Family Incomes Slipped In 1st Part Of Decade ("Rich getting richer" alert)

The Associated Press ^ | Feb 24, 2006 | MARTIN CRUTSINGER

[Sam's Army]

WASHINGTON - After the booming 1990s when incomes and stock prices were soaring, this decade has been less of a thrill ride for most American families.

Average incomes after adjusting for inflation actually fell from 2001 to 2004, and the growth in net worth was the weakest in a decade, the Federal Reserve reported Thursday.

Many families were struggling in the aftermath of the 2001 recession and the bursting of the stock market bubble in 2000, the Fed's latest Survey of Consumer Finances showed. The comprehensive look at household balance sheets comes every three years.

Average family incomes, after adjusting for inflation, fell to $70,700 in 2004, a drop of 2.3 percent when compared with 2001.

That was the weakest showing since a decline of 11.3 percent from 1989 to 1992, a period that also covered a recession.

The average incomes had soared by 17.3 percent in the 1998-2001 period and 12.3 percent from 1995 to 1998 as the country enjoyed the longest economic expansion in history.

The median family income, the point where half the families made more and half made less, rose a tiny 1.6 percent to $43,200 in 2004 compared with 2001.

Economists said the weakness in the most recent period was understandable given the loss of 2.7 million jobs from early 2001 through August 2003, when the country was struggling with sizable layoffs caused by the recession, the terrorist attacks and corporate accounting scandals.

The weak income and the stock market decline in the early part of the decade, which wiped out $7 trillion of paper wealth, had an adverse impact on family balance sheets.

Net worth, the difference between assets and liabilities such as loans, rose by 6.3 percent in the 2001-04 period to an average of $448,200. That gain was far below the huge increases of 25.6 percent from 1995 to 1998 and 28.7 percent from 1998 to 2001, increases that were fueled by soaring stock prices.

The 2001-04 performance was the worst since net worth actually declined by 9.9 percent in the 1989-92 period.

The report showed that the slowdown in the accumulation of net worth would have been even more sizable except for the fact that homeowners have enjoyed big gains in the value of their homes in recent years.

The gap between the very wealthy and other income groups widened during the period.

The top 10 percent of households saw their net worth rise by 6.1 percent to an average of $3.11 million while the bottom 10 percent suffered a decline from a net worth in which their assets equaled their liabilities in 2001 to owing $1,400 more than their total assets in 2004.

"This is the continuing story of the rich getting richer," said David Wyss, chief economist at Standard & Poor's in New York. "Clearly, the gains in wealth are going to the top end."

Democrats used the new report to blast President Bush's economic policies, contending it would be wrong to make permanent his tax cuts, which primarily benefit the wealthy.

"These statistics show why, even though GDP is rising, most people do not feel better off," said Sen. Charles Schumer, D-N.Y.

The Fed survey found that the percentage of Americans who owned stocks, either directly or through a mutual fund, fell by 3.3 percentage points to 48.6 percent in 2004, down from 51.9 percent in 2001.

Analysts said this was an indication that investors burned by plunging stock prices in the decade's early years have been leery about getting back into the market.

The share of Americans' financial assets invested in stocks dipped to 17.6 percent in 2004, down from 21.7 percent in 2001.

Reflecting the housing boom, the share of assets made up by home ownership rose to 50.3 percent in 2004, compared with 46.9 percent in 2001.

The Fed survey found that debts as a percent of total assets rose to 15 percent in 2004, up from 12.1 percent in 2001. Mortgages to finance home purchases were by far the biggest share of total debt at 75.2 percent in 2004, unchanged from the 2001 level.

There was concern that families might start to feel even more squeezed as the cost of financing their debts increases along with rising interest rates.

Although surging home values have supported consumer spending in recent years, analysts worry about the economic impact if, as expected, the home price surge begins to slow this year.

"This report shows a race between factors boosting net worth, such as home ownership, and factors pushing the other way, such as weak wage growth," said Jared Bernstein, senior economist at the liberal Economic Policy Institute, a Washington think tank.

