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Thread: Credit Suisse Wealth Report: There Are More Poor People In America Than China

  1. Top | #11
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    Quote Originally Posted by Axulus View Post
    Quote Originally Posted by Koyaanisqatsi View Post
    Unfortunately, I have to agree. This has been the whole problem with the "wealth inequality" rhetoric started by OWS and Sanders to begin with. If you are making $200,000 per year, have $1,000,000 in an IRA/401K and own a home worth $2,000,000, so long as you have an outstanding mortgage on that home, on paper you'd be negative $800,000 in debt (because the mortgage debt exceeds your salary and IRA assets). So that person would technically be in the bottom 50%, which is insane.
    I don't think this is correct, the value of the home also counts toward wealth.
    In a sense. The economists that started this whole thing--that the OWS and Sanders relied on and from which got the "We're the 99%" and "Top 1% owns more than Bottom 90%" and all that nonsense are Saez and Zucman and here is their study: Wealth Inequality in the United States PDF.

    They state:

    Let us first define the concept of wealth that we consider in this paper. Wealth is the current market value of all the assets owned by households net of all their debts.
    ...
    Owner-occupied housing. We infer the value of owner-occupied dwellings from property taxes paid. These taxes are itemized on tax returns by roughly the top third of the income distribution. Using information on total property taxes paid in the NIPAs, and consistent with what Survey of Consumer Finances data show, we estimate that itemizers own 75% of homes. We assume that they all face the same effective property tax rate.21 Property tax rates differ across and within States and our computations could thus be improved using existing tax data (e.g., by matching taxpayers’ addresses to third-party real estate databases) and by explicitly accounting for year-to-year variations in the fraction of itemizers.22 For our purposes, however, these problems are second-order, as about 5% only of the wealth of the top 0.1% takes the form of housing today. We proceed similarly for mortgage debt using mortgage interest payments; consistent with NIPA and SCF data, we assume that itemizers have 80% of all mortgage debt.
    ...
    Wealth inequality has grown less than taxable capital income inequality because the concentration of housing and pension wealth—which do not generate taxable income—has increased less than that of directly held equities and fixed income claims.
    So, yes, my numbers are off, but illustrative. As they go on to note:

    The bottom 90% share fell between mid-2007 (28.4%) and mid-2008(25.4%) because of the crash in housing price.
    So the market value of your home dropped due to the housing crash in 2007-2008, but your mortgage debt did not drop commensurately, so even though, over time, your house would again start to appreciate in value, it took a temporary hard hit at that time and so your debt ratio overwhelmed your "wealth" valuation.

    And this is the section that Sanders/OWS took their slogan from:

    Our new series on wealth inequality reveal a number of striking trends. To fix ideas, consider first in Table 1 the distribution of wealth in 2012. The average net wealth per family is close to $350,000, but this average masks a great deal of heterogeneity. For the bottom 90%, average wealth is $84,000, which corresponds to a share of total wealth of 22.8%. The next 9% (top 10% minus top 1%), families with net worth between $660,000 and $4 million, hold 35.4% of total wealth. The top 1%—1.6 million families with net assets above $4 million—owns close to 42% of total wealth and the top 0.1%—160,700 families with net assets above $20 million—owns 22% of total wealth, about as much as the bottom 90%. The top 0.1% wealth share is about as large as the top 1% income share in 2012 (from the results of Piketty and Saez (2003)). By that metric, wealth is ten times more concentrated than income today.
    As I've pointed out previously, using those exact same percentages, one could ALSO just as easily declare that the bottom 90% owns MORE wealth than the top 0.1% (Bottom 90% owns 22.8%; top .1% owns 22%).

    But that's not as sexy and doesn't make a good bumper sticker.

    A better scenario would be someone who just graduated from college or who is a few years into their career, making, say, $75k per year, who has student loans, a car loan, and rents an apartment, and has little retirement savings. On paper they have negative wealth yet their income and standard of living is in the top 1% from a global perspective, and in the top 20% or so for the country as a whole.
    Yes, same idea. The point being that it's not what it's been made out to be with bumper sticker political sloganing from Sanders primarily.

  2. Top | #12
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    Quote Originally Posted by Koyaanisqatsi View Post
    Unfortunately, I have to agree. This has been the whole problem with the "wealth inequality" rhetoric started by OWS and Sanders to begin with. If you are making $200,000 per year, have $1,000,000 in an IRA/401K and own a home worth $2,000,000, so long as you have an outstanding mortgage on that home, on paper you'd be negative $800,000 in debt (because the mortgage debt exceeds your salary and IRA assets). So that person would technically be in the bottom 50%, which is insane.
    No. you have $3M in assets and $800k in debt for a net of $2.2 million. The mortgage doesn't negate the fact the house is an asset.

    The usual scenario for negative net worth without being an issue is student loans. That is, most new graduates, even in high income fields. Say, a doctor just out of residency.

