As the rest of the world aspires to replicate the success of American capitalism, it is interesting to keep an eye on the much talked about inequalities. Noah Smith helps us with the key takeaways from the recently published household wealth surveys (Survey of Consumer Finances published by the Fed and the Treasury):
(The last point is in contrast to the Indian experience where net savings seem to have fallen as a result of higher borrowings. See our blog on the subject).
But the more heartening takeaway is the one of about inequality going down:
“…inequality decreased across multiple lines — age gaps, racial gaps, educational gaps, urban-rural gaps, and overall inequality all narrowed over the last three years.
Two groups I didn’t include on the chart were households headed by people less than 35 years old, and people in the bottom 25% of the wealth distribution. The reason I didn’t include them is because they were so big — the increases were 143% and 900%, respectively.
900%? How is that even possible? The answer is that the people at the bottom half of the distribution had almost no net wealth to begin with. In 2019, the typical household in the bottom 25% had a net worth of only $400, which increased to $3500 in 2022. That’s still a very low level of wealth. But remember, it’s a net number — the people without much wealth in the U.S. often have a lot of debt, which cancels out the assets they own.
And a big reason that the wealth of the bottom 25% went up so much is that Americans are slowly getting out of debt. The debt-to-income ratio has fallen pretty steadily since 2010”
The author reckons that the money the government handed out during the pandemic probably helped with this. Lots of interesting sub-takeaways. Well worth a read.
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.