There is a chilling report out from the Federal Reserve that the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That returns American families to the wealth level of 1992.
The biggest hit were the middle class families. The wealthiest families actually saw a slight rise. The median for credit card debt did not materially change, however. Much of this decline is due to the decline in home values which remains the biggest investment for most families. Forty-seven percent of citizens do not pay taxes income taxes and 87 percent of those earn less than $20,000 a year.
These figures are remarkable since they parallel the Great Depression but we have not seen the same degree of displacement or social or political upheaval as a result. There are different theories from better public welfare programs to a new political dynamic with many lower and middle class families supporting either the Tea Party or GOP. It may also be that many families have experienced the decline but continue to hold on to their homes so that the diminishing in wealth does not manifest as sharply in their lives. Whatever the cause, the reduction in wealth has not produced a comparative political backlash that I can see.
Source: Washington Post
@idealist
Here’s a starting point: the whole financial system is a giant house of cards.
The fractional reserve system works like this:
If you put $100 into a bank, the bank can loan out $800. The $100 you put into the bank — that the bank has in its possession — is considered a liability (because you can cask for it back at any time). The $800 loaned out, however, is considered assets because they’re accounts receivable).
And banks make money just like that. That’s how banks can “generate” funds that surpass a national GDP.
http://www.nationmaster.com/graph/eco_dom_cre_pro_by_ban_sec_of_gdp-credit-provided-banking-sector-gdp
It’s all gambling on growth: borrowing from tomorrow to fund today’s wastefulness, planned obsolescence of gadgets, shoddy clothing, disposable cups at Starbucks, equipment destroyed in wars, etc.
The metaphor of a piggy bank has absolutely nothing to teach you about what banks actually are, just as a lemonade stand has very little to teach you about how industry works.
Bron:
Idealist is right, that for every entrepreneur who makes it, there are hundreds of thousads who don’t. Only about 30% of business succeed. I think it’s indisputable that the Constitutionw as drafted to rprotect privilige.
But for all those who do suceed based on their wits, don’t forget the large part played by government subsidies.
“The West” was “won” not by Man squaring off against the WIlderness; the Westward Expansion was the expansion of technology into the remotest corners of the earth.
After 100 years of “Indian eradication” on the public dime, slave labor, and with a huge pile of public debt to buy Louisiana from Napoleon, the Federal Government instituted a “land grant” program and pushed the Locomotive straight to the furthest coast.
Old JP Morgan, while the US Government was still paving the way for his Railroad Empire, made his first pile of cash buying up some defective military surplus rifles and selling them back to Uncle Sam at a markup. I guess the things were blowing off soldiers’ thumbs.
@Michael Murry
The distinction you highlight between class and status is also of great importance.
We’re taught to think of white collar workers as “higher class” than, for example, factory workers; yet both are wage earners. Not even CEO’s are really capitalists, but draw a wage. A CEO can’t decide to throw in the towel and sell the company; a CEO does not OWN the means of production in a firm, but IS A MEANS Of PRODUCTION.
The distinction between class and status is part of what prevents the majority from coming into class consciousness. White collar workers, taught to see the world through their high status, come to think of themselves as indispensable — when, in fact, they can, will be and are being displaced in the workforce due to automation (software) just as the blue collar workers were displaced due to automation (assembly line robotics).
Allow me to draw your attention to two charts.
This first chart shows the value of slaves in the years leading up to the civil war:
http://telesio.files.wordpress.com/2012/06/value-of-slaves-after-end-of-slave-trade.jpg
After the slave trade ended in 1808, the value of slaves skyrocketed (because supply was curtailed). States like Virginia and Maryland, which were overstocked with slaves profited handsomely, as they were able to sell their stock to states like Georgia, where slave mortality rates in the swamps were high.
This second chart shows the manufacturing output per worker in the US since World War II:
http://telesio.files.wordpress.com/2012/06/productivity-growth-output-per-worker.jpg
Very similar curves. The second chart means that the value of each worker has been increasing steadily because automation lets each worker produce more. Despite this increase in worker productivity, wages in the last 30 odd years have stagnated.
It’s not a coincidence that since 1960, worker to CEO salary has increased from 40:1 to 400:1. This causes CEOs (and other white collar workers) to identify more with their capitalist masters than with the rest of wage earners.
Bron,
Playing with you shows I’m a bigger chump than you.
Just wasting my time Idiots never change, they don’t know how.
Bet you can’t tell me without looking it up who was Horatio Agner or where Trotsky was killed, and when he left USSR?
And do read “Outliers”, it shows some of the elements of success through the two recent centuries. Just trying to help.
idealist707:
yeah, well now it is harder because our society is less free and the wealthy are able to get favors from government.
Many people have become wealthy in this country and many more have raised their standard of living.
