Thursday, September 10, 2009
Economics 101 in the USA September 2009
Ultra rich: "We bought an island off the coast of the Bahamas and have moved 50% of our holdings overseas. We have no idea how much a gallon of milk costs as our servants do everything. We are unfazed and actually profiting off the current volatility in the market and the world. I frequently hunt the most dangerous game on my private reserve in Texas. " Top Wealthy .01% of the population hold 6% of all US wealth.
Upper upper class: "How shall I reallocate my assets now that our dividend payments on ultra conservative bonds and CDs has dropped 2 points? Can I keep my sweet Muffy Princess happy on two million in dividends per year? Should we rent out our family property in the Hamptons for a few weeks a year? Oh dear. I had to temporarily shutter one of our factories in China, but our personal wealth is secure. I am so glad Mumsy and Popsy had us put several hundred thousand dollars in precious metals three years ago." Next top 1% of population hold about 30% of all US wealth.
Upper class: "We had to sell one of our vacation homes at a small loss, but better that then continue to eat the mortgage payment. Our other two homes are just fine since we inherited them debt free several years ago. My $600,000 salary is safe as we are partial owners in the business, but maybe it's time to spend a little less and put more away for a rainy day. Our portfolio lost 20% over the last two years, but it's not the end of the world." Next top 4% hold about 25% of all US wealth.
Upper middle class: "We are not quite as comfy as we used to be. My salary has been frozen and our stock portfolio is down 30%. This jumbo mortgage is about to reset and our primary home is underwater. My wife is concerned she will have to go back to work as an accountant teacher psychologist lawyer nurse but I would rather she stay home with our three children. I hope I don't lose my job because then we would be screwed. My father is about to move into our guest room since his retirement account was blown away and the union had to settle the pension dispute at 60% of what he was supposed to get." Next top 10% hold about 15% of all US wealth.
The top 15% wealthy own about 75% of all US wealth. If you need to ask, you're not in this category.
Middle class: "My house is underwater and I am not sure if it is worth it to pay the mortgage. My brother and his wife just got divorced, he had to move back in with my parents. I lost my job in tech retail health finance whatever and had to take a part time job at Starbucks to help pay the bills until I can find a full-time position in my field. Thank God for Starbucks, did you know they will give health care to part timers? My wife found a job as a teacher nurse secretary but we had to put our youngest in day care. We also had to pull the oldest out of his private Catholic school, he wasn't happy but he understands, we're not able to save anything for retirement or college tuition. We have a bit saved for a rainy day but it has been raining for a while. I hope neither of us gets ill." Next 15% own about 20% of all US wealth.
Lower middle class: "We lost the house last year, I guess we really couldn't afford it anyway, damn real estate agent was a liar, and have been living in a one-bedroom apartment since then. We have no savings left and there is a lot of tension in the house. My attempt to go into business with my friend brother relative didn't work out and am back at work at the factory garage restaurant but it is not full-time and there are no benefits. The wife picked up part time work but we are taking on credit card debt to pay bills and I don't know how long we can keep it together."
Next 30% own about 15% of all US wealth.
Lower class: "We are dead broke, declared bankruptcy, my spouse left me, I am having substance abuse problems, lost my job a while ago, stopped looking for work last month, and my buddy is going to kick me out of his house next week. I am going to stay at the shelter and see if they can help me find a job, but it doesn't look good. I am socially alienated." Bottom 40% of the population own close to 0% of all US wealth.
Don't worry though, the recession is over! Everything will be fine! Economists everywhere are saying it, so it must be true. Or not.