hehehehehe…. Supermajority rule rocks.

    ?

    • Anon1970 says:

      If you lose your job in California because your employer moves to Texas and you are let go, you won’t be a happy camper.

      • MCH says:

        Nah, our governor rocks, he is going to make up for all the back rent that everyone has missed out on due to eviction moratorium.

        What more could you ask for. Gavin for prez…. ?

        • NBay says:

          He and Matt Gaetz both look and act like preachers…and if things are that bad here for you, PLEASE just move to Texas….or some other promised land.
          I dig the countryside and the climate (getting worried about climate change, though…EVERYWHERE), among many other things.

  7. Rich people can only stay rich by extracting rent from the poor. The only assets you can buy in size to extract rent from the poor are stocks and real estate. McDonald’s is one of the most visible examples where you see people in the drive-thru waiting 15 minutes to pay $5 for 50 cents worth of food. It’s an insanely inefficient operation where the big money goes into (commercial) real estate and the corporate bureaucracy. Or said differently, it is highly efficient in squeezing the labor and food cost to very low levels, while most of the money is spent on things that don’t add value to the common person, whether it’s advertising or stock buybacks.

    With interest rates permanently stuck at zero, holding cash means a guaranteed loss, so both real estate and stocks turn into cash alternatives. They are the new cash of the rich. I think valuations will just keep going up until the poor revolt with a drastic reduction in their work and consumption habits. It’s the only thing I can imagine that will truly crash markets and resolve the wealth inequality. Everything else will turn out to be a pullback BTFD opportunity, as inflation remains stubbornly low and the stock market remains stubbornly high. Even if the S&P crashed 66% from 4221 to 1435 and then does a 50% recovery rally to 2152, once you compute the compound annual return since 1990, it still comes to 6% appreciation per year. In other words, the stock market is all but guaranteed to return 6% or more on average in the long run. For this reason, I think a 66% crash would be quite boring at this point. We need a 97% or 99% evaporation of wealth to fix the inequality.

    • Antwan says:

      No idea what planet you live on. Got an iced coffee and a breakfast sandwich from McDonald’s for $3 in 5 minutes. A k cup alone is $0.50 a serving before considering the next 5-10 ingredients and time you’d need to make it at home. If anything, McDonald’s is hyper efficient and ruthless with pricing.

      • Michael Gorback says:

        An internet search here on planet Earth didn’t find anything close to the price you’re stating.

        Which McDonald’s location is this and what exactly did you order?

      • Nicko2 says:

        Ah! K-CUPS… the ultimate scam. You could pay .50 cents for that incredibly wasteful and over priced capsule….or you could buy some quality roasted coffee beans (ie. $14 for 1kg roasted) and that works out to about 8.5 cents a cup!

        Don’t get me started on so called ‘breakfast sandwich. Bake your own English muffins for pennies; organic flower and free-range eggs, organic milk; quality cheese (not processed), nitrate free-bacon. Make it for pennies.

        • Old School says:

          I remember learning as a kid you have to say no to things a whole lot in life. Offering products at multiple price points is what a market system does. Coffee market is a good example. I like the Expresso coffee in the yellow brick for under $3.

        • Ron says:

          That takes time and effort people to lazy or don’t know how to cook or clean

        • dan worley says:

          Smart man…

        • IdahoPotato says:

          “$14 for 1kg roasted) and that works out to about 8.5 cents a cup!”

          Organic fair trade coffee beans cost half that at Costco.

        • Nicko2, I pay 40 cents per K-cup and avoid all of the bacteria that develop quickly in a pot of brewed coffee sitting on my kitchen counter for as long as 3 to 4 days. Once I saw mold floating on the top of the brew, I changed to individually brewed cups of Java. As far as contributions to landfills, we will eventually have to move off Earth due to the Earth tilting on its axis with landfill growth faster in China than the U.S. WE ARE A SOCIETY ADDICTED TO CONVENIENCE, DAMN THE COST AND THE CONTRIBUTIONS TO ECOLOGICALLY NEGATIVE EFFECTS. The proverbially UGLY AMERICAN.

        • random guy 62 says:

          While I appreciate the spirit of self-sufficiency and the level of fulfillment that comes with it, these types of comments drive me nuts. We would all be better off, mentally, if we turned down the speed of the hamster wheel a little, but it would ultimately make us all poorer.

          The “I do it all myself” crowd does not properly value their time. Specialization is one of the miracles of modern society. People used to toil for hours farming, cleaning, sewing… mostly menial work that can be done more efficiently in large amounts with more machinery.

          Nothing wrong with hobbies like woodworking, cooking, and tinkering…but we should not pretend it is done to maximize the net economic benefit.

          My time at work is worth about $50/hr. It’s $20 if I go mow the neighbor’s yard on the side. An hour spent baking is a terrible use of my time unless I justify it by calling it leisure.

          In business and in personal life, it is critical to focus first on revenue and second on cost if you ever want to build wealth.

          Sorry. End of rant.

        • Sailor says:

          Randomguy62.
          I could not agree more about costing of your time, and I agree about doing stuff like lawn mowing. However, I think your general conclusion is wrong using your own reasoning, because lawn mowing is not a good example. Doing tasks myself like reno work, vehicle maintenance, repairing broken stuff, building my own computers, etc, I am better off doing those than working and paying someone else to do it. Allowing for taxes (income and sales), vehicle mileage, tailored suits, etc, I would have needed to be earning $80 an hour to pay for the work I am now doing myself. My last job, professional, was paying me $65 an hour for very long hours and ever-decreasing job satisfaction. And, like many professional jobs, doing less hours wasn’t an option. Since I had sufficient savings, I quit work. Now, I do fully accept that not everyone would have the skills and knowledge to do all the things I’ve listed safely and efficiently, but my point is that a lot more things are worth doing yourself than was the case 20 years ago. I compare costs of my work vs professional moderately often, so those figures are accurate. And as Covid has shown, the ability to reroof a barn yourself is priceless when it needs doing and there isn’t a roofer free untill 2022.
          The self-sufficiency route doesn’t mean living in a tin shack. I have a hot tub, bought cheap used, not working, troubleshot and repaired by myself. Total cost under 25% of one bought new, and mine will last longer than a new one because the fiberglass was made much stronger back then.

        • NBay says:

          Right off the label: Signature Select instant coffee crystals, makes up to 120 cups. $3.99.

          I don’t know how everyone else started drinking coffee, but for me it was the cool thing to do before HS (once we had transport other than the bus) “just like the grown-ups did”. It tasted like shit and we used lots of cream and sugar. But the early morning drug buzz was nice, and to this day I still drink it for that reason. If you want to pay extra, and take the the extra time to make an art-form out of it, that’s your business. I’ve been called “disgustingly practical” by a lot of my very good friends. Form follows function for me.

      • MiTurn says:

        And their basic black coffee is actually very good. And I agree with Shells — their dollar menu is a great draw.

    • historicus says:

      “With interest rates permanently stuck at zero, holding cash means a guaranteed loss, so both real estate and stocks turn into cash alternatives. ”
      And here’s what you needed to know would be different this time…

      THE FED REFUSES TO ACKNOWLEDGE OR FIGHT INFLATION.

      If things were in the normality struck for 75 years prior to 2009, the Fed would have rates over 3% now, and the equities and housing would all be at sharply lower levels. To KNOW the Fed would not do their DUTIES is the “inside” deal here. To EXPECT the Fed to do the right thing has been incorrect.

      • Old School says:

        I am coming around to there will not be long term cpi inflation unless they change Fed mandate. Too much debt. Economy will roll over soon as interest rate hits 1 or 2%.

        • MiTurn says:

          Old School, can the CPI be trusted? Isn’t it gamed?
          I think so.

        • historicus says:

          The Fed watches PCE…..as Powell noted today.
          Now, what is the game with the PCE?
          IT is a “chain weighted” index that allows substitutions OUT of items the rise “too much” in price.
          So drop the hamburger and just use hamburger helper instead.
          Plywood …chipboard
          Wine…..how about some homemade cider?

      • Sailor says:

        Holding cash guarantees a loss, but crucially it guarantees a small loss. This is not the case with real estate or stocks.
        What makes sense is holding durable goods. I have 3 years more of reno work, and the storage space, so I’ve bought all the stuff I’ll need over the last year, just beating all the inflation and supply shortages. That’s 3 years’ worth of inflation I won’t suffer, and much better than holding cash. The OSB flooring I am just fitting now was $13 a sheet when I bought it last February, it’s $55 now (if you can find it).

    • Anon1970 says:

      No one is forcing people to buy their meals at MacDonald’s.

      • That’s exactly the point. The average consumer has the power to collapse the system.

        They just need to act collectively. A few isolated individuals alone won’t matter.

        • Sailor says:

          They don’t need to act collectively, i.e. in an organized manner. They need to act in the way that makes sense for themselves. People mostly don’t because they are lazy, and/or crucially unwilling to learn new things (for which public schooling is largely to blame – it absolutely does not encourage kids to learn for themselves, either in school or afterwards).
          Furthermore, most people are quite rightly scared silly about “collapsing the system”, because controlling that collapse so it only affects the bad bits is impossible. Go look at what happened in the former Yugoslavia when they “collapsed the system”. There are already parts of almost every first world country where you wouldn’t dream of going, certainly after dark – 16 shot, 7 dead in Chicago just yesterday.

        • nick kelly says:

          ‘There are already parts of almost every first world country where you wouldn’t dream of going, certainly after dark – 16 shot, 7 dead in Chicago just yesterday.’

          I don’t believe it. Is this a sarc comment I’m missing??? The US is the ONLY first world country where people walk around packing heat and metros ring with gunfire at night.
          The rest of the world thinks it’s insane.

