My “Wealth Disparity Monitor”: QT, Rate Hikes, Dropping Stocks & Bonds Reduce Outrageous US Wealth Disparity

Wealth of the “Top 0.1%” drops by $12 million per household; the wealth of the “Bottom 50%,” who have nearly nothing, rises.

By Wolf Richter for WOLF STREET.

The Fed, in its new release of data on the distribution of wealth in the US, cut its classic category of the “Top 1%” into two new categories: the “Top 0.1%” and the “Remaining 1%.” And then there are the three classic categories of wealth or lack of wealth: the top 2% to 10%; the Next 40%; and the “Bottom 50%.”

The results of splitting out the 0.1% are shocking – though we’ve known it all along: Just how much wealthier the “Top 0.1%” are than even the “Remaining 1%,” and what kind of outrageous gift they got from the Fed’s money-printing and interest-rate repression. While the “Bottom 50%” have nearly no wealth.

Fed’s QT and rate hikes reduce the enormous wealth disparity.

The new release is for Q2, when the selloff in the stock market and the bond market was in full swing. The selloff hit the total wealth (assets minus debt) of the “Top 0.1%” the most, because they own the most stocks and bonds, and those got hit the hardest: The “Top 0.1%” lost $12 million in wealth per average household, compared to the end of 2021. And the unbelievably enormous and mind-boggling wealth disparity in America actually shrank visibly.

QE ended in early 2022. The Fed started raising rates in March. QT started in June. By now, interest rates have shot up, bond yields have shot up, and bond prices have fallen. The Nasdaq started falling late November. The S&P 500 Index started falling at the beginning of this year. In terms of Q2, by the end of June, the S&P 500 Index was down 24%.

And in effect, the Fed’s reversal of QE and interest-rate repression is deflating the Everything Bubble and is therefore deflating a portion of the horrendous wealth disparity that QE and interest rate repression had made so much worse.

So here is the average wealth (assets minus debts) per household, by wealth category in Q2, 2022, and by how much it changed from the end of 2021 (in bold). Note the gain by the Bottom 50%:

  • “Top “0.1%” (red in chart below): $133.8 million (-$12 million, -8.2%)
  • “Remaining 1%” (purple): $19.8 million (-$2.0 million, -9.1%)
  • The 2% to 10% (yellow): $4.4 million (-$253,000, -5.5%)
  • “Next 40%” (green): $768,000 (-$16,500; -2.1%)
  • “Bottom 50%” (not show in the chart): $69,100 (+$10,500; +15.5%).

The “Bottom 50%” of households don’t show on the chart below because they have so little, and a big part of what little they have are durable goods, such as cars, a little home equity, and pension entitlements. They own nearly no stocks and no bonds, directly or indirectly. But their net worth actually jumped from minuscule to a little less minuscule! Kudos!

So here it is, my Wealth Disparity Monitor. It shows the wealth (assets minus debts) in dollars, per average household in each category. To get there, I divided the total wealth for each category (Fed data) by the number of households in that category (number of households per Census data). The bottom green line is the average household wealth of the better-off portion of the middle class, the folks below the top 10% and above the Bottom 50%, which is an indictment of the wealth distribution in America:

Primary beneficiaries of QE and interest-rate repression: “The 0.1%”

The explosion of the wealth of the “Top 0.1%” households through 2021 (red line) shows that they were the primary beneficiaries of the Fed’s policies since March 2020. These policies were designed to inflate asset prices, and only asset holders benefited from that. The more assets they held, the more they benefited. And those that already held the most assets, benefitted the most.

From Q2 2020, the beginning of the Fed’s crazy QE and interest rate repression, through the end of 2021, the average 0.1% households gained $47 million in wealth!

This was an obscene gift that the Fed handed this small number of households for a monstrous increase of their wealth, and for an exponential increase in the already ridiculous wealth disparity to the rest of the households, even to the “Remaining 1%.” It was also the greatest economic injustice committed in recent US history over such a short period of time.

These monetary policies are largely responsible for the worst inflation in 4 decades that is mauling the “Bottom 50%” of households because they have so little, and spend all their money on necessities.

By Q2, the “Top 0.1%” households gave up $12 million of that $47 million in gains they’d made since March 2020. So the Fed has a long way to go with its tightening policies before this Wealth Disparity gets back to something that doesn’t tear up the American society.

Wealth Disparity between “The 0.1%” and “The 1%”

The wealth disparity even at the very top is just astounding. As we have long suspected, it’s not the 1% that get all the goodies; it’s the minuscule number of households that make up the top 0.1%: QE and interest rate repression since the Financial Crisis, and particularly since March 2020, simply blew out the wealth disparity between “The 0.1%” and the “remaining 1%.”

The effects of the Fed’s tightening are now beginning to dial back a small portion of that disparity; and there’s a long way to go:

My Wealth Disparity Monitor is a quarterly report card on the effects of the Fed’s monetary policies. The official reasoning for QE and interest rate repression is the well-known but dubious “Wealth Effect” which is the monetary equivalent of trickledown economics, where the Fed tries to make the already wealthy far wealthier by inflating asset prices with QE and interest rate repression, based on the doctrine that these households will then spend some of this newly gained wealth, which will then trickle down….

What we got instead of the wealth trickledown is a huge bout of inflation, of global inflation, since central banks globally have pursued similar policies of interest rate repression and QE.

Now the Fed and other central banks are furiously backpedaling, and as tightening progresses, there will be more progress in reducing the disastrous wealth disparity.

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.




  293 comments for “My “Wealth Disparity Monitor”: QT, Rate Hikes, Dropping Stocks & Bonds Reduce Outrageous US Wealth Disparity

  1. Steve says:

    Inflation is just wealth transfer.

    • Yort says:

      It used to be nearly impossible to accumulate insane amounts of wealth when the top Federal Tax rate was 94%. In 1981 an actor became President and slashed taxes and dropped the marginal tax rate from 70% when he was inaugurated to just 28% when his term ended, and had a 74% top approval rating so it seems giving out free money worked better in the 80s vs 2022…

      Yet today if the top capital gains rate for billionaires was say 60%, they could simply borrow off their shares and never pay a dime like the current scheme to avoid taxes today. The proposed billionaire taxes are not going to pass as the billionaires buy out Congress via lobby funds. And lobby reform is not going to happen as it takes tens to hundreds of millions to win elections. Catch-22…

      • WA says:

        That 0.1% chart looks like Fed’s balance sheet chart. Can we plot them together?

      • DEI & ESG Slave says:

        Hey Yort,

        Your assertion that taxes are what kept people from accumulating wealth is both wrong and foolish. Wrong in that the amount of tax exemptions that were utilized by the wealthy at the time (1930s) made it so that their effective tax rate was under 30%. Foolish in that you assume that people would choose to live under a government that take 94% of their income over a certain amount. Name a time in history where where people voluntarily gave up 95% of their income because “government said so”, especially in America. Whiskey rebellion anyone?

        Funny how no one talks about the gold confiscation by FDR or the FED exacerbating the recession of 1929 into the great depression.

        When Regan “slashed” the tax rate, he was actually bargaining with the wealthy to get them to effectively pay more. Last I checked it worked and tax revenues increased under Regan in particular.

        Lastly, if every one of the top 0.1% had their wealth confiscated, it would barely pay for the US government to operate for 6 months. We don’t have a tax problem, we have a spending problem.

        • Wolf Richter says:

          DEI & ESG Slave,

          “Lastly, if every one of the top 0.1% had their wealth confiscated, it would barely pay for the US government to operate for 6 months.”

          hahahaha, problems with basic math? “The 0.1%” have a combined wealth (assets minus debts) of $17.1 trillion. So that would pay off half of the total US gross national debt. Or it would cover the federal deficits at the current rate for about 17 years. Just to get the math right.

        • Mariah says:

          Me, it’s all fictitious ‘wealth’. It’s not backed by anything really valuable. Will the creditors accept Facebook or Tesla paper instead of (scarce) USD? At what rate?

        • RH says:

          I would add that the KNOWN wealth of the US ultra rich is that $17.1 trillion. Hidden wealth, as discussed as to UK and some other users of British Commonwealth tax shelters was apparently estimated various years ago to be 55 trillion UK pounds (then worth much more than dollars.) See “Britain’s Second Empire: The Spider’s Web” documentary. US ultra rich are far, far wealthier if you count hidden assets and by hiding assets they have long avoided US taxation: see Gizmodo story re Apple, $50 billion, and taxes.

        • ru82 says:

          The top 26 wealthiest people in the world combined wealth is more than the bottom 3.2 billion. Crazy

          If governments wants to do transfer payments. There is your targets

        • NBay says:

          That is the sloppiest collection of unsubstantiated “look over here” arguments I have seen in quite a while, but by no means the sloppiest…..so…..no prize.

        • NBay says:

          Just noticed your 1980 savior’s name was misspelled twice. Sacrilege! And how could an actor know how to “bargain with the wealthy”? Was The Art of the Deal even out back then?

      • john says:

        JFK, a DEMOCRAT, lowered the tax rate 1st!!
        selective amnesia @ work

        • NBay says:

          He said from 70%, and that was the JFK cut level. R(and understand)TGDFC!

          I read the 1960 tax rate schedule..(look it up!)….there was one hell of a lot more than 4 brackets…..just a guess, 25-50? Progressive rates.

          I do remember the tax on $12,000/yr (after deductions) was pretty high, relatively, and that was the assessed value of the 3 bed, 1 bath, 1 wall heater appx 1100-1300 sq foot 3-4 floor plan tract house we bought in Fontana, CA. Seville St, it’s still there, and at that time almost everyone worked for Kaiser Steel…Union jobs plus they had just decided they were big enough to run their own hospital….cheaper.

          Check out Kaiser Health News.com. It is put out by the Kaiser family. I seems they are a bit guilty over what they may have started, managed health care.
          They were just into making steel and stuff out of it, anyway.

        • Anon1970 says:

          The so called “Kennedy Tax Cut” was actually passed by Congress in 1964 when LBJ was president.

      • Not Sure says:

        Yort, I’d like to avoid politics here and I think it’s fair to ask a couple of functional questions…

        First, the top 0.1%ers have their wealth stored in things like assets and securities, not cold hard cash. How do we tax that wealth without destroying a lot of it? If all the hyper rich started liquidating stocks and property to pay their fair share, how would the government be able to access that wealth via taxation while the wealth itself evaporates due to crashing stock and property prices caused by forced sales?

        Second, let’s say we could magically unlock all of that paper wealth to tax it and redistribute it to the lower & middle classes through the government’s usual channels: programs, public spending, direct cash payments, maybe debt forgiveness, etc. Wouldn’t a sudden redistribution of that buying power cause massive inflation?

        I’m not trying to be a billionaire’s advocate, but I’d sincerely like to know if anybody has answers to these questions… We dug ourselves into a massive wealth-gap hole and I can’t wrap my head around how we would be able to unwind so much fake paper wealth and use the revenue from it without causing other huge unintended disasters.

        • RH says:

          You impute a reasonable rate of income to hidden and other wealth and tax that. Of course they may then sell a part of those assets, move the funds, and hide them elsewhere. The G7 would have to participate to discourage this as to most economies and would have to require disclosure of beneficial owners. They need the USA, so we could pressure them to do that.

        • Poor like you says:

          Aggressive, loophole-free, and wholly enforced estate tax.

        • Happy1 says:

          @poor like you

          Your aggressive loophole free inheritance tax would promptly be applied to the middle class. See the history of the income tax for reference.

        • Poor like you says:

          The estate tax only applies to a very small number of households.

