Counterparties: A recovery for the 7%
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Hereâ€™s the post-crisis recovery in a nutshell: from 2009 to 2011, the â€śmean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%â€ť, according to new report by the Pew Research Center. Â The reason for this, Pew says, is clear. Capital markets, where the wealthy hold a disproportionate amount of assets, boomed, while the housing market, the biggest source of wealth for most Americans, was flat.
Josh Brown looks at the Pew study and concludes that â€śwealthy American households have never had it quite so goodâ€ť. He sees a statistical portrait of American rentiers, a class with â€śinvestment portfolios who essentially extract an income from the nation and return very little (in the form of jobs or spending) in comparison to what they takeâ€ť. At the other end of the spectrum, Americaâ€™s dealing with the quiet humanitarian disaster of long-term unemployment, which Paul Krugman says is creating an increasingly â€śpermanent class of jobless Americans.â€ť
The WSJâ€™s Neil Shah tries to find a slight silver lining in other data from the Federal Reserve, which show that â€śAmericans have recouped much of the wealth they lost during the recessionâ€ť. Household wealth at the end of 2012 was $66.1 trillion, just a little more than a trillion short of its 2007 pre-recession peak.
Unfortunately, housing may not return to its former role in the US economy. Amir Sufi, an economist at the University of Chicago, writes in a new paper that the â€śdays when housing was the predominant force driving economic activity are goneâ€ť. Housingâ€™s vaunted wealth effect, Sufi finds, was most evident among poorer homeowners. Theyâ€™ve now been largely shut out of the the housing market, and arenâ€™t likely to be coming back anytime soon. — Ben Walsh
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