        • Sailor says:

          No sarc.
          The USA has the most shooting deaths, but there are enclaves in most European major cities which are effectively no-go zones. Try looking up grenades in Malmo or stabbings in London.
          What’s different in the USA is that they kill more of each other within those neighborhoods.
          What holds many cities’ homicide and assault rates down is that people not of that neighborhood’s ethnic group simply don’t go in there, including police, and reporters. I can speak from personal experience (UK and France) that when walking through some of these neighborhoods in daylight, I was the only white person there. Others took a longer route around.

        • nick kelly says:

          ’16 shot, 7 dead in Chicago just yesterday.’

          And there were how many London stabbings that day?

    • NBay says:

      Extraction = hard earned money……only difference is in who you ask.

  8. Anthony says:

    When you add it all up, these are the historic signs that cause revolutions, as you know, when the poor lose everything then they have nothing to lose. Thankfully, not here in the rich west (excluding Portland and Chicago, that is) but around many places in the world. As you know virtually every country in the world has been following more or less the same policies.

    It’s a sad situation when wars break out around the world but I suppose people who buy shares could profit from it by getting into American and European bullet manufacturers, as a revolution needs a great number of bullets.

    • Brian says:

      Domestic terrorists.

    • Sams says:

      Well, revolution and the poor uniting and fighting for a better life is not an USA thing. Not historically, and my guess not in the future. That is a cultural thing.

      On the other side, in the USA expect more corruption on all levels, economic crime, violent crime and mass shootings. Again, culture. The corruption will be at all levels and not confined to government. It will not be only waitresses and bartenders that expect a tip, but also nurses, clerks and whoever else.

      • Anthony says:

        Sams

        I was looking at mass shootings in the States, 297 so far this year but I have no idea if this has gotten worse or that’s just the normal thing ???????

        I don’t expect revolution in the USA or Europe but I do in the places where food becomes too expensive to buy. I guess it will be an difficult year looking at the news worldwide.

    • Beardawg says:

      Anthony

      I agree Wolf’s charts uncovering the wealth gap trend reflect issues which can lead to revolt (Think French Rev).

      It makes me wonder why we added 26M households in the USA in 20 yrs (many presumably via immigration) when this is how we (USA) do biz with (or should I say “to”) our people ?

      The trend is despicable, but a USA bottom 50%er must still be doing pretty well on the international scale ?

      • historicus says:

        This is all ammunition for the Socialists…
        These charts are the wind under their sails…

        The Fed short circuits free market principles, provides cheap money for Federal giveaways and Socialist programs, and creates massive wealth disparities.

        “Throw them a few thousand was we reap millions” seems to be the game here. That’ll keep them quiet.
        What’s next, inflation compensation checks?

        • Brant Lee says:

          Isn’t next- $300 per month deposited for each child starting in July? Or am I reading it wrong?

          Talk about “The only thing want’s to work on him is his dong.”

    • Degobah Smith says:

      I believe that American wealth (for the most part) rests on an increasingly fragile foundation (debt, supply chains, etc.) and I don’t think bullets will be the weapon of choice in our next revolution. Pull a few well-timed rugs and watch our entire house of cards come crashing down. Those with the most to lose will lose the most.

      • sKP says:

        average Joe is not reading all this heavy stuff. Give him A can of bear A pack of camel and over priced big Mack. And you have poured cold water on revolution.

      • Augustus Frost says:

        Most of the “wealth” in the US and other developed countries is fake; a ridiculously overpriced stock market, debts that will never be repaid, and a real estate bubble.

        Much of the income in all these countries is also the result of a substantially fake economy, from government spending and artificially cheap credit.

        It’s “real” as long as the credit mania lasts but nothing more.

        • fred flintstone says:

          Augustus hit it on the head. Reprice bonds, stocks and real estate with interest rates in historic range and this country has about 30 trillion to go before its the emperor with no clothes.
          At the rate we are spending we ought to arrive in a decade.
          Gold is a totally manipulated market right now. The feds friends are driving it down out of fear.

  9. YuShan says:

    This would never happen in a functioning democracy

    • Michael Gorback says:

      Name a functioning democracy- any time, any place.

      The USA is a republic BTW.

      • Old School says:

        Switzerland is only one I know of.

        • Sailor says:

          And the Swiss have just voted in a referendum to
          1. reject car and air fare taxes to limit greenhouse gas emissions.
          2. reject outlawing of cheap pesticides, and giving water benefits to organic farmers over users of cheap pesticides.
          ..and it was the 18-34 age group who were most against, so this isn’t the boomers “oppressing” the kids.

          The French just had a 32% turnout for regional elections. That is not a functioning democracy.

          No one I know outside a city bothers reading newspapers or watching mainstream media on TV or internet any more. It’s all propaganda, irrelevant, insufficient to form a considered opinion, wrong, or downright lies. That is not a functioning democracy either. If people cannot discover what is really going on, I would say it invalidates the election system where people are expected to vote on candidates’ policy proposals.

        • Michael Gorback says:

          Not a democracy.

      • Swamp Creature says:

        Weimer Germany was a functioning democracy. The AH dude was elected in a democratic election.

        • Michael Gorback says:

          Don’t go there. Our own “democratic” elections are nothing to brag about.

        • Bead says:

          It was a sick polity, though. Effects of their inflation seem to be underappreciated. We may be getting that sick. I hope not.

      • Augustus Frost says:

        And a good thing too

        A democracy (with a universal franchise) is two wolves voting with one sheep on the dinner menu. The type of democracy most people infer is just another dishonest system where they hope to plunder the resources of the more affluent segment of the populace.

        • RightNYer says:

          Right. The recent “Vote for me and we’ll give you $2,000” was the most flagrant abusive example of this I’ve seen in my lifetime.

        • NBay says:

          Almost as bad as Citizens United and other “dark money pools”?

      • Stephen C. says:

        Please name a functioning republic.

      • nick kelly says:

        Since when is ‘democracy’ to be distinct from ‘republic’?

        Every year the UN puts out a quality of life index. Romantics, sorry, a country has to be pretty wealthy to come near the top. There are a few guides including access to medical care, life expectancy, infant mortality etc.

        Every year the same few swap places for the top five. Usually scoring are: Sweden, Demark. Netherlands, New Zealand, Oz, Canada. They are all constitutional monarchies.

        Runners up may include Japan and Germany.
        The best the US has ever done is 14.

        • Anon1970 says:

          The cities of Toronto and Chicago have about the same populations but the homicide rate in Chicago was about 10x as high as Toronto’s in 2019 and 2020. The same ratio appears to be holding for 2021. On June 21, Toronto recorded its 30th homicide for 2021, while Chicago’s total was over 330.

        • Swamp Creature says:

          Chicago is a very big city. The homicides are spread out over a large geographic area. Baltimore actually has a much higher homicide rate per square foot. Much higher. Its a war zone.

    • Bead says:

      A functioning democracy? The manufacturing was shipped out under cover of darkness. The jobs are GONE. We were entertained while the plot unfolded. We got Walmart. Now we got Amazon. We live in a technocracy where nobody really knows what’s going on except the boffins, especially that small army at the Federal Reserve.

  10. Micheal Engel says:

    1) I knew a widow who never flew to Vienna or Verona to buy a pastry.
    2) She owned a rundown 4BD apartment in the most expensive
    section of the city, but never fixed it.
    3) She was a vegetarian, who got most of her calories from oil, spending
    little on food, never seen a fancy restaurant, in the area.
    4) She never had a car, but had > $2M in the bank in several saving accounts. collecting interest and pension from her’s and her deceased husband gov pensions.
    5) She didn’t go shopping, neither a fur coat, but had a large vvs diamond ring.
    6) She had a big library, but never red a book.
    7) She kept her living room furniture simple, but rarely used them.
    8) She never had a party in her house, never drank, listened to news in her kitchen radio, smoked two packs of cigarettes/day.
    9) Her apartment was full of plants and oil paintings she drew herself.
    10) Sometimes she was playing cards with old friends, but always fought
    with them.
    11) Never saw a movie, never had a date, kept painting for no one, but herself.
    12) She was at the top 1%, had a cash flow to the banks, because her cash
    was a sweet revenge over her poor divorced stepsister. She could never forget that when she was a child, her stepmom gave her stepsister few pcs of chocolate, but punished her.

  11. Old School says:

    I heard Fed has over 750 Phd’s. Hard to believe they got us to the place we are at. Last forty years of Fed policy sold the future out to ease pain of recessions and the future has arrived.

    It’s like they didn’t understand that their policies had consequences. Who is going to risk building a factory in USA when you can just borrow cheap and buy in your stock?

    • Swamp Creature says:

      Phd stands for “Piled high and Deep” .

      • Sailor says:

        Pretentious, highly-intelligent, yet dumb.
        I prefer IYI to describe them; no common sense basically, mostly due to never having had a real job.

        • MiTurn says:

          “Pretentious, highly-intelligent, yet dumb.”

          I’d substitute ‘dumb’ for ignorant, hence the irony (and the pretention). At least at the universities…

        • Swamp Creature says:

          Greenspan 2.0 said he consulted 150 Phd’s on his Fed Reserve staff before making the decision in 2003/2004 to keep interest rates artificially low to encourage home ownership and using homes as ATM machines to boost consumer spending.

          How did that work out?

        • Sailor says:

          willfully ignorant counts as dumb in my book ;)

        • nick kelly says:

          Re: Greenspan: in convoluted prose, he has admitted to overreacting to any hint of a slow down with interest rate cuts. He did a preemptive cut for the Y2K crisis, that never happened. But compared to this gang he was
          a stingy piker.

      • NBay says:

        That’s twice you’ve posted that, SC. That I happened to see. Maybe it’s more.
        I think you should quit watching so much Duck Dynasty.

        • Swamp Creature says:

          The quote is so accurate I wanted to make sure everyone had a chance to read it. That’s why it was posted multiple times.