        • taxpayer says:

          How would “we” tax that wealth?
          Effectively, by replacing the tax on work with a very high tax on privilege. That means labor income, even by highly-compensated folks, is tax-free. But privilege, meaning income that does not come from producing anything, is heavily taxed, ideally approaching 100%. Privilege includes ownership of land and other natural resources, electromagnetic spectrum, “intellectual property”, water rights, geosynchronous orbits… and you can probably think of some others. An incidental benefit would be that a lot of affluent lobbyists and other grifters get their income from manipulating privileges, so they’d have to find another way to make a living.
          That’s what “we” would do if “we” had any influence.

        • Lynn says:

          Deflating asset prices increases the value of lower earner’s dollars and enables them to (hopefully) to buy shelter, food and medical. And most importantly- time.

          When you have billionaires who pay their employees less than a surviving wage and constantly increase the prices of necessities like shelter, food medical etc you have an very strangulated and unhealthy economy.

          It also actively destroys culture as more and more people have very little time or money to spend on reading, science, museums, art, theater or on creating such expressions or understandings. These are the things most societies use to define themselves with and take pride in; ideas, innovations and I suppose, taste.

          A society which destroys it’s own culture is dead inside and pitiful. It has very little empathy or understandings outside of it’s own mechanized and sterile little head and so has poor communication skills and has retarded innovations.

        • rojogrande says:

          Happy1,

          The 2022 estate tax exemption for a married couple (their combined unified credit) is $24 million. That’s why it applies to so few households. With modest planning it doesn’t apply to most of the top 1% of households based on net worth from Wolf’s charts. The estate tax can be expanded some without applying it to even the modestly wealthy. The estate tax doesn’t apply to the middle class now so I doubt any changes will promptly be applied to the middle class. We don’t need to look at the history of the income tax since we can look at the history of the actual estate tax.

        • TS says:

          Likely what we would see is a shift from the ultra wealthy to the better politically connected ultra wealthy as the government confiscated and redistributed wealth.

        • NBay says:

          It’s the GD government again, eh TS?

          The “who needs it and for what” programming, and you have no dog in the race to think that, you just don’t know it.

          “prey” on the prejudices of the people WORKS, what prejudice was used to hook you?

      • SomethingStinks says:

        Which is why sometimes revolutions are not a bad thing. I hope things keep getting worse…. Until you have some meaningful riots (not the paid for ones we saw in 2020) and some real existential threat to the upper class, nothing will change. Someone needs to tell the people to eat cake.

        • NBay says:

          Sometimes I wonder if that’s the plan. Then call for and get LAW and ORDER and really button things up TIGHT!…Cops everywhere…Set fire to the Reichstag…..I mean Capitol……blame….the…uh…..well……whoever is easiest for starters……..worked before…..and corps still did great, even better, in fact.

          Not that I wouldn’t mind seeing planet trashing displays of excess burning.

        • NBay says:

          Words are tricky….for me anyway….put quotes on “displays of excess”…..had a friend that used that phrase, as in, “There’s a good display of excess” when he saw one.

        • MarMar says:

          lol “we need some riots … just not the ones that actually happened, that I have some BS reason I can dismiss”

        • Old Ghost says:

          Valerie from Australia (born, raised and worked in the U.S.)
          wrote:

          “I have always paid about a third of my income in Federal Income Tax – in every country I’ve lived. I don’t consider the money I pay to the government “my money.” What I find unfair is that billionaires don’t pay a similar rate and they have all kinds of tax loopholes where they can hide their profits from being taxed at the same rate I pay……”

          Valerie, Reagan gave the .01% a hell of a deal. A lot of us worker bees here in the USA are paying more in Social Security tax than, uhmmmm, a certain career criminal (& former president) paid in his income taxes.

      • Happy1 says:

        So allowing people to keep their own money is now “giving out free money”?

        You’re also in need of both history and economics lessons.

        JFK cut rates first in the 60s, as others pointed out. Also as others pointed out, people tax sheltered like crazy in the 70s, no one paid those top line rates.

        Also, the rates you’re referring to are for regular income. These apply mostly to salaried people and s Corp owners. Those aren’t billionaires, they are run-of-the-mill affluent people and the middle class. The Reagan era tax cuts benefited the mass affluent, small business owners, and upper middle class enormously. But those rate cuts are not relevant to billionaires.

        Reagan cut capital gain rates, which are the ones that apply to billionaires, from 28% to 20%, a much smaller proportional change. The Reagan tax cuts aren’t the reason we have such massive disproportionate well at the top of the income ladder, those cuts have been walked back.

        The Fed is almost entirely to blame. There has been easy money which has pumped up venture capital and private equity since the ’90s. This has taken place regardless of which party has been in charge.

        Yet there are still politicians who demagogue about the wealth discrepancy and claim that changing marginal income tax rates is the solution. The solution is to turn off the Fed fire hydrant and have relatively low tax rates for everyone for both income and capital gains. And maybe to rein in federal spending which is completely out of control.

        • Old Ghost says:

          I find it amazing that no one here realizes Ronnie Reagun actually raised taxes on the working people (while cutting them for the wealthy).

          How did he do that? He raised the Social Security taxes. Those are paid by wage earners, not the PMC crowd.

          I knew a number of people who saw their net Federal Tax bill go up because of Ronnie’s shenangans.

        • Happy1 says:

          @Old Ghost

          Reagan tax cuts applied to all brackets. The increase in Soc Security taxes was a bipartisan compromise with strong support from all parties, it was not a partisan project, and it was necessary because the ponzi scheme that is SS never anticipated people living older than 70 and needed to be adjusted or it would have run out of funds. Remember per FDR this was to have been something you earned based on the work you did.

        • Old Ghost says:

          Happy1 wrote: “Reagan tax cuts applied to all brackets. ”

          Happy1. Wage earners on the very bottom of the tax scale did not benefit from the Reagan income tax cuts. But they did pay more in taxes.

          Every worshipper seems to have forgotten that Saint Ronnie actually screwed over the poorest of the working poor.

          S.viii Effects of the 1981 Tax Act August 1986

          “The tax system was less progressive in 1983 than in 1980, despite the increased share of taxes paid by the top percentile.

          Summary measures based on the distribution of after-tax income, arguably the best way to determine progressivity, show that the distribution of after-tax income was less equal in
          1983 …

          the share of taxes paid by tax-payers in the bottom half of the income distribution increased slightly from 6.9 percent to 7.0 percent…”

        • Valerie from Australia (born, raised and worked in the U.S.) says:

          I have always paid about a third of my income in Federal Income Tax – in every country I’ve lived. I don’t consider the money I pay to the government “my money.” What I find unfair is that billionaires don’t pay a similar rate and they have all kinds of tax loopholes where they can hide their profits from being taxed at the same rate I pay. I also don’t consider buying stock in a stock market that is rigged in favour of the stock owners, hard work. So no, I don’t think they should be paying less than I do in taxes that benefit all of us.

      • LK says:

        We’re still living in Reagan’s America. It’s the only one I’ve ever known.

      • NBay says:

        Yort,

        “……the corporations have become enthroned….they are at my back and I fear them more than the Southern Army in front of me…….all the wealth will be in the hands of a few…..and they will prey on the prejudices of the people…….and the Republic will be destroyed.”

        -Abe Lincoln

        The Gettysburg address was a plea to not let it come to this.

        The CNN special on Rupert Murdoch pts 1 and 2 last Sun nite shows how one preys on the prejudices of the people given enough money and media power….sort of another Catch 22, CNN being a huge media corp itself, yes?

        Also see the Barry Goldwater religion quote, yet he was as right wing as one can get.

        We live in interesting times, but perhaps since the Neolithic Revolution, all Homo sapiens have………

      • Lynn says:

        Yeah, this is something on everyone’s mind.

      • CharlesTheHammer says:

        I am sorry, but if keeping thr fruits of one’s own labor is ‘free money’ you and me is fixing to fight.

        • NBay says:

          “Common sense is a collection of prejudices usually accumulated by about age 18”

          -Albert Einstein

          You still like a “playground government” best, I guess…..

    • Up North says:

      Eh Wolf, thanks as usual for the very informative slides.
      Would like to see a precise chart comparing the 0.1% to the 1% so they are roughly same height.
      My point is that the % increase, say during the pandemic, for the 2 groups probably grew by a fairly similar % . (We might be surprised if we also look at the other groups)
      If it’s simply an application of the Matthew effect…
      The numbers are still grotesquely obscene though for the top 0.1.

      • Wolf Richter says:

        “You can kill someone with the reckless application of percentages” – that’s a Wolf Street Dictum, similar to “Nothing goes to heck in a straight line.”

        If I give $5 to a homeless guy who already has $5 in his pocket, his wealth increases by 100%.

        If the Fed’s QE increased the wealth by only 10% of a guy who has $1 billion in wealth, his wealth increased by $100 million.

        So one guy’s wealth increased by 100% and the other guy’s wealth increased by 10%, has that decreased the wealth disparity?

        Hahahaha, nope, the billionaire made $100 million and the homeless guy made $5, and the wealth disparity has increased by $99,999,995 approximately.

    • Finster says:

      That’s why it’s so popular with political and financial elites. It also happens that there is a strong historical correlation between interest rates and wealth and income dispersion … the lower the interest rates, the wider the wealth gap.

    • eg says:

      Steve, inflation can also be described as a distributional struggle.

  2. Depth Charge says:

    Jamie Dimon should be in prison, with no longer a dime to his name. Ditto Lloyd Blankfein. The list is long. Very long.

    • Mark says:

      Greenspan, Bernanke, and Yellen would head the list. Felony counterfeiting and fraud.

      • WA says:

        Meanwhile wallstreet trying to spin up another rally with cnbc showcasing Fed President EVAN who is suddenly “Nervous about going too far, too fast”.

        Fed is too slow and it will remain behind to never catch inflation!

      • Flea says:

        We the people need to save this republic,this looks more like Rome every day .UNIED We stand divided we fall truer words were never spoken.Russia will become a puppet for China,boy China is smart ,get America – Russia in a conflict deplete military stockpiles then just rule the world .except financial mafia won’t let that happen,although it’s the reason we won the war

      • Flea says:

        Easier congress,hor clean house

    • Pilot Doc says:

      Jamie Dimeless?

  3. The Bob who cried Wolf says:

    So if I ever make it to the 1% I still have the .1 percenters I can blame it all on.
    It’s unfortunate, but there seems to be no good economic news anywhere at this point, and probably for the foreseeable future. My worries have been that we fall into a depression, which is already being signaled by many analysts who are using terms like prolonged recession, bad recession, worse than 2008, etc. I think they’re covering their bases for what’s about to happen. I hope the best for everyone

    • Depth Charge says:

      I’m hoping for a depression at this point. It’s what we badly need. No lessons were learned from the last housing bubble, and then they doubled down and blew the most massive everything bubble imaginable – a truly disgusting display of arrogance and recklessness.

      Let it all crumble into oblivion. 12X median income house prices are a sham. Let’s get back to 2X gross income, where they were for over a hundred years before these money printers hijacked the country.

      • Brooks says:

        The problem is a depression hurts the poor the most. If you have 10 million you can afford to lose 8 million and still be fine.

        • Bobber says:

          That’s a soundbite propagated by the top 1% as an excuse to protect the wealthy class. Think about it. If asset prices drop, those who don’t own assets have a chance to purchase them as bargain levels. Rents go way down. Transportation cost goes down. An asset price crash is a huge benefit to the poor and middle class.

          Plus, with unemployment and other safety mechanisms in place, there is cushion for those who temporarily lose jobs.

        • Wolf Richter says:

          This red herring is really getting old and smelly.

        • The Real Tony says:

          The poor are already poor its the rich that become the new poor in a depression.

        • SomethingStinks says:

          Nope…. poor are already poor, we need the bloodsucking vermin top 10% and their paid for boot lickers in congress to join the ranks. Thats the only way they get to keep their head, otherwise its going to be Marie-Antoinette time. People are getting more volatile by the day, watch your daily commute, drivers are getting more nasty. Shows the state of mind of the person behind the wheel. There will come a time when a large enough number of these people will have nothing left to lose.