[antaresequity]

but it's now at an all time high.

Only when you include appreciated real estate values.

Real net worth in terms of liquid or semi-liquid assets is down...

I am not a troll nor schill...and I do believe the American economy is in for one hell of a bumpy ride...

Speculation vs speculation...

Keep your eye on the yield curve...BUT...I FORGOT...THIS TIME ITS DIFFERENT!

[A. Pole]

[nopardons:] It's long past time for you to at least try to divest yourself of your COMMUNIST/SOCIALIST leaning. Or, you can just stop calling yourself a "conservative", because you aren't one.

I have something to confess. Before I left Poland and several years after I did believe in "free" market. Guys like you helped me to be cured of this delusion.

And I will tell one thing more, your doctrinaire attitude reminds me the hard line Commies I met under Communism. You would be happy there and then as the politruks.

[A. Pole]

[antaresequity to nopardons:] Why dont you point by point refute what I posted?

Very simple. He wasn't able to find the ready made answers in his training pamphlet.

[expat_panama]

...refrain from making any kind of comment about any of the markets...   ....whatever buddy.

The thing is that I would absolutely love to be convinced that stock prices were going to fall.  I could make millions on puts and short contracts.

I'm convinced that stock prices will be higher next year than last year; I'm convinced enough to put my own money on the line by putting my cash into stocks.  Mr, antaresequity, if by any chance you believe what you're saying enough to actually put your money where a bear market could make you rich, we'd all like to hear more about what you have to say.

[antaresequity]

lol...like I said...its speculation vs speculation...

good luck...

[Toddsterpatriot]

Real net worth in terms of liquid or semi-liquid assets is down...

Federal Reserve

I looked here, page 110 of 124. It looks like liquid and semi-liquid assets are actually up.

[Nowhere Man]

OK, I found it!!!! The computer was called the K-202 and was made in Poland around 1970-72. It ran at 1 million instructions per second, twice as fast as many American models.

Here is the link: K-202 PC from Poland



Unfortunatly from the storyies I've heard, after 30 units were made, the Communist "powers that be" didn't show a lot of interest in that. Shortsighted if you ask me, not so much the system but the people behind it because no matter where you go, you do encounter short sighted people. Playing Devil's Advocate putting myself in the shoes of a Polish Communist of the 1970's era, I would have promoted and encouraged the computer to be made just to show the world that Communism does work just as well. Maybe if he was in Yugoslavia, it could have taken off.

[expat_panama]

... real estate values.  Real net worth in terms of liquid or semi-liquid assets is down.   I am not a troll nor schill...and I do believe the American economy is in for one hell of a bumpy ride... 

Pulling ideas out of the air is easy and fun, but it's no way to manage our life savings.  

Real estate is less than a third of private wealth ($21 trillion), and that's before deducting outstanding mortgages ($10 trillion) -- check out the break down I got from page 102 of this fed report).   Home equity ($11 trillion --value minus mortgage) is even less than bank deposits ($12 trillion).   

We could try saying currency isn't worth any thing-- after all if everyone spent all their money all on the same day then the money wouldn't be worth as much.  Please let me know if you're throwing away your money-- I'll be happy to take out your trash.

Check out items 23 through 29 -- they're all based on stocks and they total more than homes and deposits combined.  

I'll agree with your point that yield curves are great at predicting stock market crashes.  In fact, inverted yield curves have predicted twelve of the last five bear markets we've had.

[expat_panama]

lol...like I said...its speculation vs speculation...  good luck...

I'll take that to mean you believe that market crash stuff when it comes freerepublic posts, but not when it comes to your family finances.   Thanks for the luck; it's always nice to have, but it's really don't need it when I simply deal with what is. 

The times I really need luck is when I'm trying to say one thing and do another --but I don't have the energy to keep up two realities like I did in my younger days.   Someday I'll have to tell you about my voting for McGovern..