    • Michael Gorback says:

      “It’s like they didn’t understand that their policies had consequences.”

      As discussed by Bastiat in 1850 in “That which is seen and that which is not seen”.

      My daughter graduated summa cum laude from Duke with a degree in economics. She then spent 3 years at the NY Fed. She left because she couldn’t go any higher at the Fed without a PhD. A guy with an 8th grade education who designs phenomenal products will fly to the top in the private world.

      She then went to Wharton for her PhD. She is planning on going to Boston to spend 2 years at the NBER, which was delayed by covid. A job at the NBER is no small matter.

      As I’ve tracked her career I noticed that she always seemed to be taking more and more math courses, most of which were statistics. She was always talking about needing more RAM because her databases were in the GB ranges.

      She has never read Adam Smith. She has never read Karl Marx. She has never read The Road to Serfdom. She doesn’t know what the Broken Window Fallacy is. If they taught any school of thought it was Keynes.

      This is not her fault. This is what economics has turned into in its pathetic effort to be recognized as a science – something it can never be. Economics is in reality a subset of sociology, specializing in how individuals and groups interact with respect to trade.

      Despite having no training in how people and groups conduct their transactions her PhD, previous experience at the NY Fed, and time at the NBER would make her a shoo-in for a Fed job.

      Do you think Wolf would be taken seriously at the Fed? He’s a former car dealer with an MBA signed by David Hume. Yeah he’s that old. Real world experience, the ability to identify patterns, to think outside the box, to question doctrine and stimulate discussion – these are not marketable skills at the Fed.

      Actually those are the least desirable qualities the Fed wants. How many papers has he published? He has a blog? Hahaha.

      • wkevinw says:

        Michael Gorback- Shocking, really. I was afraid of that.

        Never studied Smith, Marx or Bastiat? I suspect they are all Keynes people for two reasons: 1. it allows the policy makers to focus on “aggregate demand”- i.e. nation-wide policy and 2. lots of math.

        Actually this is very dangerous and explains a lot.

        Economists who focus on the “aggregate demand” are always wanting to give government checks- to increase….”aggregate demand” when the economy is a bit punk.

        The whole strategy of sending checks to the poor and extracting taxes from the “rich” is only somewhat “economic activity”. It’s mostly “government activity”.

      • Petunia says:

        I have a B.A. in economics as well, magna cum laude. I too wasn’t assigned Marx or anything much beyond the text book.

        Double majoring in math as well as economics gave me insight into the math of economics. The chairman of my math dept. used to call the economic math courses, calculus for poets. Statistics wasn’t taught as part of the math major, it was left as an exercise, a derivative of other functions. I took economic statistics only to fulfill the economics requirement.

        My economics education was helpful on Wall St. to the extent that it taught me to think and speak like them. The economic modeling on statistical methods, I found to be worthless, used to justify charging clients for research. The math was more beneficial because you could create a model to produce any result you wanted.

        The problem at the fed is that they create these simulations and believe them. There are no correlations to the real world or with real people because there is no interaction with transactions on the lowest level of the economy.

        If your daughter wants to get a Nobel Prize in economics, she only needs to inject some reality into the world of simulation. On the other hand, she may never work again.

        • wkevinw says:

          I took the first two econ courses as electives in undergrad. We did know the basics of what Marx, Keynes and Smith were trying to say.

          Economics (back in the dinosaur days when I was in school), was basically micro-economics and macro-economics; micro-economics being the fundamental basis for the macro.

          I think the ideas of micro-economics have all been lost by today’s “professional” economists. They act as though people are robots and as long as the macro-variables are correct, the robots will do what they planned for them. This is not correct, and was taught as such when I took economics.

          People will respond to the incentives by working more or less, or avoiding taxes or substitution of goods and services, whatever.

        • Sailor says:

          I did one year of economics in grade 11. We read some Smith and some Marx. We had a millionaire and someone who’d escaped East Germany come talk to us. We did a lot on the exceptions to normal supply and demand curves (e.g. Giffen goods). We did a lot of calculus on exponentials to help us realise how things can seem to go fine then go wrong very quickly. And we did the politics of economics, especially how politicians can bribe or tax people by changing market rates rather than announcing a new benefit or tax.
          It was a good school.
          Can’t say anything has surprised me or caught me out in the years since.

        • Sams says:

          Just a detail, there is no Nobel Prize in economics. It is Sveriges Riksbank, the central bank of Sweden that hand out this “Nobel Prize”. And they have anoyed the Nobel Institute by calling it a “Nobel Price”

        • Sierra7 says:

          Petunia:
          “The problem at the fed is that they create these simulations and believe them. There are no correlations to the real world or with real people because there is no interaction with transactions on the lowest level of the economy.”
          Enough said. Brava!

          One of the greatest and I might add, fallacies of the economic world is that the “….study of economics” is somehow a “science”.
          It is a study of economic human behaviour. Period.

      • Shells says:

        I was an Economics major in college. Saw many classmates go into finance and consulting- they became the entry level members Finance workforce upon graduation

      • cb says:

        @ Michael Gorback – “This is not her fault.”

        ________________________________-

        If it’s a fault at all, whose fault is it? It sounds like she is self-selecting to be exactly what the FED and powers that be want. She is fulfilling the FED’s required pedigree. I suspect she was born into the top 10% and is taking the provided path to be an continued achiever in or beyond that capacity. I also suspect you are proud of her accomplishments, which from a father’s perspective makes sense, even it provides a dis-service to the lower echelons of society.

        As knowledgeable as you are, I am surprised she wasn’t introduced to Adam Smith, Marx, Hayek and others.

        • cb says:

          “She has never read Adam Smith. She has never read Karl Marx. She has never read The Road to Serfdom. She doesn’t know what the Broken Window Fallacy is.”
          _________________________

          and sadly, it’s pathetic that a summa cum laude economics graduate from Duke would not be well versed in all the authors and topics referenced above. Whoever paid tuition should demand a refund.

        • Michael Gorback says:

          May I tell you where to stick your ignorant sanctimonious attitude? And your profiling of my daughter? And my parenting?

          It’s not her fault that she was deceived by an institution she trusted, and that I trusted. I was 1,000 miles away working and she was a naive trusting 18 year old. Was I supposed to audit her Keynesian classes? By the time I saw what had happened it was too late and I don’t know what I could have done other than pull her out of Duke and send her to George Mason for a decent education.

          She’s not following a Fed career trajectory. The Fed experience showed her the PhD ceiling. If you don’t have the right tickets punched you’re going nowhere.

          So she got a PhD at another prestigious school PAYING HER OWN WAY ON HER GRAD STUDENT STIPEND

          It was just more of the same. It’s all data mining and statistics now.

          She owes nothing to the “lower echelons of society”. Did the lower echelons pay a small fortune for her tuition? Are you aware that Duke has a policy that money shouldn’t be an obstacle to attending? They slather on the financial aid, but I paid cash. I think I’ve already contributed handsomely to the “lower echelons” through Duke’s wealth redistribution.

          Do you know where I first read Marx, Hume, and other economic works? I minored in philosophy. Bastiat, Mises and the rest were self-taught.

        • cb says:

          @ Wolf –

          Why did you delete my response to Michael Gorbach? It was accurate, positive, fair and potentially helpful.

        • Wolf Richter says:

          I deleted part of his comment, so thankfully no one saw it. And I deleted your reply to his remaining comment.

          Here is how this started: You attacked his daughter (whom you don’t know) and his qualities as father (which you don’t know either), and so he came back at you and blew you out of the water, and I deleted portions of his comment. And now you want to blow him out of the water. The escalation had to end somewhere. And it has ended.

          This commenting section is not for carrying out those kinds of vendettas.

        • cb says:

          @ Wolf –

          Michael Gorback said: “Do you think Wolf would be taken seriously at the Fed? He’s a former car dealer with an MBA signed by David Hume.”

          ____________________

          If one chooses to ignore the context and subtlety of the above comment, it could viewed as an attack. Bigger minds know better.

          I am neither ignorant or sanctimonious, nor did I attack. I have no desire to “blow Michael Gorback the father out of the water.” I’d prefer to have him as an ally.

          Michael is the one who pointed out the deficiency of a duke degree. And your article pointed out the known detriment that the FED does to the lower echelons of society to the benefit of the top percent.

          Now I expect you will exercise your proprietary right and delete this comment. So be it.

          With respect.

          cb

      • nick kelly says:

        Like it. Reminds me of all the technical analysis BS. “We think BC needs to find support at 30K, or the next support level is 25K.’

        Why are all these support levels at round numbers? Because they are psychological. The same reason the number you most encounter in pricing is ‘9’. 4.99 sounds way better than 5 dollars. BC being at 30K sounds OK. 29.900? Game over.
        Having said that, I am taken aback that one can pursue a doctorate in econ without reading Marx or Smith, at least in condensed form.

        • Michael Gorback says:

          By the time you reach grad school you should already have the basics and be ready to focus on a given field.

          Try to find an undergrad program that isn’t Keynesian. I would have given anything to have her study with Walter Williams.

          Pseudo-Keynesians run the world with their aggregate demand crap, and they perverted his counter-cyclical policy of saving during the fat times and spending during the lean times. Now it’s just spending all the time.

          And as that fails, it will evolve into MMT.

        • Lisa_Hooker says:

          There’s gotta be Cliff Notes for Marx and Smith.

      • billytrip says:

        What is even more disheartening is that the numbers they look at to do their “science” are mostly cooked beyond any meaning.

    • Petunia says:

      Phd’s spend 12 years in college alone, for a total of over 20 years in school. This is not a lifestyle conducive to learning anything about how money is used in the real world. Any housewife knows more about economics.

      • MiTurn says:

        Practically gained and applied information.

        Bravo Petunia…well stated.

      • Whatsthepoint says:

        I guess I feel lucky that my daughter will attain her PhD in mechanical engineering in only 7 years total!?