      • Flea says:

        Apparently you have no idea the consequences of a depression,

        • Depth Charge says:

          I would say you don’t. It’s the only thing that is going to wipe out asset prices and level the playing field.

        • Flea says:

          Too dc hope you like holes in your shoes and your grandkids wearing flour bags for dresses lol

        • SomethingStinks says:

          A huge section of the population is already in a depression. The middle class is slowly getting pushed to join that group. If your choice of meal goes from hungry man meatloaf @3.99 to 79 cent Raman noodle bowl, that’s you cue that you are now in the group. Meantime, the connected few are buying elections, fixing laws so they and their descendents can continue the orgy..And it is not like they work hard to make their money, it’s all grift and thievery. So yes bring on the depression, if you keep eating the steak while whittling away my piece of bread then I don’t give a damn, burn it all down.

      • ru82 says:

        What will happen is citizens will lose their jobs and houses and the hedge funds and private equity companies will be bailed out and see no hurt. The Fed will pick a couple of small firms to make examples of and let them go back.

        The gamblers will all get a free pass because their risky bets could cause a crisis. That is what we will be told. The government did not need to bailout anyone during the 2009 crisis. athe just should have taken over and nationalized the troubled companies, fired the execs, put in a few team and let them go public again. This playbook has worked many times throughout global history

    • Wolf Richter says:

      The Bob who cried Wolf,

      You’re not seeing the good news right in front of you, right here on this site in these charts: The stock market decline and the bond market decline will have very little impact on demand and the overall economy because most people in the US don’t own stocks and bonds and don’t really care. See the “Bottom 50%” who own nearly no stocks and bonds, and the next 40% who own only small amounts of stocks and bonds.

      In other words, the Fed can keep taking down stock and bond prices, to unwind the insidious damage it has done, and very little will happen to the economy.

      And another good thing: rising yields will turn savers and yield investors into spenders again.

      There’s lots of good news right in front of you, right here.

      • Mike R says:

        Agreed Wolf. We need a crap ton more of the QT and rising rates, and no pivot, or no gutless Fed who capitulates in a few short months, bc it gets cold feet. The Fed is so damn far behind the curve, and a lot of people, that are in the 99% should be really angry about what the Fed has done the past 22 years. Because what happens when all the largesse is collapsed, is we will get a couple decades of really ugly blood letting out of the bloated system. The debt to gdp ratio indicates zero growth for years. The deficits are untenable and they’ve got to be stopped cold turkey. The government is bloated and has to be cut by a minimum of 80%. The worst part is with all the debt, the existing infrastructure cannot be repaired, upgraded or replaced. That’s our roads, our power grids, our water and sewer systems. All horribly under maintained and extremely fragile. It’s a very sad state of affairs here in the US, if not world wide. The Fed has been highly immoral and reckless.

        • JeffD says:

          “the 99% should be really angry about what the Fed has done the past 22 years.”

          Sadly, Congress and local governments have done more damage than the Fed.

        • CB says:

          Mike R, the sad truth is that half the people that vote on election day won’t get mad or angry because they don’t even know what the FED is. The other 40% only vaguely know about the FED, but couldn’t tell you or me what they do or what their purpose is. I am probably being generous when I say only about 10% of those who voted on election day two years ago could have an intelligent conversation about the FED and their purpose. Next time you are out and about or at the work water cooler, start talking with someone about the last 14 years of damage that QE and interest rate suppression has created. How it caused massive asset inflation and wealth disparity. Tell them how QT and interest rate hikes are on the right track to get raging inflation under control…and look at their faces for the deer in the highlights look…and if one of them is brave enough, they will ask you what QE and QT is, and when you respond with Quantative Easing and Tightening, they will reply , ” never heard of it. ” And, that is rudimentary stuff compared to the depths that Mr. Richter routinely dives into. The average electorate on both sides of the aisle are too naive and ignorant to ever get mad and blame the FED for anything.

        • cb says:

          CB is not cb

      • Warren Icahn says:

        Hi Wolf,
        To your last point, how do rising yields turn savers into spenders?
        Wouldn’t it be the other way around?

        • Wolf Richter says:

          Ask the retirees that counted on the cash flow from their savings, and when that cash flow dried up, starting with QE and interest rate repression in 2008, they cut back their spending. As cash flow improves due to higher interest payments, they’re going to spend this cash flow because that’s what it is for.

          This was one of the big negative economic effects of interest rate repression since 2008 on consumer spending, and why the economy recovered only so slowly — with at the time $8 trillion in savings not generating cash flow from interest anymore, and that money that stopped flowing couldn’t get spent. This has been well-documented.

          Everything is connected in an economy. If you start manipulating one thing in one corner, there are counter-effects somewhere else.

        • Anthony A. says:

          Warren, this retiree who has not been able to make a plug nickel on our savings for several years now finally has the opportunity to buy 4% brokered CDs and treasury bills and make a few bucks that will go a long way in paying bills and buying much needed dry goods.

        • jm says:

          Amen! To Wolf and Warren’s replies.

        • jm says:

          I meant, “To Wolf and Anthony A.’s replies. Careless.

        • The Real Tony says:

          I spend a lot more when interest rates rise. So do many of my relatives some of who are in the class of the .01 percent.

      • Mark W says:

        A very sincere thank you, Wolf

      • Depth Charge says:

        “In other words, the Fed can keep taking down stock and bond prices, to unwind the insidious damage it has done, and very little will happen to the economy.”

        It’s too bad there are circuit breakers to prevent something like a “flash crash” to zero on the DOW. Imagine all of a sudden the entire DOW is worth zero for a few minutes. The “little guy” needs something like that – you know, a win for once.

        • Auto-outsider says:

          I disagree. With each of the last crashes, those in charge gave themselves more power. I think the solution lies somewhere in corporate governance and also how executive stock compensation is determined and taxed. Not just income tax.

        • historicus says:

          The central bankers allowed excesses to become pent up. They constantly attempted to iron out natural business cycles, corrections that flush excesses and leave markets and economies healthier.
          Thus the excesses become large and the eventual flush becomes systemic threatening.
          Enter the central banker to cure the problem, and in so doing, accrue more power….again.
          The Fed became more powerful after 2008…..they became the most important thing to the markets.

      • Tight Purse says:

        @wolf “ the Fed can keep taking down stock and bond prices, to unwind the insidious damage it has done, and very little will happen to the economy.”

        I’m an avid reader of yours but the above sounds like it was rushed. The economy is going down, as you explained in many articles about the housing market, for example. IMHO this return to reality is badly needed so, unpleasant as it is, the severe downturn is very healthy. But it will impact everyone.

        If I misinterpreted your comment perhaps you’d like to post a piece on this topic, it would be very interesting.

        • Wolf Richter says:

          I’ll give it a shot right here. These two things are not the same: asset prices and the real economy (jobs, GDP, etc.). The stock market decline will not contribute significantly to any economic slowdown. QT is reducing asset prices just as QE inflated them, and that doesn’t impact the economy much. Sure, there’s some impact, but it’s not much.

          In terms of the rate hikes, yes, they will eventually have enough impact on the broader economy to reduce demand – at least that’s the goal — so that lower demand changes the pricing dynamics and therefore brings down inflation.

        • TonyT says:

          @Tight Purse,

          Think about what QE did for the real “main street” economy – basically nothing (and, as Wolf argues, it did a lot of harm to retirees, and such). So why should reversing it with QT do much damage?

        • Tom S. says:

          Seems to me like a bit of an inverse correlation between the fed balance sheet assets and U-6 unemployment, although chicken or the egg situation may apply.

          https://fred.stlouisfed.org/graph/?g=UerL

      • Mark says:

        “You’re not seeing the good news right in front of new” (“you” ?)

        Just think, at this rate in 200 years we’ll approach a fair and open society! Free of multi-millionaire predators. Yeah ! I can hardly wait.

        • Poor like you says:

          Just about in time for Star Trek!

        • Seen it all before, Bob says:

          Elon Musk has to invent the Warp Drive and then we will follow the Star Trek storyline.

          The Vulcans will save us!

      • MitchV says:

        I’m sorry but I can’t see the good news in a correction like this. Yes the top 10 percent will have their frothy wealth chopped down a bit, but how does that help the bottom 50 percent? Having a few points of yeild is pretty irrelevant when you have nothing to invest.

        • RobertM says:

          Those that “invest” by going to work every day, and work there asses off for a paycheck to paycheck lifestyle, may finally after 40 years get some leverage for higher pay. They need it, and deserve it.

        • Flea says:

          The wealthy don’t loss money ,they short the market and make more money,by the way fools your 401k created this mess .stop giving them your labor to steal.VERY few people will get any money back

        • Seen it all before, Bob says:

          The bottom 50% will have rapidly growing wages and higher secure savings rates. Not all of us poor people are are speculator/gamblers in the equities/crypto markets. We missed out.

          In other words, we will return to normal.

        • Flea says:

          The top 10% probably sold or shorted there shares .making even more money

        • Enlightened Libertarian says:

          Rich people have assets. Lower middle class and poor people have jobs. A recession that lowers home values is going to increase unemployment. What good is a 25% drop in housing prices if you don’t have a job and can’t get a loan?
          [Also 8% construction loans kills new construction].
          The solution to a housing shortage [or unaffordabillity] is too increase the supply.
          But you can’t build a house without getting government permission. Government controls the supply of housing.
          [Of course another solution is to reduce the demand by not subsiding people to have kids but no one ever, ever, ever wants to talk about that-world population almost 8 billion people and racing towards 10 billion].

        • JeffD says:

          “how does that help the bottom 50 percent?”

          In the short term, they feel some pain. In the long term, they do better off. The essential goods and services needed today will still be needed after everything goes bankrupt, so the bottom 50% will still have a job after the bust. What will change is that the cost of living will fall as the price of home, auto, and medical fall substantially. Overall, expect a better standard of living over the long term.

        • elbowwilham says:

          How many of the bottom 50% are involved in the housing market in some way? I remember in 2009 a lot of those people lost their jobs.

        • The Real Tony says:

          Simple they didn’t lose anything so they become richer.

        • rick m says:

          Talking about the short term and long term effects on the ragged people is bull. There’s no long term when you’re broke. What can we pay for today? tomorrow never comes.
          Laying low, seeking out the poorer quarters where the ragged people go.
          Something tells me I’ll have company.

      • Arya Stark says:

        “Very little will happen to the economy”

        Not sure how you make that claim. If the economy roared due to these policies shouldn’t the economy contract when you reverse them?

        Higher rates will kill zombie companies thus increasing unemployment. Many of these are hi-tech companies that pay high wages.

        While the top .1% lost 12 million, that is a rounding error for them. The 50-90% crowd absolutely depend on the stock market and asset prices, especially when it comes to their 401K. They also do most of the spending in this country. If prices of goods and services remain elevated, these folks will be hit hardest as their wealth declines thus reducing spending which cascade to reduced profitability.

        I agree that it is a good thing to reduce the very damaging wealth disparity. But this adjustment will be the middle class who were told assets only go up and suckered into depending on that notion.

        • Gattopardo says:

          Arya,

          “If the economy roared due to these policies shouldn’t the economy contract when you reverse them?”

          The economy didn’t roar. We didn’t see any 5-10% GDP growth, even including the government spending component. China has routinely had higher growth than then US did throughout this era of super easy money. ASSET PRICES roared. Totally different thing.

