How the Fed Boosts the 1%: Even the Upper Middle Class Loses Share of Household Wealth to the 1%. Bottom Half Gets Screwed

It is ironic the Fed puts out this data, as if to show off its success, and how every time the wealth of the 1% is threatened, the Fed comes up with new bailouts, rate cuts, and other shenanigans.

This is the transcript from my podcast last SundayTHE WOLF STREET REPORT:

OK, the Federal Reserve just came out with its quarterly data on the wealth of American households. It’s mostly the headline numbers that are being displayed in the media – how much wealth American households have – namely a new record of $107 trillion, thank you Fed, QE, interest-rate repression, and Wealth Effect. But the Fed’s data also shows the wealth distribution.

Everyone knows that if you’re in the bottom 50% of households in terms of wealth in this country, you’re essentially screwed. At the bottom 50%, you’re chasing after the American dream, and while a few are able to get out of the bottom 50%, for most, the American dream remains just a dream.

But the share that the bottom 50% of households have of the overall wealth, of that record $107 trillion, is minuscule. It’s just 1.9%.

That share is down by half from the already miserably low levels of 1999, according to the Fed’s data. So those folks in the bottom half of households are screwed and we knew that.

But today, we’ll take a closer look at the top 50% to 99% of households by wealth because even their share of the wealth is now declining, while the share of the 1% is surging.

This is the upper middle class and the top of the middle class, and they’re losing out to the 1%. And it’s a big deal in terms of dollars because those households have a lot of wealth, but their share is shrinking as the share of the 1% is gaining.

In other words, this economy – and I will point my finger straight at the policies of the Federal Reserve – is set up to shift an ever-larger share of the wealth to the top 1% and away from everyone else, according to the Fed’s own data. And the Fed is bragging about it.

We already know what is happening at the bottom half of the households: They’ve always been screwed. They’re just screwed even more today than they were 20 years ago, according to the Fed’s data.

As of the new data from the Fed, the bottom half of the households, owns 6.1% of all assets that Americans own. They own just 2.2% of all stocks and stock mutual funds. They own just 2.7% of what the Fed calls “pension entitlements.” The gold-plated executive pension plans are only for the few. They own just 13.5% of household real estate wealth. They own just 0.1% of the “private business wealth.”

But in terms of debt, the bottom half of households carry 36% of the total debt, such as mortgages, credit card debt, auto loans, and student loans. So they own 6.1% of the assets and they owe 36% of the debt.

And the wealth of the bottom half of households – wealth being assets minus debt – amounts to just $2 trillion, or 1.9% of the total household wealth.

These are the people who cannot save anything because their expenses for housing, healthcare, education, transportation, childcare, etc. are eating up their income. And because they cannot save anything, they have no means to invest. The whole system is set up that way.

Healthcare expenses cost roughly the same for rich and poor. The problem is that health care expenses are enormous in the US, and become an affordability issue for the bottom half of the households, a huge burden, and lots of people struggle to pay for it or cannot afford it.

The healthcare sector is now around 18% of GDP, or nearly $4 trillion a year. This business has become immensely profitable with its monopolistic structure, constant mergers, abuse of the patent system to prolong pharma monopolies, outrageous hospital bills as hospitals have become integrated into corporatized medicine. And so on. Paying even for basic healthcare has become a nightmare for the bottom half of households.

For the lucky ones who’re covered by an employer’s health plan, family coverage costs the employee on average $6,000, according to the Kaiser Family Foundation. This is just the insurance premium. Then there are copays and deductibles, etc. And those deductibles can be thousands of dollars.

For families without employer health coverage, the premiums alone for reasonable insurance plans run over $20,000 a year.

Then there are housing costs – whether people own or buy. They have surged in many places in the country. And for the bottom 50%, paying for a roof over the head in a lot of places is straining budgets, or exceeding budgets. Just check out the thousands of parked vehicles that people live in, around Silicon Valley, San Francisco, and other places. These are people with jobs that cannot afford housing.

The costs of higher education have become a huge burden at the bottom 50% of the wealth scale. This burden is carried by the family that now sacrifices in many ways, and it will be carried by the student who will end up with a pile of student loans.