      • ivanislav says:

        The truth is, PhDs are usually dunce caps. It means you were willing to work for peanuts for 5-7 years, of which perhaps 2-3 were really valuable. Mostly it just means you delay family formation and spend more time living a college-lifestyle and going to bars with similarly foolish peers. On top of that, the critical-race-theory types are now in full control of even the hard sciences and outspoken unbelievers will have their careers aborted. That’s not to say PhDs are never warranted, but many of the people who get them are doing so simply because school gives them positive feedback and self-esteem and it appears safe. Finally, some fields essentially require them for advancement and in those cases you have to either hold your nose or choose another field.

        Things people should know before going into a PhD program – please share this if you know someone who considering it:

        1) Academia is extremely political.
        2) Upwards of 75% of research is useless bullshit, but successful investigators either truly believe in their work or know how to dress it up to get funding.
        3) Being a protected/preferred minority will give you a big leg up in funding. White or East Asian straight conservative males should strongly reconsider.
        4) PhD candidates working under self-interested advisors (being high-profile is well correlated) should appear capable, but not overly so. Highly productive students are potential future threats to their advisor. In those cases, they can limit the student’s publications or transfer their work to others. Limiting the student’s publications will prevent them from becoming an independent competitor, while the advisor still benefits from the output and can keep them trapped for longer, perhaps even funneling them into a research position in the lab. The smartest people I ever met (genius-level, but with less social acumen) tell horror stories.
        5) Speak to former students and postdocs and look for warning signs. It is incredibly important to understand the advisor and social climate before you make a decision to join a group. Look up former students/postdocs and email or cold-call them.

        • Bead says:

          PhD’s follow their herd or pay the consequences. Conventions are enforced with extreme pettiness.

        • MiTurn says:

          A PhD is an expemsive status symbol and most fields have an excess.

          “Please, call me doctor…”

        • Michael Gorback says:

          Not quite a dunce cap. She has an appointment as an assistant professor now at a first year salary that would make you weep. I can’t believe how much they make.

          Doctors spend a minimum of 12 years (college, medical school, residency) and many don’t make what she’s making.

          However, I don’t think she’s in it for the money. I think she really believes in research. Lord knows I tried to get her to skip grad school, swim in the toxic waste of Wall Street, and move on to part 2 of her life. You know what they call a 30 year old on Wall Street who makes $1 million per year? A failure.

    • cb says:

      Old School said: “I heard Fed has over 750 Phd’s. Hard to believe they got us to the place we are at.”

      ___________________________________

      Not hard to believe at all. Some time back, the average IQ for Phd’s was reported as 114. To get a Phd is a practice of jumping through the right hoops. They are NOT smarter that the rest of us. Further, to get a Phd requires approval from the right consortium. Group-think!

      • cb says:

        and ……
        large salaries and benefits, gained respect and reverence (even if misplaced and false), and social standing within the “right” group make it quick and easy for many to adopt the necessary dogma

  12. Fat Chewer says:

    Thank you for this extremely relevant article, Wolf.

    • Chauncey Gardiner says:

      Agree. Final paragraph of Wolf’s post is the tell.: “This is an astounding but totally-taken-for-granted and totally accepted result of the Fed’s monetary policies. No one is even allowed to question it. It’s accepted because the top 10% like it that way, including Members of Congress who could actually do something about it.”

      Don’t expect this report to be prominently featured in Chairman Powell’s testimony before Congress today. But given the timing of its release, perhaps it will inform some of the questions by members.

  13. Micheal Engel says:

    1) Bezus is divorced. He and his ex belong to the top 10%. He will never
    comeback from space.
    2) Same for Bill & Melinda Gates. After Seattle was burnt : top 10%.
    3) After congress burning, in Feb 1933, the whole place will be owned by one man.

  14. Brant Lee says:

    I suppose this article and stats won’t be on the evening news. Everyone is too busy enjoying the unemployment and stimulus, right?

    This time reminds me of when my company was crushing the union back in the 80s. The company was proposing a different wage structure paying much less, but a huge signing bonus to accept the contract. Most employees wanted the bonus, voting to take the contract. Unbelievable.

    We’re getting the same from the government. Throw em a few bones while the rich completely steal the country.

  15. Micheal Engel says:

    Germany won in the east, had a tie in the west.

  16. Chris Herbert says:

    This is not a bug, it is a feature of the dominant (and pretty much useless) macroeconomics we were all taught at university. This macro was intentionally designed to funnel wealth up the income ladder. Tax cuts, hell yeah!
    Tax avoidance loopholes. hell yeah! Offshoring employment? You bet your bum yes! Fictitious transfer pricing costs? Of course, dummy. Jeez, talk about being three beers short of a six pack.

  17. Micheal Engel says:

    Germany was punished in Paris 1921 because they started WWI.
    Hinden & Luden forces were much smaller than their opponent in the east,
    but time was on their side. Since their opponent response was slow and subpar, Germany risk/ rewards was on their favor. By solving the threats in the east fast, they had a chance to stop the threats in the west.

    • Swamp Creature says:

      Correction

      Austria/Hungary started WWI

      Serbia instigated the Dual Monarchy Austria/Hungarian empire into a premeditated invasion. Germany was dragged in after Russia invaded Austria/Hungary their ally and threatened the Eastern Front and German territories.

      • Micheal Engel says:

        1) Sazonov response to Austria invasion was general mobilisation, not invasion.
        2) Germany was sandwiched between Russia in the east, France
        and GB in the west.
        3) Since Russia R/R were old and defective and their troops were subpar, Germany had to response to Sazonov threats, because the balance of power that was kept for 100 years since 1815, was screwed up in 1914.

      • Micheal Engel says:

        1) Those are the symptoms.
        2) The real cause : the slow death of the Ottoman
        empire. Their cancer spread all over the world.
        3) The death of an empire is more dangerous than it’s rise.
        4) From tranquility to extreme volatility.
        5) Sir John Glubb pdf wrote the formula.
        6) Sean Mcmeekin : “The Ottoman end game book” tell it as
        it was. Almost.

      • Sailor says:

        On 5 July 1914, Germany gave AH a blank cheque to attack Serbia.
        AH would not have invaded otherwise. Based on their subsequent (failed) attempts to rein AH in later in July, the best estimate is that the Germans mistakenly thought there would be no Russian military response. This was the trigger for war, which then followed from the interconnected web of alliances and ententes.
        The Triple Entente did not oblige Britain to declare war on Germany whatever happened between Germany, AH, Russia, and France.
        The World War, involving the British Empire as well, was caused by German war plans (originated in 1906) that involved attacking France through Belgium. Britain was obligated to protect Belgium, so the German planning was quite deliberately dragging Britain into what was up to that point a European mainland war.

  18. Crush the Peasants! says:

    This type of analysis is akin to comparing the height of professional basketball players to the height of kindegarten basketball players, without considering that the pros were small at one time. It fails to account for wealth class transition, and its attempt to alarm is based upon the unstated assumption that wealth class status is static and unchanging.

    • TheRealMRDyno says:

      It would be really interesting to see this data recalculated to show net worth divided by (age – 20).

      • Wolf Richter says:

        This is household data. Meaning wealth per average household. US households have on average 2.6 members, ranging from 1-person households to large 3-generation households.

    • Wolf Richter says:

      Calm down. It’s just the Federal Reserve’s data on wealth distribution.

    • Bobber says:

      You suggest the worsening of wealth concentration is attributable to changes in the mix of young and old people in the data, rather than policies of the Fed.

      You also suggest class mobility might be better today than before.

      Aren’t these non-starters?

    • NBay says:

      Agree. Lotto winners were completely left out of the discussion. Obviously spin.

  19. Michael Gorback says:

    I might have to strangle the next person who mentions that silly book.

    • Michael Gorback says:

      Add to the list the next person who drags Post WWI Germany into these discussions.

  20. Aaron says:

    Of capital, land, and labor, the Fed only buys the first two in the form of securities. That is what is sitting on their members banks balance sheets as assets. If it was instead somehow labor, you can bet they’d be buying that to prevent margin calls and cascading defaults. The issue with securitizing labor is that it is basically indentured servitude.

    Of course those who own securities will see their nominal values increase.

    It is how the Fed accomplishes their third mandate of low unemployment. By raising the price of land and capital, it lowers the real price of labor, which results in low unemployment.

    This process was described by Keynes in his book “The General Theory…”.

  21. Phoenix Rising says:

    The first step in solving any problem is to understand it sufficiently to accurately explain it. You’ve nailed it in this analysis, Wolf…especially with regards to the last part of the final sentence. “and because the bottom 50% don’t know about it, and don’t understand what the Fed is doing to them, and are too busy trying to survive in this disparity nightmare.”

    • Turtle says:

      Practically speaking, the only solution on a personal level is to work yourself into the top 10%.

      • Phoenix Rising says:

        It’s certainly one solution. Using the “carrot on a stick” method is a time-proven motivator, but not so much when the stick continues to grow exponentially…regardless of how big the carrot gets.

        • Bobber says:

          Yes. Put yourself in the position of a millennial starting a family. You make $80k and are trying to save a down payment for a $500k house, but the price of the house goes up 10% each year.

          You manage to save 5% of your gross income, which is $4,000 per year, but the down payment requirement goes up $5,000 per year. You’ll never be able to buy the house, and that’s before considering increases in other living costs like education, transportation, food, medical care, etc.

        • Swamp Creature says:

          If you really want to get into the home ownership game then there are choices and tradeoffs. With these low interest rates you can’t expect to get a dream home in a good location. Forget it. This what you keep hearing from these junkyard dog Real Estate agents. If I were in this situation I would buy something like a newly renovated townhouse in a marginal location. I’ve seen these properties and they are being snapped up by Veterans under the VA loan program. These neighborhoods are undergoing gentrification and if you hold out for 5 years or more you will make out OK. At least you will have a roof over your head.