[antaresequity]

I am short american eq mkts...in a broader sense... so no ... its not an alternative reality...

[Toddsterpatriot]

Even if your insinuations were right there is no Communist Poland anymore :)

Excellent.

"I left Poland because I was anti-Communist. And I was for the trade unions".

It looks like one of your main reasons for moving here has been fixed. You can go back now. Quick, before Bill Gates, Warren Buffett and the Walton family steal all your money.

Before you leave maybe you can explain how the wealth of those billionaires was "gained at the expense of the lower classes".

Please stay in touch. Let us know how much better the regulations, taxes, safety net, redistribution and trade unions are back in your native country. Make that socialism with a human face a success. As an example for the rest of us. Good luck, God speed.

[billbears]

I believe in a free market system. However what we currently have could not be considered free market in the least. Government intervention into the market through 'regulation', into the economy through the Fed (fiat money vs hard currency; and no the US dollar is not hard currency), and the activity of speculation (not just in real estate) has brought about a situation that we very well could be in for a bumpy ride.

The problem is that when this does happen, either political party in a ploy to pander for votes will intervene further into the economy (much like FDR in the 30s) only making the situation worse.

[nopardons]

Why don't YOU prove what you've been posting? I'll tell you why you can't....you post 1/2 truths, complete lies, and utter delusions.

Interest rates are still amongst the lowest of the low, that they have ever been. Mortgage rates are now even lower than what G.I.'s got at the end of WW II and those were part of the G.I. Bill; government mandated SPECIALS.

Nope, anyone who imagines that what you call a "spending spree" ( which it really wasn"t/isn't ), was NOT driven by property values. Not to mention the fact that the sale totals, for last Christmas, were *cough* higher than the previous year.

Are you talking about commodity prices, vis-a-vis the market, or as in what we pay for things? No matter......prices go up and prices go down; twas ever thus.

Gas prices are up a tiny bit, at the pump, but it's still way down from the high.

But since you don't specify WHAT commodity, but instead, go off into the wild eyed ravings of an uneducated, THE SKY IS FALLING doom&gloomer, please answer the following questions, so at least we are on the same page.

The supply of WHAT is decreasing?

The production capacity of WHAT is decreasing?

How are "the emerging markets" putting a strain on American ability capital and resources?

WHERE ARE YOU GETTING THIS CRAP FROM?

It is difficult to refute made up, disjointed, delusional mewlings, but I did refute, handily, some of the smoke and mirrors rantings, you pulled out of thin air. YOUR TURN. :-)

[nopardons]

I don't believe a word you've said.

But, if it is true, which I still doubt, then you never really understood anything at all about what a free market is. You still have a SOCIALIST mindset.

As to my being "happy" in the old Communist Poland, no, dear, I would not have been; especially since I've been a rabid anti-Commie since I was a tiny child.

[nopardons]

SHE, I am a SHE!

HOW MANY TIMES DO I HAVE TO CORRECT YOU ABOUT THAT? NO WONDER YOU'RE SO MESSED UP; SIMPLE FACTS ARE IMPOSSIBLE FOR YOU TO RETAIN.

[A. Pole]

You can go back now.

It is you who should move to a country where trade unions are illegal, you must feel horrible in post New Deal America.

[nopardons]

LOL....the DOW was up, yet again, today. Seat prices are through the roof. And here's one for ya...there is a brand new instrument, now available to be bought and sold, which looks VERY interesting and very promising. :-)

[A. Pole]

As to my being "happy" in the old Communist Poland, no, dear, I would not have been; especially since I've been a rabid anti-Commie since I was a tiny child.

If you grew up in Communist country you would be a hard line Commie.

[nopardons]

No, it's how American companies RAISE CAPITAL, which is something you have no comprehension or knowledge of.

[A. Pole]

SHE, I am a SHE! [...] SIMPLE FACTS ARE IMPOSSIBLE FOR YOU TO RETAIN.

Why should your sex matter?