      • The Bob who cried Wolf says:

        The working class will get screwed like we always do. Even when the fed comes in with all kinds of aid for the working class we all know it’s basically gonna be a fat cat bail out, and will be nothing more than the same sort of meddling that got us here in the first place. The correction is needed, there’s no doubting that, but the pain it’s gonna inflict is unimaginable to virtually everyone living today. In 2008-2010 I remember my mom saying that we all had no idea what a real downturn was like (she’s the silent generation so remembers the depression). Now she’s watching this one unfold and is very concerned.
        I’m sure there’s good news somewhere in this, but certainly not for the masses. They will continue to work their asses off, but only if there’s jobs to work at.
        On another note, regarding the bottom 50, my guess is that their net worth is up only because of the used car market driving up the costs of their only main asset. That market is starting to tank, too.
        There’s a lot to digest in the numbers above, and yes, some is good, but the bulk of it is bad.

      • BigAl says:

        I’m seeing what you’re seeing, too, but I think you should look a move or two further on the chessboard.

        Wealth Management strategies have moved towards “wealth preservation”. That’s no longer bonds – it’s hard assets. Thus, as the prospect of paper wealth losses grows – the lure of hard asset acccumulation (e.g. real estate, rent-bearing housing) really only seems likely to increase.

        I’ve provided a list of at least 3 reasons why the Fed. might still pivot that have little to do with inflation. I won’t restate them here, except to say that I think some co-ordination of monetary policy with the UK, EU, Japan (and others) seems inevitable now that the dollar is off to the races at the expense of the currencies of those other countries.

      • Spod Gaju says:

        He Wolf, speaking off damage, what do you think of this chart?

        https://fred.stlouisfed.org/graph/fredgraph.png?g=Uebh

        For sure this will hurt the asset holders of housing…housing prices have far out run disposable income.

      • Augustus Frost says:

        At some point, declining stock prices and tightening financial conditions will lead to millions of layoffs. C-suites aren’t going to sit around forever and watch their stock price crash while doing nothing.

        This is the biggest asset bubble in history, not even close. A continuation of both the dot.com bubble and pre-GFC, it’s lasted over 20 years. If the credit cycle turned in 2020, it will later turn into the biggest bust in history too.

        There has never been a major bear market in history without a recession or economic depression, not even once. All economic contractions in my adult life (since the 80’s) have been brief even if sharp due to government distortions.

        There is one coming up and soon which won’t be as brief or shallow.

      • The layoffs are aimed at white collar workers. Blue collar folks are still in demand. It’s a good time to be a working person.

        • Publius says:

          And the laid off white collar workers cancel their planned home improvements, dine out less often, buy fewer clothes, etc., which reduced demand for blue collar employment.

      • Harry Houndstooth says:

        Pure wisdom served up fresh daily.

      • Valerie from Australia says:

        I must admit, I was a encouraged by this article after months of worrying about a world-wide deep recession / even a depression. If the Fed can manipulate the money supply and finance so that the stock market, which has enjoyed enormous gains for years, is deflated whilst the middle and working classes aren’t thrown into poverty, THAT is a good result IMHO.

        The “conventional wisdom” my area of the middle class has been sold is that our retirement funds are all invested in the stock market. So if the stock market declines greatly, so do the retirements and pension funds of every day Americans. Is this just a obfuscation sold to us by the 1% to make us believe that a bloated stock market benefits all of us? I get that big declines in the stock market hurt the ones who own the most stock but because of low interest rates, the only place people like me felt they had to save for their retirement was to invest what little they had extra in the stock market.

    • JeffD says:

      You can not overestimate the amount of damage malinvestment of capital has done to both the economy and to society. If prime rate can stay at around seven percent for the forseeable future (once it gets there), the ability for economic distortions to dominate and permeate the world we live in will effectively disappear. There will be little real ability for fake businesses to form, or for “sick” businesses to undercut prices of “healthy” businesses and drag them down.

  4. BuySome says:

    Wealth DispAIRity Monitor might be more appropriate these days considering what is being valued and how hollow those promises of forking it over are proving in certain sectors.

  5. Tbv3 says:

    I believe the increasing disparity of wealth is a function of the increasing leverage in the economy that began in the mid-1980s.

    The ratio of total US debt (public & private) to GDP has increased from its longterm average of 1.5x to its current 3.7x — more than doubling over 40 years, with the gains accruing to those who were most levered.

    Several WSJ reports after the GFC pointed out the biggest losses in net worth befell private-equity & real estate titans.

    The trade has worked this way:

    The political Leftwing, advocating on behalf of poor people, extolls policies intended to create tight labor markets, which invariably resulted in political backing for interest-rate suppression and “Greenspan’s Put” — a godsend for the highly geared.

    Never forget, in the fall of 1990 Citicorp had weekly auction-rate preferred stock outstanding costing it 16% — that they could not refinance more cheaply. At the same time S&Ls, and the LBO/RE – operators like Robert Campeau and Donald Trump were dead in the water.

    But they were all “saved” when Greenspan cut the FFR from (almost) 9% in 1989 to 3% by 1993 — a move aided & abetted by the Left because it would help the downtrodden.

    Ask yourself: Is our world better off today because policymakers saved Citicorp and LBO/PE operators (Donald Trump, Henry Kravis, Leon Black, Schwarzman, David Rubenstein, et al.) from certain destruction in the early 1990s?

    I think not. But the gains that accrued to the highly leveraged over the last 4 decades never would have happened without the intellectual ground paved by New Keynesians, most prominently James Tobin (Yellen’s diss. advisor.) See his testimony at the Clinton 1992 Economic Summit on youtube.

    For the last several decades many “mini-Trump” wannabes have sought to achieve “intergenerational wealth” by buying houses with little or no downpaymet.

    As Aeschylus wrote in the Oresteia : May it turn out well.

    • Wolf Richter says:

      FYI: Wealth disparity “decreased” so far this year.

      • Syd Glover says:

        Wolf
        Thanks again for a timely set of facts.

        One thing I would like to point out that many of the comments miss is that voters repeatedly choose candidates who lie and hurt them, not because of paid lobbying, but psychological tendencies is to side with the rich

        People want to look and feel rich. Look at all name brands endorsed by the top 1%. Celebrities and sports figures make obscene wealth and no one complains about them.

        • phleep says:

          It is just like casinos advertising the rare big payout: the manipulation of the bait of this culture’s wannabee “star system” lures the votes. The votes are vital, so the very few very rich have a keen interest in media that can manufacture a narrative to attract the wannabees to slit their own throats. Hence a cult of bait-and switched people ready to die for a guy whose main accomplishment was cut taxes massively to the top dogs, while debt kept towering and a phony stock market was fed (more bait). And DC is a particle collider where money converges massively.

        • Happy1 says:

          And the left consistently promotes higher marginal income tax rates as a panacea to cure inequality, when they know that this affects the upper middle class and small business owners but leaves the billionaires untouched. Both parties are at fault.

        • HowNow says:

          Happy 1, you’re blaming the “left” for taxing the wealthy to reduce inequality.
          So you must have a better idea. What is it?

  6. AdamSmith says:

    It seems the whole economic game is now oriented towards knowing what is to come in order know what moves to make. Data science focuses on making it easy to predict while most have no clue until it is done and even then they do not know what really happened. There are so many data points to achieve this and the most revealing was Robin Hood selling data on the “sardines” to the sharks and whales ahead.

    The new investing reality seems to have less and less to do with any of the concepts taught in the last 50 years. How they tell you it is and how it really is breathless treachery…. Every man for himself and eat what you kill. Amazing to witness the permutations constantly changing….

    This is happening in every sector of the economy and is behavioral economics at its finest.

    I had a highly successful run with military surplus. I also was able to manufacture and compete with China on one product and even then I could not get a foothold except in the wholesale market which was not online. After 10 years of Amazon, EBay and PayPal I finally understood why China was able to prevail as they were chosen and I was not. The minions who are effectively serfs to the online system might make enough to call it a business but it would and could be shut down in a moment as I witnessed many times. Brutal at best.

    Really, most here seem to be older and still believing in and operating in older system with some so savvy that it may work to some degree but the the elephant in this room is the reality that most are dinosaurs still hunting by the old rules. Wolf continually points out the treachery and foolishness easy to see and some not so easy to see.

    Living in the outrage makes it hard to know what actually one might evolve in this truly dog eat dog reality unfolding before us.

    What is the future for those here in the few remaining years?

    • Motorcycle Guy says:

      AdamSmith,

      “What is the future for those here in the few remaining years?”
      Based on history, I don’t see much hope for improvement in the (former) United States of America. Therefore I have taken the same action that my German grandparents did in the 1920s when they left Germany for America.
      I have “bugged out ” for a country where I can grow my own food, I have a fully paid for house and the people are wonderful and speak English.
      I wish you well.

      • Ken says:

        I’ll come and join you. Which country am I buying a ticket to?

      • phleep says:

        There is no “outside.” There is no panacea immune from global linked (and fast-acting) forces, be they financial, climate, etc. Every person in the world thinks they can find this hidden patch, even as every other is beating the bushes to crowd in there. Good luck.

      • Dan says:

        Your parable breaks down when your German grandparents didn’t “bug out” to a country that spoke German in the 1920s.

  7. Enlightened Libertarian says:

    I just want to point out that this train wreck took place under both Democrats and Republicans.
    Actually, more like a plane wreck that crashed into a heavy population of innocent bystanders on the ground.

    • Motorcycle Guy says:

      E. L.

      Consider this is big “Thumbs Up”.

    • The Bob who cried Wolf says:

      What happened in Italy is about to happen here.

      • Gattopardo says:

        What? That we’ll elect a moderate leader with a relatively volatile/fragile coalition, who will then be grossly exaggerated as “hard right” and “extreme”?

        The US would be lucky to have a leader like Meloni.

      • rick m says:

        Italy is nothing like the US. Businesses and individuals there have always lied to Rome. And now Brussels.
        Here it made economic sense for big business to co-opt the government, because it would be around long enough to pay them back with interest.
        If you mailed a bribe in Milan in the seventies, the government might be out of power by the time your bribe reached Rome. Italy has always had a few too many mouths to feed for what comes out of the Italian soil. That’s why they came here. Rich Italians hide their money and families in other countries. Rich Americans mostly hide out here. Love the place, but it’s been a mess since before the visigoths moved in. Hope Georgia Meloni lasts, but it’s unlikely.
        “Tanti nemici, tanto onere”(Matteo Salvini).

    • phleep says:

      So your recommendation? Anarchy? Self-policing? (Sound of uproarious laughter.)

      • Enlightened Libertarian says:

        Why can’t you have fiscal responsibility in an enlightened democracy?
        Why do I have to choose between a corrupt two party system or a dictatorship or anarchy?

        • cb says:

          What Libertarian wants a democracy?

          enlightened democracy? is that the democracy that embraces all the Libertarian values or lack of values for that matter?

        • elbowwilham says:

          “A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.”

        • cb says:

          @ elbowwilhelm –

          you think maybe it’s funny money that kills the deal?

          without funny money and borrowing of such, it is very difficult to have loose fiscal policy.

          never trust the bankers ……………………
          they want something for nothing
          and your productive capacity is want they want

  8. ReaderInJapan says:

    Thanks for your reporting Wolf, great work as always! Just noticed a small correction needed…
    “Next 40%” (purple): $768,000 (-$16,500; -2.1%) –> should be “(green)”

  9. Kevin W says:

    I have every confidence that the selloff in equities and bonds, and the resulting far higher interest costs for lending is going to severely impact the UHNW households, I’m far less sanguine that the damage will be contained there.

    A household that is at $160 million and sees $12 million in net worth? I doubt it will impact them much in a nuts-and-bolts way. But when tens of thousands of people (so far) are walking away from new home buys because of skyrocketing mortgage rates, that impacts the Main Street economy in many, many ways.

    The founders of FB and Google have more money than God, and are responding by . . . . putting a hard freeze on new hiring, and announcing layoffs. The guy who cleans Zuck’s pool still has a job, but anyone who thought they were going to be laying carpet or bricks for FB’s new offices won’t be.

    I’m not much of a trickle-down guy when economic times are good. But I’m very much a **it-rolls-downhill guy when things go pear-shaped.