        • Wisdom Seeker says:

          @Turtle and Bobber –

          There was a nice book on this called “The Millionaire Next Door”.

          It takes more than just hard work to get into the Top 10%. But in fact you can get into the Top 10% on a median salary, if you play the game right.

          In addition to working steadily and hard, you also have to teach yourself how to save and invest, and then have the discipline and patience to do it consistently for decades.

          It also takes a bit of wisdom and support, since most of us get impulsive at times, and impulsive consumption kills your chances making the Top 10% unless you have a Top 1% income. A good spouse who shares the savings goal is your best asset, because usually one spouse can curb the other’s impulses.

          You can make the Top 10% on a median income, but to do so you have to save more like 25% of your income.

        • Turtle says:

          @Wisdom Seeker

          That is a fine book and worth anybody’s time. I read it about 10 years ago with my wife. And interestingly enough, just this year we became the “millionaire next door” living in a 1,300 square foot house, owning one car, zero debt, and so on.

          To be frank, Jerome Powell accelerated things for us and a million bucks in various assets is peace of mind but it ain’t what it used to be. Half the country will be millionaires in a few years if this crazy home price appreciation doesn’t cease.

        • Lisa_Hooker says:

          They make the carrot appear larger by making the stick shorter. Same carrot. Maybe even a smaller carrot.

      • Phoenix Rising says:

        For example, was it really necessary for the Fed to totally screw savers for the past decade with near-zero interest rates on their savings deposits in bank accounts? Could they not have devised a policy where savers were fairly compensated for the “loans” they were making to the banks, while at the same time, implementing an effective QE policy? What were all those savings deposits truly worth? Well, the banks would surely find out in short order if every saver decided to withdraw their savings and stick it in their mattress.

        • Swamp Creature says:

          Phoenix Rising

          Was in my local Wells Fargo bank the other day to perform a routine $300 cash withdrawal from their ATM machine. The machine was out of cash and said to go to another branch. I went inside and asked the teller what was going on. He said they just filled the machine with cash in the morning. Then I asked to do another transaction involving transfer of funds from one checking account to another. The dude then started going into a sales pitch about some mobile apps. I told him I was not interested in any mobile apps and didn’t even own an I-Phone. He looked at me like I was from another planet. This is the kind of service you get from these banks in return for 0% interest.

      • Crush the Peasants! says:

        Imagine that! You have to work harder to accumulate wealth. What a concept!

        • Turtle says:

          The funny thing is, I saved $150,000 cash during the last two years and in the same period of time, home values went up $150,000 in SoCal. All I’m trying to do is go home.

          Good luck, Millennials with HCOL hometowns. That even includes cities like Boise and Reno these days. How funny is that?

          Obviously a correction is on its way and Jerome is working his hardest to increase its severity.

        • Crush the Peasants! says:

          You can’t afford CA but you can afford many other states where you will get a lot more bang-for-the-buck. Consider moving.

        • Turtle says:

          I’m already in Texas. I can move back to CA, but I’m not a fool. Just giving an example of how even saving something like $5,000/mo doesn’t keep up with the appreciation. It’s pretty lousy to be a Millennial in SoCal today, short of an exceptional income (or “inheritance”, as they so often call it).

      • NBay says:

        That “personal solution” has some mathematical problems, I think.

  22. Paulo says:

    I was surprised to see appliances listed as assets. Reminded me of my tenant’s stories about how his mom took in borders, and then used her ‘earnings’ to buy a gas powered washing machine. :-) Then, my mind just flashed on to our own laundry room. The washer I traded for and I’m sure the dryer is 20 years old. I have a spare dryer (used of course) I was going to swap for, then I thought why not wait until the old one craps out?

    Appliances are a pretty feeble asset is my point.

    My statement is that if you are in the bottom rung, the path upwards is slow and measured. The rumoured wealthiest man in a local city near me, who lives on a 2 acre estate on the beach, owns and operates a takeout window lunch and dinner restaurant. He worked there with his wife and one child until he simply got too old to continue. His past would have been through the ranks of Chinese labourer at the long defunct coal mine….the Chinese were brought in by the owners to try and break the union. The union organisers had to meet in secret or risk being beaten or even shot. He had a plan for after the coal mine, worked hard, and bought assets that mattered like the block of buildings he worked from, or his waterfront.

    I’ll believe the dire straits articles and stats (hats off to the band) when I see unrest and union organising resurface. I continually read the old, “Poor me/us, we want higher wages”, but I don’t see the same people organising their workplace; in other words, standing up and delivering for their needs and family along with their fellow employees. Shut ’em down. Shut it all down until someone notices that it doesn’t work for Richie Rich and his pet politicians anymore.

    42 years ago I organised a company for Teamsters 213, a construction local. I worked for owners that were a-holes and we received the same threats the old coal miners did…..not the violence, but the threats and intimidation + replacement workers brown nosers. It was beyond hard, and I will never forget it. Our biggest gain was pride and respect in addition to a livable wage. Until I see people standing up for themselves, standing together, it’s all just whining imho. If the Bezos of the world could get away with it they would pay $2 an hour. Shut ’em down until they open their wallets. Speaking of Dire Straits, how about “Money for Nothing” lyrics?

    Chorus:
    We gotta install microwave ovens
    Custom kitchen deliveries
    We gotta move these refrigerators
    We gotta move these colour TV’s

    How about shut it down and strike? Take it back or just take it? Until that happens it’s all just hand wringing. Screw the political nonsense and well paid politicians. Organise and stand together until they blink.

    • MiTurn says:

      Until it finally ‘died’ two years ago, we had a 50-year-old GE upright freezer that worked great. We never had to replace the freon (my parents bought it new in the 1960s and handed it down to me), although I once had to replace a fan (which I bought at a used appliance-parts store).

      They don’t build them like they used to…

    • wkevinw says:

      Generally, unions are a result of labor shortages, not a cause of such. In other words, striking only works if there are no replacements (called scabs)- or people just refuse to work at the place in question (work somewhere else, go back to the farm).

      Unions in the US have dwindled because of globalization of the workforce. There is an over supply of labor in the developed world because of the globalized workforce.

  23. jrmcdowell says:

    The favorite mechanism for driving the wealth-effect doctrine is equity prices. Some have likened the stock market to a software application that has been programmed to trade higher.

    I think of it more as a simple manual control system. Fed and government officials turn the input dials to control the output flows of money printing, interest rates and stimulus spending which enter the financial markets and economy. And of course, the level of the stock market is the setpoint.

    The control apparatus also measures inflation and employment which serve as the pressure and temperature gauges that ensure the safe operation of the system but BLS technicians have recalibrated these instruments such that they no longer display accurate readings.

    Perhaps one day this can be converted into a fully automated system with feedback control where certain percentage movements in the averages would automatically trigger increases (or reductions) in printing or interest rates as the circumstance required. Maybe, they could even share the setpoint with everyone in advance.

    Or perhaps they could get out of the wealth-effects business so that Junior could afford a house one day.

    • Bead says:

      “Or perhaps they could get out of the wealth-effects business so that Junior could afford a house one day.”

      What? And the give the next generation a stake in responsible capitalism? Yes, that would be politically astute. But it ain’t gonna happen.

  24. Poor like you says:

    These Wolf Street income disparity reports are how I came up with my username.

  25. Turtle says:

    Never been one for conspiracies but it’s clear the powers that be are willing to pretty much destroy the country just to double their own wealth.

  26. Yamo says:

    The bla bla bla Fed´s talk show has been absurd, everybody knows they are lying, specialy the other countries around the world.
    Its a lose-loser game for the US, meantime enjoy the freak liars show.
    16 speakers this week, to convine of a big big lie, LOL

  27. Petunia says:

    No mention of pension assets, 401K’s were suppose to make us all rich. Only high earners really benefit from them because they have the time, and other assets, to let them grow undisturbed. Low earners have too much economic disruption in their lives to get any real growth.

    • Wolf Richter says:

      Petunia,

      Pension assets are included in the totals. I just didn’t detail all of it because it’s a huge pile of data. But you can see the pension assets of the 50% in the fourth chart from the top, yellow line.

      In this data, pensions are classic pensions, such as an employer’s pension or a government pension. A 401k is not considered a pension here, it’s like an IRA, a tax-deferred investment product, and those investments are included under the other categories (stocks, bonds, money market funds, etc.).

  28. LK says:

    Whole lot of *misinformation* and *cherry-picked* data too. Just because the information and data are out there doesn’t mean people have:

    1) The time to do the research
    2) The knowledge of what they are looking for amongst all options available
    3) The ability to evaluate sources

    We used to have three news networks that all pushed a common set of facts. We now have hundreds if not thousands of information streams, including whatever gets shared over Facebook by Friends & Family (the “ultimate” trusted source), all pushing their own narrative. Google search results can be manipulated via SEO to push information to the top of someone’s search. It can be a madhouse.

    Most people are naïve and gullible. That isn’t a discredit to them, but a recognition of human nature; see Malcom Gladwell’s Talking to Strangers to see even experts get fooled by all the different underlying factors which put people at a disadvantage when dealing with frauds or other people who do not have their best interest at heart.

    Yeah, “There is no excuse for the American people today to be so ignorant of what is going on.” Sure. Pull up them bootstraps, people!

  29. Give Me A Break says:

    John Williams: “FED’s inflation target is NOT based on any methodology”

    There it is. The well-being of almost entire population is determined by a metric that a bunch of thieves pulled out of their collective as….

    The real guilty party are those enablers who has 10K in their 401K, dreaming to become the next Elon and keep voting for the clowns to keep this charade going.

  30. Michael Droy says:

    A simple solution for anyone who wants to win votes and get elected.