Try again Leon Trotsky.
I’m not from New York. I’m not even from New Jersey. At least the wind usually blows East.
matt’s johnson:
Not me, I leave that for lefties like you, since you guys want to tell everyone how to behave and how big your soft drink can be.
Bron,
You’re not a king. Your problem is, you want to be.
Indigo Jones and Michael Murry,
Now you and MM can divide up the Herculean task to explain to us the finance and money market. Where these derivative “bets” are residing, and why they have any importance to us—I mean WE did not make them—so why are the ours to back up at all???
How much of it is real, paper, etc.? Whatever it is, it’s not in our pockets, nor credits for us to enjoy.
And what is the structure (large balloons please) of which derivatives 270 (?) TRILLION is a part of?
And relate that to the overall picture, please.
You guys can do a national economics with international trade extension model 101 for us.
Think how much better that is than one more amazing tale
from JT, or some starlet/judge/imam/preacher/crooked person/everyman’s dumbness tale.
How about it guys???
Bron,
As usual, believing in fairy tales, are you.
Try reading “Outliers”, there the rise of the 1830 group is explained. And am sure for every do-it-yourself man you’ll find 100,000 who had both money and connections.
The exceptions prove the rule.
We have the founder of IKEA, started with bare hands.
But Persson of H&M had a successful Pa to follow, but definitely added his bit. Except for them, the others are born or associated themselves to riches.
Try again, Horatio Alger.
Indigo Jones:
In answer to your contention that our Republic was founded so the rich could prosper, I say no not hardly.
America is one place where being rich is no guarantee your children and grandchildren will be rich.
If you go back and look at the economic history of the 19th century, nearly all of the great industrialists started out either dirt poor or of modest means.
Andrew Carnegie was a dirt poor Scottish immigrant.
Cornelius Vanderbilt was poor, he started at 16 with borrowed money and a small boat.
Isaac Singer was born to German immigrants no more than middle class.
James McKay was an Irish immigrant.
J. C. Penny was a clerk for a dry-goods store in Colorado, he bought out the owners and opened his first store.
I can go on and on with stories like these of poor or middle class people who did well because our founders gave us a free society. They didnt do it just for rich people. Most rich people were not rich at one point in their lives. In fact I believe 70% of the Forbes list of the 400 wealthiest Americans were self-made men and women. In other words they started from the bottom few rungs of the ladder.
America was founded to give people a chance to live for themselves and not for a king or the state or their neighbor.
@Michael Murry
You’re quite right about the problems of returning to a gold standard; even if China didn’t show up at our doorstep demanding their gold coin (you know, since the Federal Reserve holds more Treasury bills than China now, things have gotten a little more complicated), the price of gold can be easily manipulated if a buyer (or cartel) sets out to buy up all the gold on the market (i.e., create scarcity to increase the value of their holdings).
I don’t know much about Paul Craig Roberts, but in that quote you gave, he sems to have things right.
rafflaw – “You will never see rational people in Washington without getting the money out of our elections.”
NYT: “2 Campaigns Chasing Funds at Frantic Pace”
http://www.nytimes.com/2012/06/13/us/politics/for-obama-and-romney-nonstop-fund-raising.html?_r=1&hp
Tip of the iceberg. Rational people would do rational things in a rational environment. Can’t have that.
Indigo Jones @ 11:34 am —
“This is ‘buy’ design.”
Brilliant!
For the haves to have more, GDP must grow [ed.: ya know, that’s probably not sustainable over the long haul]. Growth is dependent upon consumption. Consumption is dependent upon growth in real wages or, in the absence of growth in real wages, cheap credit. Since Bush tax policy resulted in concentration of wealth in non-job creating sectors, easy credit it was. When the credit dried up . . . .
CLH,
You will never see rational people in Washington without getting the money out of our elections.
When I was in Idaho, a farmer gave water melons away for free to the fire fighters.
One cruise missile costs a million dollars. Through it at a mud hut. Or issue food stamps.
UNICEF: U.S. Child Poverty Rate Among Worst in Developed World
New figures show the United States has one of the highest child poverty rates in the so-called developed world. According to UNICEF, out of 35 wealthy countries, only Romania has a higher child poverty rate than the United States’ 23 percent.
USA USA USA
CLH, check out Bernie Sanders.
He once told me about the lobbyists and corporate influence in DC:
“However bad you think it is, it is much, much worse.”
Homelessness hits record 43,000 in NYC as
Mayor Bloomberg stupidly cuts rent subsidies that save $20,000 a year over caring for the working poor in homeless shelter. Refuses to use Federal aid during record homelessness in his city. Bastard.
What a dumb ass. I thought he could do math:
http://www.democracynow.org/2012/6/12/bloomberg_cuts_threaten_thousands_with_eviction