    • The Bob who cried Wolf says:

      Over the spring and summer in our neighborhood there were at least 10 landscape installs. There are currently zero. This was the main indicator I missed when the whole thing popped in 2008. I distinctly remember a friend saying the last install he did was for a referral I gave him in 2008. His business closed shortly thereafter. Since then I’ve made myself pay attention to these indicators, anecdotal as they are. Any one of us can walk around now and count the amount of houses being landscaped, painted, stuccoed, new windows, and even roofed (most roofs in need of replacement actually have five years to go). The masses of work trucks zooming up and down the streets has plummeted. Aside from the roof, most things we do to our houses is elective and can wait. The money has tightened big time in this type of construction. What’s scary is that interest rates are no where near what they were in the 80’s and we all know we have a long way to go to tame inflation. Everyone knows that 8% is a total bs number. Inflation of what we need is way higher.

      • Anthony A. says:

        Independent contractors have been knocking on my door asking if I need my driveway power washed for $125.00. Then the tree guys are leaving their business cards at my door also looking for work. It’s getting slow around here too.

      • AdamSmith says:

        I have been a builder in SoCal for many years. I have three times gone from nothing to hefty net income then back to nothing then on to other things.

        I am waiting for the construction prices to drop when I see the young studs with 100K trucks and huge mortgage payments I know this will be soon….

        In a rolling fashion over the next few years there will be all kinds of tools, equipment, and vehicles being sold way below market prices.

        It is my turn to get things done for nothing and I welcome watching the young turks “get some” reality training like I did….

        Problem is the government keeps these people from facing reality but it is clear to see it cannot last forever so I would say this looks like it will be a very hard and fast landing affecting most people at all levels of the market.

        I have no hope in the current economic policy and am unshakeable in believing the outcome of Capitalism is always superior to the outcome of socialism.

        • Sams says:

          That capitalism always privide a superior outcome to socialism may not always be true.

          Capitalism may precede, in forms like crony capitalism, feudalism and corporatism. If there is a really hard landing and power structures stay intact, be not surprised if capitalism have turned corporatism. Captialsm in an old wrapping, but facism good as ever…

    • Bobber says:

      You make a good case for progressive tax rates and taxing extreme wealth at higher rates.

  10. Petunia says:

    As someone solidly in the bottom 50%, I’m still amazed by the resentment against the stimulus checks that merely refunded $5K in tax money to working class families. The real stimulus money never reached the bottom.

    • Tight Purse says:

      Refunded? How much federal tax are those in the bottom 50% paying? Redistribution is more like it. Also, the federal budget has a deficit, year after year, so this added to the national debt. Yes, I resent that and so should you.

      • Wolf Richter says:

        Tight Purse,

        There’s much bigger stuff that you should put on your resent list. The forgivable PPP loans that just about everyone got, and the huge amounts in bailout money that the airlines and other entities got in 2020, that were far larger than the stimulus checks. And you should resent that the richest companies – semiconductor makers such as Intel, many of which wasted billions of dollars on share buybacks – are now getting $50 billion. And that automakers are getting billions via all kinds of incentives in the EV area (some of it in tax credits to consumers which will instantly be eaten up by the automakers in form of price increases). And the monetary policies that have largely contributed to or caused this inflation that is now wreaking havoc on the economy.

        • Rosarito Dave says:

          Hey Wolf, as a recovering alcoholic/addict, I have learned that RESENTMENT is the #1 offender leading to relapse. :-)

          Therefore, while I shake my head at the sheer absurdity of these giveaways, I choose to see my personal powerlessness over these people/institutions and just TRY to find what my personal solution is, by trying to SEE the reality of the present situation.

          I’m a glass half-full sort of guy, who’s usually pretty damn grateful and content with my lot in life, having somehow survived my former lifestyle and now living on the beach in Rosarito, MX (BTW, I’m probably somewhere near the 40th percentile in net worth, MAINLY due to having bought and paid off a house in San Diego in 1999 and sold it to move here in 2018).

        • Tight Purse says:

          I do resent each of those, and more! Too depressing to mention them all. Maybe we should all wish for a gigantic crash that will bring the end of most such nonsense.

          Cheers!

        • phleep says:

          High five Rosarito Dave. Some guys I went to high school with are in that crew, and the survivors definitely are the sober ones. That is a special breed. Those tools for life are amazing.

        • Enlightened Libertarian says:

          1000% agree.

        • Enlightened Libertarian says:

          1000% agree with Wolf.

        • John says:

          Precisely.

        • Antoine says:

          Don’t forget that a house earns more by just sitting empty than I do from my labor. My house makes more money than me.. Peak insanity?

      • Flashman says:

        What we should resent, is the money wasted on the military industrial complex.

        • Bobber says:

          Don’t forget $50B or more of unemployment fraud, plus $300B of wasted PPP handouts to fraudulent businesses, as well as amounts wasted on businesses that did not suffer revenue loss during the pandemic.

          Rewarding fraud is the worst use of money.

        • phleep says:

          Flashman,

          Without war/welfare state, this would be a completely different economy and planet. I doubt any of us can even begin to imagine it. It has mortal hazards too, but is so counter-factual it is fiction.

      • phoenix says:

        Bro, nobody cares about the national debt at this point.

      • Valerie says:

        Tight Purse:
        What I resent is the massive amount of tax dollars spent on waging war in countries all over the world so that multi-national corporations can steal their natural resources for a song of a price – and the massive amount of government debt due to bailing out the stock market and salvaging the “too big to fail” banks. What I don’t resent is some piddly amount that allows the working poor, who probably don’t even have health insurance, to have some kind of income so they can feed their children, pay rent and pay their bills.

    • drifterprof says:

      I didn’t perceive much resentment about helping working families.

      There did seem to be a lot of criticism about 1) youngsters playing the unemployment bennies and stimulus checks to fund a life of Riley, and 2) employers defrauding the government for tens of billions.

      Like with foreign aid, the United States is grossly incompetent at implementing programs to help people in real need without blowing most of it on grifters.

      • phleep says:

        If you bring gum, you have to bring it for everybody. Some will squander it. Welcome to Earth.

        • phleep says:

          The payouts were on such a short-term, emergency basis, it would be impossible to meet the standard you impose. Talk is cheap.

          The greater moral hazard and failure was the situation going in, the overall laxity that became much worse when an actual (foreseeable) shock of some kind happened, and the extended printing spree into 2021.

        • JeffD says:

          The $20,000 in (student loan) debt relief certainly wasn’t distributed to everybody. A large chunk of it was distributed to people who live and work near Washington, D.C.

        • JeffD says:

          Highest Average Student Loan Debt per Borrower

          1. Washington, D.C. ($55,508)
          2. Maryland ($43,619)
          3.
          4. Virginia ($39,892)

    • Nissanfan says:

      There should be no resentment against the stimulus checks, but against people that got excited about those checks and at the same time failing to notice that they were getting pennies on a dollar of new national debt created in the name of the coronavirus aid.

    • Einhal says:

      I’m not going to speak for others, but I resent that “stimulus” because most of the lower income households don’t pay anywhere near that much in taxes to begin with. Someone who pays $800 in taxes and gets $8,000 in “stimulus checks” is not getting a “refund.” They’re getting “free stuff.”

      • drifterprof says:

        “The official reasoning for QE and interest rate repression is the well-known but dubious ‘Wealth Effect’ which is the monetary equivalent of trickledown economics, where the Fed tries to make the already wealthy far wealthier by inflating asset prices with QE and interest rate repression, based on the doctrine that these households will then spend some of this newly gained wealth, which will then trickle down….

        What we got instead of the wealth trickledown is a huge bout of inflation…”

        So, that somehow doesn’t register much larger on your sensitive resentment meter?

        • Einhal says:

          I don’t know why people continue to think this is a compelling argument.

          “People shouldn’t get free stuff at others expense.”

          “But, but, but other people got free stuff too and you’re not complaining about that!” HAHA GOTCHA!

          “Uhh, actually, I have been speaking out forcefully against QE for the past 12 years, and I opposed the PPP loans at the onset, because they didn’t require any proof of lost income. Try again.”

      • drifterprof says:

        Einhal – you spew about resenting lower income households not paying much tax. But many of the largest corporations and oligarchs pay ridiculously little tax. That’s the core rot in the system. Resenting small time grifters is a disingenuous diversion.

        It’s not a game of gotcha. It’s facts. Try again.

        • Einhal says:

          Reading comprehension not your strong suit, eh?

        • drifterprof says:

          ” I resent that “stimulus” because most of the lower income households don’t pay anywhere near that much in taxes to begin with.”

        • Swamp Creature says:

          driftwood,

          I agree with Einhal. Everyone should pay their fair share even low income households. Everyone should have skin in the game. The problem now is too many freeloaders. They should go back to work and take a second job if necessary and stop whining.

        • HowNow says:

          Lyndon B. Johnson:
          “If you can convince the lowest white man he’s better than the best colored man, he won’t notice you’re picking his pocket. Hell, give him somebody to look down on, and he’ll empty his pockets for you.”

        • NBay says:

          How Now,
          Good quote!…..I figured it out on my own, but never knew LBJ actually said it. When he got his “fairness” laws passed, I do remember he told his celebrating staff, “What are you all so damned happy about, we just lost the South forever”. (the Dixiecrats all went GOP, for the same promised reason, and got it.

          How do you think Jerry Springer and his ilk got rich?

      • JeffD says:

        I assure you, the work-output-to-grift ratio is *much* lower among the poor working class than the rich working class, in aggregate. Poor workers often put their health and life at risk, while rich “workers” spend their day talking on the phone, or moving a paper/file from one place to another after a few annotations.

        • Happy1 says:

          There are dishonest people in every income spectrum.

        • Einhal says:

          JeffD, society has definitely prioritized things poorly, but the fact is, a higher percentage of people can dig ditches than can program high-quality code. How much people are paid has a lot to do with the scarcity of their skills, not danger or “worth” to society.

        • JeffD says:

          I get that. All I’m saying is that the continuous indirect dividends the working poor pay to society are many multiples of the $5K in stimulus check they received. Not sure I can say the same about the subsidized wealthy.

        • Augustus Frost says:

          The primary reason there are rich grifters is because every single time in history without fail, they use the power of government to plunder the populace.

          The ignorant share the fantasy that the common man can “turn the tables” on the elites but it’s never happened more than temporarily. Any common man elites replacing the old ones simply resume the plundering.

          The only way to limit elite plundering is to limit the scope of government but then, the rich grifters can’t be plundered either.

        • HowNow says:

          AF, your point is that Government causes the rich to run the table and get richer. A quick look back in history shows the opposite: the serfs, slaves, untouchables have been at the mercy of kings, emperors, royalty, the clergy for thousands of years, rulers that actually owned the lower class (which was almost everyone). Rule by government is truly a recent phenom and, with more ninnies thinking and echoing thoughts like yours, we’ll be back to fascism (rule by oligarchs and dictators) in no time.

          Freshen up, AF. Get a cup of coffee. Some of your ideas need more caffeine.

        • NBay says:

          How Now,
          Well said….again…..stick around. Democracy is hard, very hard, but it beats fascism, which is what corporations are, little fascist states existing within an attempt at Democracy, benefitting from it, yet preferring it went away entirely.

          They have become ENTHRONED, as Lincoln said/warned

    • Seen it all before, Bob says:

      The only resentment I have with stimulus checks is that they were paid out to families making 200K with jobs. I believe that it should have been a safety net below a much lower income or tied with unemployment.

      I do resent the fraud with forgiven PPP loans. Some business owners paying themselves millions in salary and buying expensive cars and houses.
      Of course, they also paid their minimum wage employees in order to be forgiven.

      • Einhal says:

        Agreed and agreed. The fact that retail sales skyrocketed right after the stimulus is proof positive it was poorly allocated and distributed.