    Create a 75% wealth index. The net wealth of the bottom 75% of the pop. That shows the true index of wealth since the top 25% don’t matter much (and you don’t need their vote).

    alternatively median income – which I gather in the states is unchanged in 35 years while GDP has doubled.

  31. Heinz says:

    This enormous wealth disparity can not be blamed solely on Fed, although they are implementer of this scandalous scheme.

    Congress is supposed to provide oversight of Fed’s activities but they have long been content with a ‘hands-off’ relationship and those regular congressional Fed hearings are laughably lame.

    So Congress is the enabler of all these central bank shenanigans. And by extension the public that repeatedly votes these clowns into office.

    And please tell me where in the Federal Reserve Act is it stated that one of mandated duties of Federal Reserve is to ensure that Wealth Effect policies are implemented.

    • Angel says:

      The education system and the electorate are also enabling the government failures and, therefore, in part are also responsible for this mess.

      The entire point of the mass education system was to create an educated, informed and an active electorate/worker. Without the education system working properly you end up with neither a capable worker nor a functional democracy. As a response/through the lens of Engels “The Conditions to the Working Class in England”, Marx and Engels (who was Karl Marx’s working partner) created the rest of their work which included creating a public education system. The point of the education system was to create an educated, informed and active electorate who had the wherewithal to be a good democratic citizen. A failure in the education system would lead to the types of comments and observations being made here.

      As the system deteriorates/collapses, the system will need to reduce the education level and increase propaganda to keep the worker/masses quiet. Potentially, this would include reducing theory such as no longer teaching socioeconomic theory to Economic majors. Teaching this type of material and history would be dangerous. Many of the observations here suggest this has been going on for extensive period of time with all the expected consequences. It would also add an explanation of “why” for what we are observing.

      • Sierra7 says:

        Angel:
        Well, of course!
        What’s that old story:
        “To grow good mushrooms keep them in the dark and feed them loads of manure”.
        That’s our system.
        “History” becomes a burden to learn; to ignore it is to invite Hell!
        Coming soon to a region near you (and me)!

        • Lisa_Hooker says:

          Back in the ancient days when writing codes was still fun I had a mushroom-cap hat. A small, but legible, sign on the back read: “Keep me in the dark and pile on more shit!”

  32. The poor at least in this country live much better than they used to. The workplace has been cleaned up, incl racism, bigotry, and sexism. Any CEO can get nailed for workplace etiquette. Now post Covid the workplace will be sanitary as well. I am sure Mike Lindell hates Liberals but he doesn’t dare fire them. The working class has better health care. The benefit package for the lower 50% is worth more. The legitimate question, would you rather have a little more money, and no regulations, so a hurricane or a health crisis can wipe you out, or would you rather have the same backstop the 1% have?? Not going broke over a burst appendix.

    • Wolf Richter says:

      Ambrose Bierce,

      That’s not the question. The question is why is the Fed purposefully increasing the wealth disparity by purposefully increasing the wealth of the top 10% by purposefully using monetary policy to inflate prices of assets most of which are held by the top 10% and specifically by the top 1%? That’s the question.

      • Artem says:

        I wouldn’t say purposefully. Wolf’s view is that corporate America is the main culprit, and the FED is a co-conspirator. More likely is globalization is the main culprit, and FED is a helpless enabler.

        • OutsideTheBox says:

          Wolf IS right.

          Globalization was initiated, executed and continues to be maintained by corporate America.

        • Sierra7 says:

          Artem (and others)
          I would suggest that outright, official “globalization” (mostly of labor) is a relatively recent entry into the global scene.
          A decent (documented) study of US foreign/labor policies particularly since WW2 will show the groundwork activities of the US in repressive foreign labor policies that include(d) outright arresting, torturing, killing
          of labor activists all around the world within their global influence. They did this also in collaboration with some of the US organized labor internationalists…(see: AIFLD history) and so many foreign governments. The crushing of US organized labor has been a battle going on for many, many decades.
          In true capitalism it will always be a battle between capital and labor however they are currently defined.
          The FED is way, way beyond it’s original intent. Blame our out of touch politicians under the influence of the natural oligarchy for the mess we are in today. The public does carry a burden; lack of formal and self-education of the environment they live in.

      • Aaron says:

        Labor isn’t securitized, and hence the Fed doesn’t purchase it. If it was, they would likely buy that too. However, if they did, it wouldn’t create a drop in the real price of labor compared to capital so it wouldn’t necessarily foster low unemployment.

        • Artem says:

          That’s what helicopters are for, Aaron. If only that pesky congress or the consitution wasn’t in the way…

        • The relationship between the nanny state and corporate America is carefully synchronized. When Walmart moves into a town they offer new subliving wage jobs, and state and county welfare agencies pick up the slack. The more worker subsidies the more discretionary income, and the cities collect the sales tax revenue. One political party exploits the workers and the other party offers them crumbs to keep them from open revolt. Exploitation disappears when all work and commodities are valued fairly. Bitcoin will destroy the forex system, and the old global colonial economy.

      • historicus says:

        “The question is why is the Fed purposefully increasing the wealth disparity”

        Then the real question is …”Who does this unelected body serve?”
        Apparently not the People, for now with inflation at 5%, they dont lift a finger. Perhaps this is the curtain pulled back on the Fed.
        The mandates suggest they promote employment, stable prices, and moderate (reasonable) long term interest rates. Following those guidelines would be a good course to serve the People.
        But when they violate and do things diametrically opposite of those directives, there is no blowback. I still cant figure this out. The inflation is damaging and nothing more than arranged theft.

        • Sierra7 says:

          Historicus:
          “But when they violate and do things diametrically opposite of those directives, there is no blowback. I still cant figure this out.”
          Not very complicated.
          Most people don’t want to have to be so detail oriented on what is effecting their lives. They expect the system to work for them in some way or other without having to watch every minutiae of activity or by what power it is exercised.
          On a more cynical view: “The Commons have not suffered enough yet to command the use of (un)civilized force” on the perceived powers that be.
          Give it a bit more time.

      • Yort says:

        Wolf – per public records, J-Pow started with about $40 million in long only stock index ETFs (SP500, Russell, etc) when he was hired. Therefore, I’d assume he is first and foremost ensuring that his two daughters are going to be wealthy, and then perhaps secondary make the rich richer in order to hold a position of power. He seems to me to be somewhat dazzled by the wealthy, attending Bezos parties, etc. I’d guess being the most powerful person in the world would increase the ego beyond reason. As lets be honest, J-Pow is affecting the future of more humans on Earth more directly than anyone in existence at this point in time…

        That said, the guy might actually be regretting the damage he has done, as per the April 2021 CNBC headline article “Powell says he plans to meet with homeless Americans in Washington, DC”…yet not sure it even possible to reverse course without collapsing the entire world economy. Lesser of multiple evils it would seem…

        • historicus says:

          The charts provided show how the bottom end is doing with the Fed policies…
          Homeless….? Drug rehabilitation and mental care is more a solution than zero interest rates.
          9 million job openings……and a homeless issue?
          Jobs and interest rates are not involved.

  33. Artem says:

    This thread is uncommentable. So I’ll have to comment.

    You can either crucify capitalism or monetary system as a whole, or defend capitalism and sound like a jerk. Those who have little are bound to continue to have little. The global labor force is too large to share any meaningful fruits of their labor. All the compounding in the world can’t turn a penny into a $32,000,000 in multiple lifetimes.

    • Robert says:

      ” The global labor force is too large to share any meaningful fruits of their labor.”

      As Wolf’s article clearly states, the wealth is concentrated in the top 10%. So if we enforce our borders and tax the hell out of the 10% or 1%, then that money can be distributed with the bottom 50%. The bottom 50% only have their labor to bargain with, not intangibles.

      The really big fallacy is that all those in the top 10% somehow earned their wealth. It is easy to see how the bottom 50% earn their money, but the top earners are now raking it in based on Fed inflated assets and hidden rents on the 50% (i.e your home went up in value but so did the rent for the bottom 50%).

      Of course the big problem with taxing anything is that you’re relying on the government to distribute the wealth. Most of the COVID relief money for landlords with tenants who could not pay rent was never distributed properly. It bodes poorly for quick fixes, largely because those in government don’t believe there is a problem with inequality in the first place. It might even suggest we do not live in a representative democracy.

      • Angel says:

        “The really big fallacy is that all those in the top 10% somehow earned their wealth.” That is a serious and dangerous overgeneralization. I respectfully suggest that you get to know more of the top 10% and what they did to get there. While there are definitely individuals in the top 10% that deserve that attitude, many do not. The vast majority do not sit on their yachts sipping champagne and laughing at the little guy nor have they taken unfair advantage of them. The vast majority work 80+ hour weeks, make tremendous sacrifices especially with the family, take large personal risks, large investments, search for opportunity, not necessarily do as they want, wish or love but what will move them head. In short, for the vast majority, it’s not nearly as sweet as it’s made out to be.

        Seriously, do a perception reality check before this turns bloody.

        • Nicko2 says:

          Most wealth is inherited.

        • Robert says:

          “The vast majority do not sit on their yachts sipping champagne and laughing at the little guy nor have they taken unfair advantage of them. ”

          You put color into my comments that just wasn’t there.

          But a good portion of the 10% are taking advantage of a system that allows them to exploit the bottom 50%. That’s how I would flesh out that comment.

          By the way many of your comments on the sacrifices made by the 1% could easily be applied to the bottom 50%.

        • Wisdom Seeker says:

          @Nicko2: I would agree with you that we need to restore and augment the inheritance tax, because wealth should be earned and not inherited.

          But most of the wealth in existence today (dollar values) couldn’t have been inherited because it didn’t exist previously. Amazon. Tesla. Bitcoin. Microsoft. Facebook. Google…

          It wasn’t mostly inherited, it was mostly racketeered, legally or otherwise.