  3. Top | #13
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    Quote Originally Posted by Loren Pechtel View Post
    Quote Originally Posted by Koyaanisqatsi View Post
    Unfortunately, I have to agree. This has been the whole problem with the "wealth inequality" rhetoric started by OWS and Sanders to begin with. If you are making $200,000 per year, have $1,000,000 in an IRA/401K and own a home worth $2,000,000, so long as you have an outstanding mortgage on that home, on paper you'd be negative $800,000 in debt (because the mortgage debt exceeds your salary and IRA assets). So that person would technically be in the bottom 50%, which is insane.
    No. you have $3M in assets and $800k in debt for a net of $2.2 million. The mortgage doesn't negate the fact the house is an asset.

    The usual scenario for negative net worth without being an issue is student loans. That is, most new graduates, even in high income fields. Say, a doctor just out of residency.
    Just like GDP, net wealth doesn't count everything that it could.

    A person with a medical degree has a quantifiable debt but they also have a nonliquid asset (their brain and ability to earn an income practising medicine).

    I'd rather be a medicine graduate in the United States with $100,000 debt than a no-debt homeless person in China.

  4. Top | #14
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    Quote Originally Posted by Loren Pechtel View Post
    Quote Originally Posted by Koyaanisqatsi View Post
    Unfortunately, I have to agree. This has been the whole problem with the "wealth inequality" rhetoric started by OWS and Sanders to begin with. If you are making $200,000 per year, have $1,000,000 in an IRA/401K and own a home worth $2,000,000, so long as you have an outstanding mortgage on that home, on paper you'd be negative $800,000 in debt (because the mortgage debt exceeds your salary and IRA assets). So that person would technically be in the bottom 50%, which is insane.
    No. you have $3M in assets and $800k in debt for a net of $2.2 million. The mortgage doesn't negate the fact the house is an asset.
    Read the follow up post.

  5. Top | #15
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    Quote Originally Posted by Metaphor View Post
    Quote Originally Posted by Loren Pechtel View Post
    Quote Originally Posted by Koyaanisqatsi View Post
    Unfortunately, I have to agree. This has been the whole problem with the "wealth inequality" rhetoric started by OWS and Sanders to begin with. If you are making $200,000 per year, have $1,000,000 in an IRA/401K and own a home worth $2,000,000, so long as you have an outstanding mortgage on that home, on paper you'd be negative $800,000 in debt (because the mortgage debt exceeds your salary and IRA assets). So that person would technically be in the bottom 50%, which is insane.
    No. you have $3M in assets and $800k in debt for a net of $2.2 million. The mortgage doesn't negate the fact the house is an asset.

    The usual scenario for negative net worth without being an issue is student loans. That is, most new graduates, even in high income fields. Say, a doctor just out of residency.
    Just like GDP, net wealth doesn't count everything that it could.

    A person with a medical degree has a quantifiable debt but they also have a nonliquid asset (their brain and ability to earn an income practising medicine).

    I'd rather be a medicine graduate in the United States with $100,000 debt than a no-debt homeless person in China.
    I do agree that net worth doesn't count one's education (which is why making student loans dischargeable is a bad idea), but that has nothing to do with the example that failed to count the house as an asset.

  6. Top | #16
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    Quote Originally Posted by Loren Pechtel View Post
    but that has nothing to do with the example that failed to count the house as an asset.
    Once again, read the follow up post. Or just this part:

    Quote Originally Posted by Koy
    The bottom 90% share fell between mid-2007 (28.4%) and mid-2008(25.4%) because of the crash in housing price.
    So the market value of your home dropped due to the housing crash in 2007-2008, but your mortgage debt did not drop commensurately, so even though, over time, your house would again start to appreciate in value, it took a temporary hard hit at that time and so your debt ratio overwhelmed your "wealth" valuation.
    And then this:

    When you owe money on your real estate, it can increase the impact of a loss of value. When a $550,000 house goes down to $450,000, it has lost 18.2 percent of its value. However, if you have a $400,000 loan on the property, your equity will go from $150,000 to $50,000 -- a loss of 67 percent of your equity.

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    Y'all are racist as shit

  8. Top | #18
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    Quote Originally Posted by PyramidHead View Post
    Y'all are racist as shit
    What????

  9. Top | #19
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    Quote Originally Posted by Metaphor View Post
    I'd rather be a medicine graduate in the United States with $100,000 debt than a no-debt homeless person in China.
    Or a graduate with a MS in English Literature with a $100k student debt in the US ...

  10. Top | #20
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    Quote Originally Posted by Koyaanisqatsi View Post

    Once again, read the follow up post. Or just this part:

    Quote Originally Posted by Koy
    So the market value of your home dropped due to the housing crash in 2007-2008, but your mortgage debt did not drop commensurately, so even though, over time, your house would again start to appreciate in value, it took a temporary hard hit at that time and so your debt ratio overwhelmed your "wealth" valuation.
    And then this:

    When you owe money on your real estate, it can increase the impact of a loss of value. When a $550,000 house goes down to $450,000, it has lost 18.2 percent of its value. However, if you have a $400,000 loan on the property, your equity will go from $150,000 to $50,000 -- a loss of 67 percent of your equity.
    That's not what I was objecting to.

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