        It was marketed as keeping struggling people afloat. Instead, it went to people to go splurge.

        • bulfinch says:

          Wasn’t that splurging designed to have a net-healthy effect for local economies that are better than 70% consumer spending-driven? In that case, why should you care how people below the green line spent their stimulus checks? And can we stop calling them stimmies, like they were some kind of cheap club drug? It was the fond scraped from the bottom of the pan and spread thin across the poor and working classes.

          And while we’re at it, let’s retrain our crosshairs away from the kid who bought a new Honda Civic and focus them solidly onto our saviors, the “job creators” and their newly outfitted 25K sq ft Armageddon Bunkers built on their private islands staffed by underaged runaways. This is not just a question of larcenist scale, either. One is US and the other is THEM.

          I was in line behind a little old lady buying a banker’s weight in various meats from the deli a few months back; a shocking amount of meat. I watched her pay with her WIC card and then proceed to roll her cart out to her food truck in the parking lot. A lot of slobs would bridle at that kind of thing, but I thought it was a clever maneuver. It was a good hustle.

          We work-addled Calvinist weirdos reflexively bridle at the idea of handouts or free lunches — ok; but again, the engine of our economy is based on spending and wealth effect is the active ingredient in that scheme.

      • bulfinch says:

        It’s probably good policy to ensure everyone gets a slice, even them what don’t need it — just to deprive anyone who might’ve delighted in the narrative of water carriers v water drinkers.

        Meanwhile, lambasting the proles for getting a bit of crust tossed back their way seems a little bit low-brow. There’s a parable from where or when I don’t recall, but it goes something like this: a genie reveals itself to a man and tells him that he will grant him any wish his heart desires with the condition that the man’s neighbor will receive double that of whatever he wishes; at this, the man wishes his left eye to be removed.

        It’s all a nasty, brutish hustle – esp for anyone at/below the green line – and then you’re dead. I salute anyone who can sneak past the reaper by any means available. As with the path to hell, survival & the pursuit of happiness doesn’t map in a straight line, either.

    • Old school says:

      It was a gift from your future. In hindsight the prudent thing to do was to early buy necessities before inflation kicked in from the money drop.

    • Depth Charge says:

      I didn’t like the stimulus checks, Petunia, because I said they’d be inflationary, and I don’t like the government just handing money out to anybody, myself included. It wasn’t a tax refund because people who didn’t pay taxes got them, too. That being said, those were the least of my gripes.

      The PPP “loans” (let’s call them financial windfalls, what they really are) were, BY FAR, the most outrageous stunt that CONgress has ever pulled. Almost a trillion dollars was essentially handed to the people who least needed it – wealthy business owners. And then there are the fraudsters who stole hundreds of billions through essentially zero oversight.

      Next, the “extra $600” per week in UE bennies was equally disgusting. Never, EVER should somebody earn more on unemployment than they did at their job, under any circumstances. And this went on for over 1 1/2 years.

      I know a woman whose late teens/early 20s daughter was making less than $200 per week part time. They let her go in 2020, and she started getting that “extra $600” plus her regular UE check. The first thing she did is went and bought a brand new car – a little Honda Civic or something. Her mom didn’t love the idea, but that’s beside the point.

      The government essentially started buying unemployed people brand new cars and toys and all sorts of things as a result of a public health crisis. And let’s never forget that this was ON TOP of the rent/mortgage eviction/forbearance. So, these people effectively saw $4k to $5k per month of financial windfall, for doing absolutely NOTHING.

      It is beyond outrageous and morally reprehensible. And now they wonder why there’s inflation and companies can’t hire workers? Many small businesses are gone forever because the PPP loans favored wealthy insiders, and then the people who would normally apply for the jobs were sitting on the couch collecting their windfalls, uninterested in working anymore.

      • Einhal says:

        Well said. And when the eviction moratorium was finally listed by the Supreme Court, idiots like Kathy Hochul went political and said it was “cruel.”

        These people are despicable.

  11. Xaver says:

    We would need quotas in Congress according to these wealth brackets and in other parliaments too of course.

    • Escierto says:

      One simple way to manage this would be to make anyone over the age of 60 eligible to serve in any office. Enough with the gerontocracy! I am 68 myself but I am sick and tired of being ruled by rich white old codgers who don’t give a d*** about the future.

      • Escierto says:

        That should be ineligible! Darn autocorrect!

      • drifterprof says:

        lol… you don’t think there are thousands of young men and women that would jump at the chance of getting access to dark money for acquiring wealth and power?

        • Escierto says:

          Fine. Better that than that the current geriatric oligarchy! I absolutely loathe old people because most of them care nothing about future generations. For me my grandchildren are the loves of my life!

  12. Digger Dave says:

    Wow, my fellow Americans are struggling, that’s my read. Our personal story follows. My interpretation based on Wolf’s explanations is that we’re doing extremely well based on our income, but we somehow are made to feel by society that we’re not keeping up based on what we see. Glad to have this reinforcement of knowledge instead to show the truth.

    On the spreadsheet where I track our personal wealth, I never increased our asset values to post-pandemic pricing because we had no intentions of selling our real estate and because I never believed the gains were real or sustainable (thanks Wolf!). And even though we are both in our early 40s, and even though neither one of us have any inheritance or ever had an income (excluding capital gains and real estate income) higher than $50k in a year, somehow by this chart we’re in the top 30%. We live modestly, but not miserly. We have a kid and pets and hobbies, take European vacations to see distant family, eat well, go out for dinner and things like that. But we also live rurally and have a house that cost us just above $100k that we paid off a while back. I’m a tradesman, work on my own house, and also the household mechanic (late model cars bought at auction or on the cheap through Craigslist always, never having paid more than 25k for a vehicle, which was a work truck). We never found it hard to invest 40-50% of or earnings per year. We own no stocks besides whatever minimal amount my wife puts into her retirement fund to get the match.

    So my read on this data is that the bulk of American households, based on our personal situation, are bad at money management. I need to stop looking at their overpriced cars, houses and toys and equating that with success. I guess you can’t see the debt attached to it.

    FYI all of our excess income has gone into real estate, and the same type – small apartment buildings producing about 20% ROI on cash invested, with working class tenants and respectable income (but not exorbitant), 100% of which goes back into the properties. Many of our tenants, about 50%, make more than we do. We had just gotten up to the pace where we could start buying properties more frequently (closed in March 2020 on the last one), then the pandemic happened.

    Hopefully during the next crash we will focus on shoring up the bottom for necessities and will ignore the needs of the top. And hopefully a more fair society will emerge.

  13. DanR says:

    Can the 0.1% collectively even sell off much of their stock in this decline without taking a big price hit? Or even sell off a second home? I don’t see the markets being liquid enough to allow for that.

    • drifterprof says:

      Well, if a .1 percenter has owned the same DJI stocks for the last two years, s/he is still, on average, up 6%. So maybe a bitter pill to swallow, but no big price hit.

    • Brant Lee says:

      I wonder what the real strategy is now for the Zuckerbergs and such. Have they already borrowed against their stock when rates were below 1%? It seems they have to forever hold a major portion of their company stock, what would it look like selling off your company? But can they just watch their precious wealth go down the drain?

      Unless of course you are the Musk man. One day he is in court being sued for a 46 billion tab to buy Twitter. The next he’s joyriding in his spaceship. It’s all good.

      • Flea says:

        Musk is building rockets to go to mars @97 million apiece,taxpayers got it no worries

    • Flea says:

      Of course they can sold out Microsoft around 16 months ago then price of stock is down ,but it’s not a rigged game. Or musk taking profits hahahahaha

    • Augustus Frost says:

      No, they can’t collectively sell without crashing the price of whatever they own.

  14. NAS says:

    Terrific article, thanks
    I’d like to dig deeper in to the data.
    Please provide a link to the underlying Federal Reserve data.

  15. Dazed And Confused says:

    Are these figures nominal or “real” i.e. inflation-adjusted?

    • drifterprof says:

      The above “Wealth Disparity Monitor” chart shows the top .1% households average about 135 million in assets. The bottom 50% average such a relatively insignificant fraction of household assets, in can be considered nearly zero compared to the .1%’ers.

      If the difference was adjusted for inflation, then one would have to assess how much harder the inflation hit the bottom 50%’ers. Simply adjusting for inflation would assume that inflation
      hurt both groups equally.

      • HowNow says:

        Because no self-respecting conservative or libertarian will read the research (“Capital”) by Thos. Pikkety, they won’t know how, from the tax changes of the Reagan era onward, wealth has moved unchecked into the hands of the wealthier and wealthiest members of America. Tax reductions… who would’ve thought? And, what the knuckleheads that parrot the wishes of the .01%, the capitalist system was working well prior to Reagan: with high tax rates for the wealthiest, all classes were benefitting, at about the same rate.

        • HowNow says:

          And that was also a time (prior to the “Reagan Revolution”) when corporations believed in a “social contract” – that they had some moral responsibility to care for their workers.

    • Wolf Richter says:

      Not inflation adjusted.

  16. Dazed And Confused says:

    Presumably the wealthiest have done worst recently because a higher proportion of their wealth is in financial assets (stocks, bonds, crypto etc.) that have already suffered a deep draw down.

    The bottom 80% most likely have most of their wealth tied up in their home equity which is still benefiting from the massive gains of the pandemic housing boom. If or when the pandemic housing boom turns into a bust, the bottom 80% might start to suffer much deeper losses to their net worth and wealth inequality might start to trend up again.

    • drifterprof says:

      Wolf states:
      “The “Bottom 50%” of households don’t show on the chart below because they have so little, and a big part of what little they have are durable goods, such as cars, a little home equity, and pension entitlements.”

      So the “Bottom 50%” has relatively minimal home equity that is not large enough to suffer “deep” losses in a housing crash. They’ll just continue living in the house as before.

      • phleep says:

        > “in a housing crash. They’ll just continue living in the house as before.”

        That’s not what happened in ’08. My neighbor was in default and kept living there though, because the banks wouldn’t foreclose and book their losses, I guess. So she moved in her felonious drug dealer psychopath boyfriend. That was fun. Finally they dragged her out.

    • Einhal says:

      It’s already turned into a bust. Houses are basically not moving. The housing market has seized up. If any sizeable portion of the homeowners tried to sell their houses to “realize their gains,” we’d go from having a “shortage” to a “glut,” and prices would plummet.

      • Anthony A. says:

        My friend the young (40’s) real estate broker came to our daily Old Man coffee meetup this morning and asked if anyone of us old retired guys would be interested in investing in a private note for $100 k as his client can’t get a mortgage with prevailing rates at the amount of mortgage needed to buy the house. The “investor” would be a lien holder on the property once it closes (along with the bank, I assume). He got no takers.

        The RE market is “tightening up” around here and it didn’t take very long to happen.

        • Swamp Creature says:

          Anthony A.

          I would tell that loser RE broker to take a hike yesterday

  17. vinyl1 says:

    Another interesting point is that the 99-99.9% actually have more collective wealth than the top .1%. If you take 9 households with average wealth of $20 million, that’s more than the 1 household with wealth of $134 million.

    But wait! The top 10% excluding the top 1% collectively have even more money – $4.4 million times 90. And they also have what the top 1% doesn’t have – substantial voting power. With about 10 million households, they might count for up to 15% of the ballots cast, because they have more adults and a more likely to vote than poorer households.

    • Augustus Frost says:

      Voting only changes policy at the margin. It doesn’t matter where on the wealth distribution you fall. Look at foreign policy as an example.

      The policies that matter most are effectively on auto pilot.

  18. Winston says:

    “Dropping Stocks & Bonds Reduce Outrageous US Wealth Disparity”

    If one looks at a graph comparing the wealth of the top 1% versus the bottom 90%, one can see a two steps forward, one step back ratcheting effect for the former and no gain from that for the latter.