        • vinyl1 says:

          @Nicko – Studies have shown that of all households with more than $1 million in assets, 83% inherited nothing, and 90% inherited less than $100K.

          This makes sense, because there were just not that many rich people 60 years ago for 15 million households to inherit from.

  34. Swamp Creature says:

    Speaking of wealth disparity, I just passed by a couple of Exxon gas stations that posted premium gas at $4.70/gallon. I wonder what those dudes that got suckered into buyin those expensive Ford F-150’s are thinking about their purchase now. If it goes to $7/gallon which everyone is predicting, and one station in NVA is already charging, it will cost over $350 to fill up their tank. These gas guzzlers will be left parked on their driveways. The owners will have $60K to $70K in debt on a useless hunk of metal.

  35. Ancestral Addiction says:

    “The fact is that people (the wealthy) are sitting on their rear ends on their couches earning and not paying taxes on money while people are going out every day to a job and working their butts off just to make ends meet. And that just seems like an upside down structure,” said Abigail Disney, granddaughter of Roy Disney, brother of Walt Disney.

    “For many people, especially those most deeply embedded in the culture of having and getting money, ethics are a wispy and ineffectual nuisance—an abstract set of principles that can’t possibly stand up to the rigors of life lived fast, business conducted efficiently, and competitors devoured and cast aside,” Disney wrote in her op-ed.

    Disney compared wealth to addiction, explaining that “when you have things, you have to have more things, anything you have turns into what is normal.”

    “There are people flying private aircraft right now who would rather be shot than get on a first class seat on a normal airline because it would mean they would have to walk through an air terminal,” she said. “And that is terribly dangerous to democracy, to society.”

    • NBay says:

      Good post! The addicts need to be in drug therapy….it’s a disease, and society gets hurt badly by what they will do in desperation to get their fix and maintain or increase their high.

      Exactly like addicts on the streets, who are locked up without a second thought. Only a few lucky ones get therapy.

    • Lisa_Hooker says:

      Why waste time in a dis-ease ridden terminal when you can have the car drop you at the plane’s fold-out steps? Up, up and away, to infinity and beyond.

  36. historicus says:

    cdr…
    Blaming the Fed is accurate in many respects.
    Socialism and the Trillion dollar bills and doing outs…..all enabled by the record low cost of borrowing for the government….courtesy of …….THE FED.
    The current employment condition is a result of the Fed. The over generous payouts have kept potential workers at home …. and there are a record number of job openings. If borrowing costs were in the real world….ie equal to the inflation rate, these giveaways that result in promoting idleness would not occur. The cost would be prohibitive.

    • Old School says:

      Seems like the central banks model is simply to try to facilitate debt growth faster than GDP. By definition it’s a temporary scheme and we are at the stage that huge distortions are being caused by Zirp needed to keep it going. Once 10 year hits zero it’s probably game over, but who knows.

  37. Putter says:

    Inflation is a regressive tax. Compounded, it destroys the middle class and the poor. A stable currency will go a long way to lowering the wealth differential. JP says we need 3% to make up for the period below 2%. Premium gas in Cali now $4.50, looking forward to $5.

  38. Artem says:

    Robert,
    Fixing wealth distribution is not about giving out CASH to the poor (with the government as the middle man). It’s about giving out ASSETS. The only reasonable solution is to either disallow productive assets in general (what the 1% generally holds) or to nationalize them, i.e., give all ASSETS to the bottom 50%.

    Having the government as a middle man just makes people IN government more rich and more powerful.

    • Bead says:

      Give them cell phones, flat screen TV’s, junk food, and pain pills. That should keep them quiet.

    • Anthony A. says:

      Rather than give assets to the poor, why not give them opportunities to upgrade their skills? Then they can get jobs and work towards acquiring their own assets like many of us did. No one gave me the time of day when I was poor.

      • Wisdom Seeker says:

        Personal skills are the best asset, but they cannot be given, they have to be worked for.

        What people need are genuine opportunities, not handouts and not dehumanized serf jobs.

    • vinyl1 says:

      @Artem – If the bottom 50% were given shares of Amazon taken from Jeff Bezos, what do you think they would do?

      If you say sell the stock, and spend the money, you understand how the world works.

      Who would then own all the stock? Why, rich guys, of course.

  39. Yort says:

    Wolf – using “average” instead of “median” for charting wealth inequality can be get confusing. Any chance to use “median” for future charting?

    For example, the world’s 500 richest people added $1.8 trillion to their combined net worth in 2020, according to the Bloomberg Billionaires Index. Yet the top 10 richest people added $540 billion to their wealth in 2020, according to BBC news. Therefore the top 10 richest skews the “average” data upward artificially, and using “median” versus “average” helps smooth the data more towards reality…

    Here is what happens if we remove the top 10 richest and calculate the “average” net worth increase, for the top 500 richest, in 2020:

    $1.8T/500 people = $3.60 billion “Average” net worth increase per each 500 richest people in 2020

    Now remove the top 10 richest:

    $1.8T-0.54T= $1.26T

    1.26T/490 people = $2.57 billion “Average” net worth increase per each of the 490 “next richest people in 2020

    Therefore using the top 10 richest in the “average” calculation, one get a gigantic 40% increase in “average” net worth increase, versus using the median.

    I get it, inequality is really, really bad and I have told people for years that nobody on this Earth should be worth more than 100 million as the two billionaire friends I have know over the years have lead me to come to this conclusion for multiple reasons (I could literally write a book about them, simply put wealth accumulation is an addiction that is not healthy for either the billionaires or society). If I had the power, I’d change the top tax bracket to 90% federal tax for anything over $100million dollars a year (thus Bezos and Elon would have gained “ONLY” $10 billion versus $100 billion in 2020). If you can’t live off $100millon dollars a year, you might want to find another planet to live on as this planet can not handle the environmental and resource loading of humans having $100million to spend each year. I’d suspect more than 50% of humans would agree on such a policy and we would enact it immediately, if we had a true democracy and not one controlled by the billionaires and power elites. Instead those in power get us the bottom 99% to fight between themselves and distract the bottom 99% with media and govt circuses…

    Long story short, one must understand that “average” data allows the 10 richest to skew the “average” 40% higher for the remaining 490 “next richest”. And note that this “average skewing” applies, to a lesser extent, to the top 10%, top 9%, top 5%, etc. And as long as the elites can get the bottom 50% to be jealous of the top 20%, top 10%, ,etc…then they can continue to sell us pay less than a living wage to have the poor box and ship us cheap China trinkets online, to keep us all “fulfilled” while they build the world’s largest yachts and of course a “chase yacht” so their mistress can land their jet helicopters…

    • Nicko2 says:

      Haha! Great comment.

      I disagree with you on the relevance of billionaires. Billionaires play a peculiar role in today’s globalized world; particularly in emerging economies, where they wield tremendous non-democratic powers over tens, or even hundreds of millions of people. The new oligarchs emerging around the world are something new, creating a different future than we expected, a most assuredly non-democratic one; and it’s an open question if it’ll be more egalitarian.

    • Wolf Richter says:

      This is based on the data the Federal Reserve provides and makes publicly available. The Fed’s data = totals by category: TOTAL wealth/assets/debts of the 1%, etc. I divide the total by the number of households in that group to get a per household average for that group. To present a median, I would have to have the original data down to each household.

      But the groups are already divided into the 1%, the next 9%, the next 40%, and the bottom 50%. So this is less of an issue than presenting, for example, the “average wealth of all Americans.”

      In addition, fur further illustration, I included the wealth of the richest 30 Americans = $2 trillion (via Bloomberg data), to show how top heavy this is.

      The median also is full of distortions in its own right, just different distortions.

  40. Bead says:

    Like clockwork the Bullard baloney is walked back for our nice afternoon blow-off top

    • Wolf Richter says:

      We’re going to get months of this. This is classic procedure, back and forth, I would say orchestrated, until everyone has gotten used to the taper. And then they’ll do it.

  41. Angel says:

    Historically, when you see these conditions things often get nasty and bloody. There have been comments that, despite history, the masses will not rise or at least not in the US. I respectfully suggest that this may be incorrect and that this time wouldn’t be different. While I do agree that the vast majority do not understand what is happening, they do understand that life is becoming more difficult, that they are being left behind particularly by the wealthy (ultra wealthy) and that the playing field isn’t level. They don’t have to understand. They only have to become frustrated and angry enough to respond. There is significant anger and tension building.

    I have been aware of the anger against the 1% for over a decade but it was rarely overt nor particularly pronounced, however, in the last few years it was being whispered, then talked about and now outspoken with propaganda against the 1%. The group that it’s being directed against is growing larger and now includes beyond the 1% & the top 10%. It is anyone who is middle class and regardless of how they got there. The vast majority of whom do not have the financial wherewithal to live the life they are accused of and are also the whipping boys of the system. There is no perception check.

    In the last 6 months, a locally well supported and accepted group brought out a mini documentary supposedly to direct the local population in a positive and sustainable direction. The reality is that the video was pure hippie sustainability hiding a scapegoating propaganda campaign against the top 1%. There is no questioning how accurate, reasonable or healthy this film is. To question it is taboo. It is coming from what is regarded as an inclusive community that doesn’t believe in violence (supposedly but you should see the domestic violence rates). It’s incidents like this that are acting as large and very worrying red flags. This is happening IN Canada. We certainly don’t have a cultural that is prone to revolution, uprising or otherwise. Hell, the meme’s about Canadian culture always saying “sorry” is very true along with trying to keep everything peaceful. Despite this, there is a growing movement against anyone perceived as having any type of wealth beyond your own. If this is growing here, then the US shouldn’t be so sanguine that it can’t or wouldn’t develop some very dangerous social trends, events or end up in another revolution. Nor should it be dismissed in other first world countries.

    I’m not saying where this will go but from a sociohistorical perspective,the world should be very worried. The inequities that the governments have created and policies that continue to increase that inequity is a very dangerous game.

