Counterparties: A recovery for the 7%

By Ben Walsh
April 24, 2013

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Here’s the post-crisis recovery in a nutshell: from 2009 to 2011, the “mean 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%”, according to new report by the Pew Research Center.  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 “wealthy American households have never had it quite so good”. He sees a statistical portrait of American rentiers, a class with “investment 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 take”. At the other end of the spectrum, America’s dealing with the quiet humanitarian disaster of long-term unemployment, which Paul Krugman says is creating an increasingly “permanent class of jobless Americans.”

The WSJ’s Neil Shah tries to find a slight silver lining in other data from the Federal Reserve, which show that “Americans have recouped much of the wealth they lost during the recession”. 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 “days when housing was the predominant force driving economic activity are gone”. Housing’s vaunted wealth effect, Sufi finds, was most evident among poorer homeowners. They’ve now been largely shut out of the the housing market, and aren’t likely to be coming back anytime soon. — Ben Walsh

On to today’s links:

EU Mess
Jose Manuel Barroso’s anti-austerity comments anger Germans, encourage everyone else – Der Spiegel

TBTF
Brown and Vitter unveil the first draft of their bill to reform Dodd-Frank – Tim Fernholz

Not-So Small Government
The US government’s investment in electric cars is not going well – NYT

Hot Money
The world’s largest commodities firm did hundreds of millions of dollars of business with Iran last year – Guardian

Charts
The vanishing Wall Street trader – Bloomberg
Human traders are winning, reports increasingly scarce human trader – Bloomberg

Wonks
Paul Krugman rules the land of economic punditry as “KrugTron the Invincible” - Noah Smith
A high risk, high return solution to the EU mess – Dan Davies

Compelling
Reddit users’ failure to identify the Boston bombers doesn’t debunk the wisdom of crowds – James Surowiecki

Oxpeckers
“If Jill Abramson were a man…” – Ann Friedman

Growth Industries
Diseased pig carcass disposal is becoming a big business in China – Caixin

Popular Myths
Don’t buy a stock because you like a product – NYT

Politicking
The SEC may require public companies to disclose all political contributions – NYT

Indicators
The internet is obsessed with North Korea, even when there isn’t any real news – BCA Research

And, of course, there are many more links at Counterparties.

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