    Shorting and the ability to buy REAL assets at fire sale prices during the busted bubble phase result in that and the people in a position of adequate power to fix what is behind this bubble/bust effect don’t because they benefit from it.

    The beneficiaries of the process which causes bubble/busts include, besides the top 1%, politicians who borrow to provide services (effectively bribing for votes) which can’t be provided with just tax receipts.

  19. c1ue says:

    I just attended a Hoover Institute thing where Phil Gramm (yes of Gramm Leach Blilely fame) and a couple AEI economists were promoting their book: “The Myth of Inequality in America”.
    Their basic premise is that the above Census data is bad because it excludes transfer payments as well as taxes paid.
    I think this isn’t entirely invalid, but I strongly suspect the “data” they use is hopelessly junk because they carefully focus on only “income” due to GINI focusing on income.
    In particular, they assert the bottom quintile is received $50K a year in government transfer payments: federal and state.
    I don’t doubt that there is some nominal $50K number averaged out, but I would bet money that this is primarily due to housing for younger families and health care for all, but skewed by Medicare. Medicare total spend is in the $790 billion range – and I would be surprised if it wasn’t skewed towards poorer households (SNAP is like $100/month – insignificant).
    And, of course, Medicare is still reflective of ridiculously high US health care spending even if it is “70% lower payments per procedure than private” (from Gramm).
    The biggest red flag from their presentation was the assertion that the $60K average income of the bottom quintile would put them solidly upper middle class compared to 1965 – junk economics of the highest degree since milk and gas are single digit cents per gallon today.

    • Wolf Richter says:

      c1ue,

      “Their basic premise is that the above Census data is bad because it excludes transfer payments as well as taxes paid.”

      BS. RTGDFA.

      This is an entirely different set of data here than what you imagine. Commenting on an article without having read it really makes you look stupid:

      1. the above data is NOT Census data. It’s data from the Federal Reserve.

      2. WEALTH (asset minus debt) is NOT income. This article is about wealth; your BS comment is about income. It’s stupid to confuse “wealth” and “income.”

      3. The ASSETS here include homes, stocks, bonds, pension entitlements, durable goods, any cash, etc. and any amounts saved from transfer payments are INCLUDED.

      4. Wealth is after taxes. It’s what is left over after you pay your taxes.

      In the future, if you refuse to read the article, but want to add some unrelated stuff, fine, but do NOT connect it to the article, or else I will shred it. I’m sick of this BS, wastes my time. Commenting guideline #1.
      https://wolfstreet.com/2022/08/27/updated-guidelines-for-commenting-on-wolf-street/

      • jm says:

        Wolf, you’re too harsh. He was critical of the AEI economists’ thing at the Hoover Institute, writing ‘I strongly suspect the “data” they use is hopelessly junk because they carefully focus on only “income” due to GINI focusing on income.’ Largely just adding some more support to your argument.

        • Wolf Richter says:

          jim,

          here is what he said:

          “Their basic premise is that the above Census data is bad because it excludes transfer payments as well as taxes paid.”

          And that’s total BS. The “above data” is from the Fed, not from the Census, and it’s “wealth” not “income.”

          He should have read at least the title before commenting.

          If he wants to be taken seriously, he should say: “I have not read the article, and I have no idea what it says, but I went to a thingy the other day and they were talking about income data, not wealth data, and….”

    • phoenix says:

      “Hoover Institute”… stopped reading there

      • NBay says:

        Yep. Might have as well been Heritage Foundation, or the many others with same fixed agenda.

    • cb says:

      Oh Gawd,

      Another “educated” cheerleader ………………..

      The .01% thanks you ……………………….

      The do throw money at the bottom, to buy complacency, and maintain their status as elites, and to maintain their servants and cannon fodder should the need arise.

    • cb says:

      and Phil Gramm.

      What a maggot. I hope you didn’t pay for that conference. Even more so, I hope the taxpayer didn’t fund it.

  20. breamrod says:

    calling the middle class “middle” is a farce. We need a new term. Like half a percenters of the 1%( maybe)

  21. CreditGB says:

    What would any economy be like if there were very limited or no wealth disparity?

    In 70 years I’ve never seen such victimization and class envy. If you are in the 1%, good for you, congratulations and more power to you. Build another house or mansion, buy more cars, build several yachts, fly private jets, and invest in IPOs (hopefully those with a legit product or service capable of generating returns on your investment). Keeps an economy busy with work in support thereof.

    Seems like more and more are complacent with the subsistence that arrives from their government and enjoy belly aching about those with some initiative, driving hard for some wealth and comforts.

    Face it, reality is you only reap what you sow.

    • Wolf Richter says:

      CreditGB,

      You don’t get it. You totally missed the point. It’s what caused the wealth disparity: the Fed’s “Wealth Effect” policy.

      It would be helpful to read the article so you know what it’s about.

      It’s not about the 1%. In fact, there is no 1% in the article — only “the 0.1%” and the “remaining 1”

      The article discusses the huge wealth disparity between “the 0.1%” and the “remaining 1” and between other wealth categories.

      And the Fed’s “Wealth Effect” policy inflates asset prices as a matter of policy to make asset holders wealthier, and thereby create inflation that hits those that have the least the hardest. It’s the greatest economic injustice in recent history.

      Wealth creation is fine and laudable, and should be a goal, and wealth disparity will always exist, and that’s fine too. But what we have with the Fed’s policy of the “Wealth Effect” is a scandal.

    • phoenix says:

      keep sucking. maybe they’ll let you take one of their cars for a spin

    • Bobber says:

      There is 10x more free-loading damage caused by people at the top of the wealth scale than at the bottom. Do we really need to list out the government subsistence programs that subsidize those who already have wealth?

      For now, I’ll just list one big one – a lower tax on passive capital gains than manual work.

      Why are some people designated “job creators”, but others aren’t, simply by virtue of their wealth. I thought this country was built on equal opportunity for all.

    • cb says:

      @ CreditGB-

      It sounds like you were either born on 3rd base, or suffer from Stockholm syndrome. But the .1% thanks you. They appreciate cheerleaders keeping the servants in the right state of mind.

    • Depth Charge says:

      A toady says what?

    • PalermoCatania67 says:

      Omg… CreditGB,

      If you can’t reread your comment and see how ridiculous it sounds… Yikes.

    • cb says:

      CreditGB asked: “What would any economy be like if there were very limited or no wealth disparity?”

      ————————————————–

      A lot of people would have more and some people would have less. And a lot of people in the middle might be freed from wage and debt slavery. And shelter would be much cheaper. And people closer to the top might have to provide some of their own services and do some of their own work. And self important snobs, too stupid to know they are insulting themselves, might not be so quick to slap themselves on the back bragging about their feather bedded offspring working for the FED.
      etc.

    • NBay says:

      CGB,

      So you want to play “pursuit of happiness” without rules, rule enforcement, OR EVEN BOUNDARIES?

      Sounds like a lousy sport to me, I don’t want to play or watch it.

      I suppose Calvin thought it was cool, but he did have a sorta referee, plus all PLAYERS (only) won in the end….still not much of a game.

  22. Kenn says:

    One thing that worries me; While this correction may reduce the wealth of the 0.1% households, it also reduces the value of all the private and public pension funds in this country.
    Working people will be hurt twice.
    First when their pension benefits get reduced, and there are many ways companies can reduce their pension obligations – it’s been done to me several times.
    Second, when government pension funds lose value, the workers’ taxes will go up to cover the loss. Government workers never have their pensions reduced.

    • Bobber says:

      Nothing to worry about. Private pensions are funded by corporations, and corporate profits are at all-time highs. Corporations can fund their pensions.

      • Kenn says:

        High corporate profits mean that THIS YEAR’S pension contribution will be met. However, no corporation, no matter how good their profits are can reimburse significant losses in their pension fund.

  23. elissa3 says:

    Q: How many total households are there in the US. I tend to skim fast, so I hope I didn’t miss this. My guess is about 160 million.

  24. BigAl says:

    It’s true that the “Wealth Effect” (i.e. cutting rates to boost asset prices so as to induce increased consumer spending) might be gone from the Fed’s playbook – but there are still many reasons why they could pivot to lowering rates. The odds that at least one of these won’t manifest in the next few months seems low.

    Reason #1: Growing municipal solvency issues arising from lowered property tax receipts. Since COVID, cities and towns have become *MUCH* more dependent on property tax rev. due to the loss of many small businesses.

    Reason #2: A liquidity crisis emerges in the credit markets as a result of QT. While the cause/manifestation may not be the same as the September, 2019 spike in overnight funding rates – it seems unlikely that the Fed can unwind its balance sheet rapidly (if at all) without problems

    Reason #3: Geostratetic alliances. Crashing currencies in the UK, EU, and Japan arising from a strenghening dollar could undermine support for US foreign policy initiatives.

    All seem plausible to me. My bet is that “Reason #3” is the first to manifest.

    • cb says:

      Reason # !: Let the small government entities suffer from from forced living within their means.

      Reason #2: If there is a liquidity crisis it is because someone was imprudent in their taking on debt or reading future market activity. The structure should reward prudence, and punish imprudence.

      Reason #3: why should the common American care? A lot of US Policy initiatives have been detrimental to them. purposely so ………….

      • BigAl says:

        I only have the time to comment on your comment on my point #3…

        It ain’t what Americans care about…it’s what “The Blob” cares about…and they aren’t answerable to the American people.

  25. DR DOOM says:

    I am amazed,and Marx and Lenin would have been amazed about the mechanism of pacification of the bottom 50% . Can it be explained in the usual flippant casual manner such as the pacification was due to circus and games and booze ?

    • John says:

      Interesting thought. Marx in my view was not unlike many of the classical economists that preceded him, with 2? exceptions:

      1. At bottom, all economic systems are law-governed, natural phenomena that can be studied scientifically.

      2. Rates of profit tend over very long periods time to decline.

      If we accept this premise we might expect market movements over time (in either direction) to have an observable relation to declining rates of profit.

      • cb says:

        @ John: “2. Rates of profit tend over very long periods time to decline.”

        ——————————————————–

        Why accept this premise? any support?

        I will throw out a premise to consider: Concentrated ownership and power, in a Capitalist system, tends to concentrate over periods of time.

        Premise two: Concentrated wealth and power is bad for free markets.

    • Nebukadnezar says:

      That’s how I read Marx when I was young (I was already programming for money):
      ‘He claims to be able to create a better system ? This means he has an excellent understanding of the current system (whatever it is). He should be able to make a lot of money in the current system. Not all the time. But much more than others. Let’s see’

      He was a loser.
      Getting a few points right doesn’t make you smart.
      If you make a claim that you understand something you should be measured by being able to predict the future. When you want to make your bet is your choice. But if you make a bet you better get your science right.

      So I didn’t read him.
      Instead I checked a few points: do smart people exist in his model ? No. They are meaningless to his model.
      Did he publish everything ?
      Here I have to give him some credit. The final parts weren’t published until he died. So there is always a possibility that he was in doubt whether he really had a model or nothing at all.

      In his time ‘labour’ was exchangeable (more or less) but needed.
      Most people right now are useless (more or less) because they have no skills at all but high costs of living. Universal basic income was (is) a topic because of this.

      • cb says:

        “He was a loser.”
        “So I didn’t read him.”

        ———————————————————

        ok

    • Valerie from Australia says:

      People at the bottom have given up. They have no hope and they are exhausted from working two jobs, not getting ahead and getting zapped with and unexpected expense, like an injury. They are beaten down.

  26. John says:

    I suspect standard business cycle contractions disappeared a long time ago. We’re getting Fed manipulated contractions instead. They’re less frequent but more devastating.

    Ron Paul and Jeremy Grantham don’t have much in common. But it’s interesting that they seem to concur on the FACT that economic decisions of enormous importance are NOT being made DEMOCRATICALLY. They are being made by an extremely tiny and extremely wealthy and powerful minority.

