'The Rich Had It Rough During The Recession,' Said No Credible Economist Ever

What is this “net worth”thing of which you speak?

To give you a little bit of context, this chart showing the bottom 25th, middle 50th, and upper 90th percentiles of American net worth was part of a presentation by Professor Amir Sufi explaining the causes behind this net wealth decline, and the American economy’s sluggish pseudo-recovery afterwards. Cliffs for those who don’t speak Econ:

  • Giving banks access to cheap and free money is overrated because of the vicious cycle of lending restraint. Borrowers with recession-devastated credit are now riddled with debt; stingy banks do not give borrowers the money they need to stimulate the economy, which would give them more income to save. So with less savers depositing, the banks have less capital to disburse to an increasingly uncreditworthy customer base, as borrowers are now largely underwater on their mortgages. Wash, rinse, repeat.
  • Debt affects the lower classes far more than the upper class because most of the lower 90 percentiles’ net worth is tied up in their homes of now questionable value.
  • If any significant changes are to be made, Sufi says they need to come from fiscal (government) policy rather than monetary (Federal Reserve) policy. It's time to stop focusing on the banks; the true problem lies with the burden of American household debt.
via The Guardian / YouTube

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