    • Petunia says:

      Canada is already gone in terms of civil rights, there are none. They arrested a pastor for holding services during the lock down. The goon squad that did it looked like they were trained by the SS (the national socialist variety).

      BTW, the pastor immigrated to Canada from the eastern block seeking freedom. He called them national socialist and he is totally right.

  42. Mr. House says:

    Welp, reading the comments here is an eye opener. Nobody can agree on anything, but i bet we can all agree on one thing: nothing will change!

    • Nicko2 says:

      Don’t fight the Fed, Is the lesson I guess? The ideological battle lines of the 21st century are drawn; a new cold war with China is hotting up. Pick your team.

      • Mr. House says:

        I pick truth, which sadly is the underdog and a very small team.

        Any of you guys ever watch the movie JFK? Just revisited it for the first time since it came out on VHS and i’d suggest everyone do it. Made much more sense to me now then when i was 12 or so when it came out.

        • VintageVNvet says:

          Question is, ”Whose/which { TRUTH } ???
          That of the MSM?? That of the alternative press/media?? That of the radical left or right??
          That of the clear propagandists??
          That of the oligarchy, and if that, which side in the now clear battle continuing since the end of WW2??
          ETC.

    • VintageVNvet says:

      ””The only constant is change.”’ ,,, would be the only ”anything” I could even talk about talking about to agree on, so far.
      Don’t even buy into the second ”law” of thermodynamics being absolute, without substantial postulates preceding.
      That may be a bit too high a bar for most folks, but, fact is, it’s all theory, even if flight is proven — with substantial conditions, eh?
      Just TRY to stay out of trouble,,, you won’t succeed, but you can have almost as much fun just trying.
      Just saying…

    • Auldyin says:

      MH
      Law of nature. Isaac Newton!
      A body will continue in it’s state of rest or uniform motion unless it is acted on by a force.
      eg a pitchfork up the A**

  43. vinyl1 says:

    I think your numbers are off. The 90th – 99th percentile probably does not have an average of $4.3 million, and that is certainly not the median for this group. Some pundits say that assets of $4.3 million would put you in the 97th or 98 percentile, but the bulk of the 90-99th group probably has less than $2 million.

  44. simonyoosen says:

    This type of wealth distribution is destined for social unrest. Thanks to the FED and their cronies! Some of these 1% likely could migrate elsewhere before the tragedy hit home. At the end of the day, career politicians in the country should be totally eliminated for the good of public.

    • K says:

      Career politicians are not the cause, so eliminating them would not change anything. Did you ever hear of the saying “lead or silver?” While it is primarily used as a reference to the tactic of drug cartels to offer politicians and policemen either bribes or bullets, i.e., death, that phrase also encapsulates why US corruption is so pervasive.

      You have to alter the wealth distribution by other means or the mere existence of the wealth disparity creates a situation in which the wealthy can reward or punish the judges or politicians who fail to protect them or violate the laws to further their interests. If a judge in LA or politician in California were to disrespect one of the ultra-rich, at the next election, funds will be spent and he or she will lose the next election.

      For example, in LA County, most lawyers already know that cronyism and corruption is endemic. Thus, we have to try to work with “connected” lawyers who will be protected by their crony judges. That is also why certain, famous but “connected” monsters could do whatever they wanted, e.g., with actresses.

      The “lead”/punishment is also not just in the form of bullets. What would a judge or politician do for the ultra-rich if some pedophile had provided an underage girl to him to abuse and video recorded that judge or politician engaging in such sexual abuse, then sold that video recording, so the ultra-rich then threatened to release the video recording? Read the news.

  45. K says:

    Great article. Of course, their “Federal” Reserve is the primary mechanism by which the ultra-rich have been covertly transferring American’s earnings and wealth to themselves: e.g., by having their “Fed” lend their banks trillions at 2.5% per year that the banks then lend to Americans at 25% per year.

    I am surprised that most Americans, or at least the less wealthy 74% or so, are not more outraged by the shenanigans of the ultra-rich, such as their “Fed.” Aside from insider trading, bribery of judges, politicians, and bureaucrats, traditional organized crime, and other corruption, the other why the ultra-rich, and the rich, who are the richest 1% of Americans, were able to grow their wealth so much is through tax evasion or tax avoidance, which only a minority of the rest of Americans practice.

    For example, the richest have their money in trust funds that hold foreign companies or shares of US companies, like Apple, that have never repatriated their billions of foreign earnings from manufacturing their products in the CCP-controlled, mainland China. Such companies have been effectively shipping US jobs to China for decades in exchange for getting subsidies from the CCP to do so in the form of subsidized factory locations for pittances, quasi-slave laborers who have few rights and are closely surveilled by the CCP, immunity to pollute or to violate patent or similar, non-CCP laws, freedom to abuse their workers and neighbors, ultra-low interest loans from CCP-controlled banks, etc., while paying little in taxes to China and none in the US.
    The beneficiaries of the trusts of the ultra-rich never even have to worry about paying US taxes, except for any earnings that any US company earning foreign income foolishly distributes as dividends to their trust. As to those, only the trust, not the beneficiaries have to pay taxes. Provisions in trusts now allowing them to own real estate in which their beneficiaries reside mean that those beneficiaries do not even have to pay property taxes.
    That is why I was so astonished at the proposals made a few years ago to “forgive” the income taxes owed by companies like Apple on foreign earnings (which a lot hold through paperwork in tax havens like the Cayman Islands or Ireland), so they could supposedly spur economic growth by bringing those earnings on which they had never paid taxes back to the USA. How ludicrous!

    How stupid did those people think Americans were? Most of those funds (e.g., foreign earnings of US companies) were ALREADY in the USA or in the EU or wherever, because the companies and trusts were always and are investing in the US or EU, etc., through other, shell companies in the tax havens, like Ireland, the Cayman Islands, etc. View “Britain’s Second Empire: The Spider’s Web” for a very brief introduction which grossly underestimates the hundreds of trillions “held” in foreign tax havens, but actually already invested via shell companies in the US, EU, and other countries.

    The paper, shell companies invested wherever the opportunities for profits were the greatest, because those “paper-work,” foreign shell companies were used to do the direct investing, not the US companies, so that as not subjecting the US companies to US taxation on their foreign income. If forgiven all US taxes by fools in the US, those companies’ leaders would grin contemptuously and continue investing wherever they saw the greatest opportunities for profits. Read “Apple Is Not Alone Dell, Microsoft and Fifteen Other Fortune-500 Corporations’ Financial Reports Indicate Their Offshore Profits Are In Tax Havens; Hundreds More Likely Do the Same” in Americans for tax fairness.
    Incidentally, if you think about it, the latest corporate tax reduction enabled whichever US company that had evaded/avoided US income taxes for decades, by hiding or simply not bringing back to the USA, their foreign income, to save BILLIONS in taxes, because they were rewarded for their unpatriotic behavior (e.g., of transferring US technology to China that could be used to sink US Navy ships) by being given effectively discounts on the taxes that they would have had to pay if they had brought their foreign income back to the USA in earlier years.

    • K says:

      To clarify, the truly wealthiest, trillionaire families that actually own the world’s greatest fortunes are almost certainly not being counted among the top 1% wealthiest Americans, who I refer to as the “rich.” They fear kidnapping, etc., too much so their wealth is too well hidden, e.g., by making them or their heirs beneficiaries of trusts, etc. They are often getting “consulting” fees or live off “loans” that they technically would not qualify based on their visible earnings/wealth to receive.

      A lot of them live hedonistic lives, e.g., in Thailand, or other fleshpots.

    • K says:

      See “Irish-based structure may still help Apple avoid billions in tax” in the Irish times.

  46. yxd0018 says:

    Some experts such as Ray Dailo point out an analogue of our current times with the 1930s. Following this period inflation exploded while nominal interest rates were being supressed, leading to a real interest rate of -18.86%. Naturally, this was desasturous for holders of cash and bonds. Over the following 30 years, accounting for dividens, stocks outperformed (corporate-)bonds over 10 times.

  47. Sound of the Suburbs says:

    What is real wealth?
    They had the same problem the last time they used neoclassical economics.

    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.

    It took them a long time to disentangle the hopelessly confused thinking of neoclassical economics in the 1930s.
    This is the second time around and it has already been done.
    The real wealth creation in the economy is measured by GDP.
    Real wealth creation involves real work, producing new goods and services in the economy.
    That’s where the real wealth in the economy lies.

    Keynesian economics was bad.
    Do you remember the 1970s?
    Oh yes, I remember that.

    Neoclassical economics was bad.
    No one could remember that.

    “Stocks have reached what looks like a permanently high plateau.” Irving Fisher 1929.
    This 1920’s neoclassical economist that believed in free markets knew this was a stable equilibrium.
    He became a laughing stock.
    Better shelve this for a few decades until everyone has forgotten.
    Now everyone has forgotten we can use it for globalisation.

    It’s not only god that works in mysterious ways, we must add globalists to the list.

  48. Auldyin says:

    What happened is there and obvious to see thanks to W’s charts. It’s also obvious the Fed enabled the cash to make it all come to these numbers by use of QE into financial markets rather than Govt spending into investment and jobs in the country. (does military count?)
    For individual billionaires I think they have also been greatly helped by monopolies and the ability to buy up competitors at minimum money cost. For example, Amazon, Tesla, etc had cash-burn rates for years that could never have been sustained in a traditional money market. They would have been wiped out in a couple of years at historical rates.
    I’m amazed to learn US has grown 105m to 126m h/hlds in 20yrs. I make that nearly 1%pa which needs to be read alongside Gdp growth over the period.
    These graphs are great for showing progression over time, but a snapshot as a bell shaped distribution gives a picture of how many fall into each wealth band. Same for incomes. Don’t know how much data you get access to.

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