Wealth diving and speed-bumps (chart)

By way of Mark Thoma, the Great Recession’s effect on net wealth by net percentile:

Those at the top of wealth-food-chain saw a speed-bump, everyone else took a nose-dive. The chart comes from a comment paper to the Kansas City Federal Reserve by Amir Sufi (PDF) (emphasis mine):

[…] Figure 1 shows the huge amount of heterogeneity in wealth shocks in the U.S. during the Great Recession, and I hope everyone in this room appreciates this important fact. If you look at the 90th percentile of the net worth distribution, the decline in net worth from the Survey of Consumer Finances has been very moderate–almost no decline at all. If you look at the median and the 25th percentile of the net worth distribution, you see a dramatic reduction in net worth for these households. This is exactly the effect of debt. Debt concentrates the decline in the asset prices almost entirely on the levered agents, and that’s exactly what you’re seeing in the graph. Remember that households in the 90th percentile in the U.S. population hold the grand majority of the financial assets in the economy, whereas the median and the 25th percentile, if they have any assets, it’s basically exclusively housing assets. Given the strong recovery in financial asset prices but the languishing housing market, we can see why the lower part of the net worth distribution has been hammered in this recession. 

Looking at this I’m reminded of the infamous Rick Santelli rant that was the impetus for the Tea Party. If you’ll remember it wasn’t a rant about bailouts for the wealthy, but about even the prospect of a housing bailout for the rest of us…


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