    You can’t blame this minority for looking out for themselves. Who among us would act differently?

    • phleep says:

      The designers of our system saw with perfect clarity they were walking a line between a grotesquely concentrated wealthy-powerful king-dynasty (elite capture), and chaotic mob rule. Hence a republic, not a monarchy or pure (mob rule) democracy.

      Some speed bumps were thus put between mob rule and the actual levers of power. Might there be come re-redesign of the Fed structure? Yeah, maybe so.

      • cb says:

        Oh Gawd,

        Another happy yappy lecture from an Egghead happy with his station in life.

    • cb says:

      John said: “You can’t blame this minority for looking out for themselves. Who among us would act differently?”

      ——————————————————————

      any decent person can. Perhaps not you, but others would act differently.

    • eg says:

      The behaviour of the Fed, along with the effects of that behaviour, start to make more sense once you realize that it’s essentially an aristocratic institution.

  27. Gen Z says:

    Hike the rates some more!

    Way too many FOMO couples getting approved for million dollar loans to overpay in Toronto real estate.

    • Depth Charge says:

      Can you imagine a “couple” buying a grossly overpriced house these days, based upon both of their incomes which requires they to stay together for the long haul? It’s a preposterous notion and an even more disturbing reality. Talk about signing up for failure….

      • Gen Z says:

        I heard that all it takes is one false allegation and Toronto Police are obliged to take the accused from the home to keep the peace.
        50% of Canadian marriages fail within 10 years.
        A divorce lawyer charges over C$700 per hour in Toronto.

        • Anthony A. says:

          That’s the way it works here too. After going thru a California divorce 30 years ago, I still feel the pain of writing those checks to the attorneys (yes, both of them).

  28. Crush the Peasants! says:

    Who! Interest rate repression has caused this terrible inflation? But the rates had been repressed for quite some time, and no inflation.

    More likely the unethical, harmful lockdowns and the related CARES Act and PPP loan forgiveness free monies. Decreased supply (lockdowns), increased demand (free monies).

    • Einhal says:

      Many economists thought that CPI inflation was destined to appear after we started printing money, that it was never going to be wrapped up in the asset markets forever. It all came at once.

    • Bobber says:

      It was the increase in home value, caused by interest rate repression, that played a key role in the inflation. 65% of households own their homes and they saw 40% RE appreciation in two years, equating to thousands, hundred of thousands, or millions to many households.

      The huge gains in stock market values from pre-pandemic levels was also a contributor, although the impact was mitigated because 90% of stocks are owned by only 10% of the population.

    • drifterprof says:

      Crush the Peasants!: “Interest rate repression has caused this terrible inflation? But the rates had been repressed for quite some time, and no inflation.”

      The principle of an economic bubble is that it can expand for quite some time.

      Crush the Peasants!: “More likely the unethical, harmful lockdowns…”

      The article is not about the various causes of inflation. It’s about the last two years or so of QE, and interest rate repression, causing wealth effect:

      Wolf: “From Q2 2020, the beginning of the Fed’s crazy QE and interest rate repression, through the end of 2021, the average 0.1% households gained $47 million in wealth! This was an obscene gift that the Fed handed this small number of households for a monstrous increase of their wealth.”

      If you need to get triggered about the lockdowns, at least do it in a relevant article.

      • Crush the Peasants! says:

        @drifterprof,

        Instead of being triggered by correct comments on the medically and economically harmful lockdowns, you might take some time to read the article.

        Here is a relevant excerpt that was at the end of the story. A true appreciation of Wolf’s analysis requires more than just reading the headline.

        “The official reasoning for QE and interest rate repression is the well-known but dubious “Wealth Effect” which is the monetary equivalent of trickledown economics, where the Fed tries to make the already wealthy far wealthier by inflating asset prices with QE and interest rate repression, based on the doctrine that these households will then spend some of this newly gained wealth, which will then trickle down….

        What we got instead of the wealth trickledown is a huge bout of inflation, of global inflation, since central banks globally have pursued similar policies of interest rate repression and QE.”

  29. nightdipper says:

    IMHO, People who acquire wealth deserve to keep it. In the longer term a way to “achieve more equality” or “to eat the top 0.1%’s kids for breakfast” is to reform inheritance tax so that Gates, Fink and the like actually pay the 40% estate tax instead creating charitable foundations. Many of these foundations may not serve any real purpose other than to protect and transfer their wealth tax free while providing income for themselves and their heirs. They still control their wealth while alive and when not alive a trust is used to pass control of the foundation/wealth to the next and future generations. I’m not envious of those at the top, I am happy with my lot in life. I would rather folks keep what they earn rather than government confiscating it.

    • Zero Sum Game says:

      Check out “Wealth and Our Commonwealth” written in the 90’s by Microsoft Bill Gates’ father.

  30. Swamp Creature says:

    All the malinvestment that zero interest rates has fostered over the past decade and then some will have to be unwound before any meaningful recovery can occur. It’s as simple as that. The sooner this is done the better. That means a severe recession or depression worse than 2008/2009. This will sweep up a lot of innocent bystanders but that’s the price that has to be paid. The Fed and these useless bums and scum in Congress who spent us into bankruptcy deserve all the credit for this and they all should go to hell sooner rather than later.

    • Augustus Frost says:

      It’s questionable whether the accumulated distortions can be corrected while the country remains intact. That’s how bad it actually is now. It will take an economic contraction a lot worse, a lot more extended, or both to achieve this outcome.

      The US and by extension global economic system only “works” with perpetually expanding debt. Look at the minimal (as in barely noticeable) decrease in US total debt during the GFC and what happened.

      So, debt will keep expanding until there is either a deflationary collapse with enough defaults to restore balance. Or the debt is inflated away enough to achieve the same result.

      Problem is everyone’s debts are somebody else’s “wealth” and either outcome means most people are a lot poorer as wealth, incomes and living standards decline or crash.

      When this happens, a lot of people get angry resulting in large scale political “blowback” with all sorts of unintended consequences. See history for examples.

  31. Connor says:

    What’s the explanation of the wealth increase for the bottom 50%?
    Just tracking inflation, and the beneficiaries of helicopter money policies?

    • Wolf Richter says:

      Those that own homes have seen their home equity jump over the first two quarters this year.

      • gametv says:

        I would argue that home prices are not real. The fall in real estate prices has hardly begun and if you really need to sell a home in many areas, you cant get a price close to what the latest comps are showing. There are always a few fools out there willing to buy homes for a slight discount to recent comps. But as the economy turns south, it will get more and more difficult to sell homes at prices that are based on recent comps.

        We are simply at that point where there is no net under home prices, but they hang up in the stratosphere.

        • Xavier Caveat says:

          Used homes turned into games of chance, but similar to a casino, the winnings aren’t yours until you cash out and leave.

      • Swamp Creature says:

        So homes have gone up. You got equity. BFD. What good does that do you? higher property taxes, higher maintenance costs. higher ins costs. It’s just a number on a piece of paper. I like cash flow. A house is just a big drain on your budget. And an illiquid one to boot. And now we’re going to have a housing crash.

        • rick m says:

          SC- nailed it. Illiquidity is the precipitate factor.
          The homeowners of central Florida are presently facing one of the problems with a chunk of their appreciated money having a street address. The slab on grade Airbnb house I’m working on this morning replaced the pier and beam house that floated away in August ’05. The nice young couple who own it didn’t know.
          Too old and close to the beach to want to own. When the big one comes, I’ll drive away. Far more people own houses than know how to fix them. The safe money is the cash that they pay to maintain and repair their “investment”.

  32. Lynn says:

    Very nice article.

    “And the unbelievably enormous and mind-boggling wealth disparity in America actually shrank visibly.”

    I thought this might happen with what they are doing with asset deflation, but then said to myself “Nah they wouldn’t bother for the Pee’d-on”. Glad to see it. Hope the tendency sticks. It’s been sucking the other way for so many decades that it’s a necessary start.

  33. Leverage my Leverage says:

    Foreign Reverse Repos is well publicized data by the Fed but the new Foreign Standing Repo Facility does not appear to have any published data.

    Could the Fed use or be using this facility to provide USD to Japan for instance or other nations that may attempt to prop their currencies up against the ever rising dollar??

    • Wolf Richter says:

      Nonsense. it has a $0 Balance. It’s on the Fed’s balances sheet.

      1. click on the link:
      https://www.federalreserve.gov/releases/h41/20220922/

      2. Go to Table 1

      3. Go down about 1/3 of Table 1 to:

      “Repurchase agreements
      “Foreign official
      “Others”

      4. Use your index finger to go straight across the screen to the right, and note the $0 balances.

      5. There is no demand for repos right now because no one wants to borrow cash; everyone is awash in cash, and they have trouble figuring out what to do with it, so they use the “reverse repo” facility to lend this cash to the Fed for 3.05% interest.

      Question:
      Why is it so much fun to just make up some BS, attach 2 question marks to the end, and spread it like manure, hoping that something new will grow from it??

  34. Swamp Creature says:

    “The US economy could be grappling with deflation in the next 6 months, and the Fed could be forced to pivot in the face of demand destruction, ARK Invest’s Cathie Wood says”

    Time to buy long term treasuries and cash in on some huge capital gains. You can’t get hurt.

    • Wolf Richter says:

      You’re not really going to believe Cathie Wood all of a sudden???

      (after she ruined the investors in her funds?) (as her flagship ARKK fund is down 75%) (this woman says whatever)

  35. Arya Stark says:

    I love the smell of PIVOT in the morning. Thanks BOE. You’ve shown us why nobody believes the central banks anymore. Why should we. You always do the same thing.

  36. historicus says:

    Will the Fed do what the BOE is doing? Buying long term paper?
    Defending low long rates seems to be the game of central bankers….forcing curve inversions.

    • Wolf Richter says:

      There is real CHAOS going on in the UK bond and currency markets triggered by stunningly reckless policy announcements of the new government.

      The 10-year yield exploded from 1.9% to 4.5% in two months — without even QT. That kind of sudden “tightening” blows up everything. How much “tightening” of this type do you want???

      • historicus says:

        I’d like to see the balance sheet come down and the yield curve be positive
        Id like to see fed funds cover inflation

        Call me old fashioned

  37. David G LA says:

    The “bottom 50 percent” is a ridiculous grouping on the fed’s part. The difference between someone in the first or second quintile (0-40) and someone in the third quintile (41-60) is HUGE. So a subset of the third quintile (40-50) let’s say maybe gained 30k in home equity in the last year, (which is sinking as I type this comment) and perhaps a thousand or three of covid scimmie, and that translates to a “10k average rise in wealth for the bottom 50.” Who are they trying to fool? the bottom two quintiles are POORER THAN EVER thanks to rampant inflation. Yes, income disparity (the gini coefficient) has decreased, but, come on… it barely moved the needle. It’s maybe back where it was in 2020 pre covid. I looked at the graphs on the fed page Wolf included in one comment.

  38. CreditGB says:

    Somewhat unrelated to bubbles, but then, what isn’t related to bubbles these days?

    Anyone heard what the IRS is planning to do with the tax brackets? Keep hearing no rate hikes but then they can “slide the brackets” to get more revenue. Or is that just nonsense?

    • Wolf Richter says:

      The tax brackets are indexed to inflation and move up with inflation, period.

      There is a lot of BS floating around out there. I have my hands full keeping this BS outa here. I have no idea why it’s so much fun spreading this BS.

  39. knoxj@knology.net says:

    That much wealth causes dangerous political problems. Taxing may be appropriate. When I started work in 1967, I think the top rate was 93%. The top .1% may take over the Government. I have assets and like their increase. However, I received a lot of money for no increase in production.

  40. SOL says:

    A pie chart of wealth would look ridiculous.

Comments are closed.