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Household Leverage Ratios By Wealth Distribution

Summary:
We are just starting play with the wealth distribution data and will have much more coming your way.  What we have seen so far is shocking. The distribution of wealth has deteriorated significantly over the past 20 years and is now so skewed toward the top that average U.S. household wealth is close to million, though the median household wealth is only around k. In fact, the aggregate level of wealth of the bottom 50 percent peaked in Q1 2000, the height of the dot.com bubble, and is down almost 10 percent in nominal terms.  Whereas, the aggregate wealth level of the top 1 percent is up almost 120 percent over the same period. If  I brought a number of a forecast like that to my manager when I was a very young economist working on the World Bank’s capital flows model back in

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We are just starting play with the wealth distribution data and will have much more coming your way.  What we have seen so far is shocking.

The distribution of wealth has deteriorated significantly over the past 20 years and is now so skewed toward the top that average U.S. household wealth is close to $1 million, though the median household wealth is only around $70k.

In fact, the aggregate level of wealth of the bottom 50 percent peaked in Q1 2000, the height of the dot.com bubble, and is down almost 10 percent in nominal terms.  Whereas, the aggregate wealth level of the top 1 percent is up almost 120 percent over the same period.

If  I brought a number of a forecast like that to my manager when I was a very young economist working on the World Bank’s capital flows model back in the day, he would say,

“You are forecasting revolution.”

Note the relative leverage ratio of the bottom 50 percent.  For several quarters after the GFC the bottom 50 percent, not all households but in aggregate, were technically insolvent, where debt levels were greater than the value of assets ( > 100 percent on the chart).

These data puts the current political climate and debate around debt forgiveness in context.

Stay tuned for some shocking data.

Long pitchforks.

Household Leverage Ratios By Wealth Distribution

Gregor Samsa
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