The Atlantic points out a chart in Bernanke’s report to Congress showing the mean ratio of Americans’ net worth to annual income. After bouncing around 5x for much of the early ’90s, it went well above 6x during the tech boom, dipped briefly, and then soared to 6.3x-ish in 2007 before plummeting to around 5x again today. The Fed report, and Daniel Indiviglio at the Atlantic, point to this as a key restraint on consumer spending, as consumer confidence won’t rebound until people have repaired their balance sheets.
Here at Dealbreaker we were more surprised that the ratio was so high, since we assumed that the average American didn’t have much in the way of net worth beyond a 47 inch flat screen, a Wendy’s Baconator Deluxe and an underwater mortgage. So we looked around for median data, assuming that the mean was dominated by the top and fluctuations are driven mostly by Tiger Woods’s property tax bills. And we put together a somewhat different chart, based on the Fed’s Chartbook, which is triennial and only goes through 2007 (and measures slightly different things from the report to Congress):
This shows ratios of mean and median net worth to pretax income, in 2007 dollars, for (1) all families and (2) the top 10% of the income distribution. The median ratio rose from 1.8x in 1989 to 2.5x in 2007, before presumably falling in 2008. That’s a 2007 median net worth of $120k, by the way, which caused a range of emotions at the (intensely competitive) Dealbreaker HQ.
But while, yes, the mean data is largely driven by the top end (mean net worth of households in the top 10% of income was $3.3mm in 2007), the median family net worth still went up from 1989 to 2007 at a rate well outpacing income. Any guesses why? We’re going to go out on a limb and blame housing – and guess (without data) that the median ratio therefore fell a lot faster than the mean in 2008 and beyond. Likely making this chart even worse for the typical family than the Fed and the Atlantic suggest.
Chart of the Day: Why Americans Feel So Poor [The Atlantic]
u00a0because the population is older on average and people save (generally not enough) over the course of a lifetime.
Does my civic count towards my net worth?u00a0 It’s a ’98.nn- UBS VP
Nicely done.u00a0
Awwwww yeah, custom DB charts…the Goldman Sachs pitchbook factory swings into action.u00a0 I like this very much.
On my 23rd interview at Dealbreaker I am sitting in au00a0conferenceu00a0room and in walks Matt “The Machine” Levine……..
has anyone seen matt levine and tyler durden in the same room?
I have. We all worked on the same floor at 200WnnFab
Well done!nnOriginal economic insights, salacious gossip and T&A, all on the same blog– this I like.
OK – I’d call this first week a winner.u00a0 Well done, Matt!
Maybe they’re the same person?nn- Film critic
Agreed. Matt’s doing very well.
Beat me to it..
+1 for Matt.
I feel poor because I went to the vending machine the other day and they charged me a buck 50 for some tiny ass shit-sandwich (I missed lunch because some manager had my balls in a vice, and, oh yeah, cafe hours were reduced to save money), a piss-infused beer barely fit for a munchkin at the ballpark cost me $12 (they litterly poured 10oz in the cup, poured 2oz on the ground, and said “fuck you”), a $100 part dropped off my car that costs $2000 in labor to fix, my asshole employer notified me my prescriptions will now cost $50 instead of $10 (just for the fuck of it, according to the financial documents), the airline decided to just throw on another $100 in fees so some numbnut can molest me while his buddy (who, btw, doesn’t believe in evolution, democracy, or black people) steals my laptop out of my bag, the closest deli decided the meat wasn’t good enough so now I have to pay $30 a pound for a godamned sandwich, and, according to my calculations the other day, by the time I have kids and they turn 18, I have to find $100,000 a year for 4-8 years (per fucking kid) just so they can get stoned without getting thrown in jail.nnThe only thing whose price hasn’t exploded over the duration of that chart has been vodka, Big Macs, and that tabloid in the aisle that always has Bat Boy on it.nn”Why do Americans feel poor?” Fuck you, jackass!nnnPosted from my BlackBerry Bold
You can find unemployed mechainics on Craigslist who will do one-time jobs for $25-50 per hour.
Tried that once. The guy showed up in drag with a 14 inch dildo strapped to his chin. Never again.
This reminds me of people I went to college with.
I’d save my money by not filling the prescriptions. The pills don’t seem to be working.
Oh, really?
Ok, so median net worth is less than mean net worth.u00a0 Got it.u00a0u00a0Is that why the VIX dolphin from the other day was diving downward?nn–Guy who is trying really hard to put all these new statistics and Dealbreaker graphs together but didn’t make the cut at GS (only made it to round 18–Naked sandwich board selling of VIX options in front of Wall Street drugstores).nnP.S.:u00a0 Seriously, good job this week Matt.u00a0 Some of us just need a little time to catch up…
Same study, Median Net Worth by Agen35-44: $87kn45-54: $183kn55-64: 254kn65-74: 239kn75+: 213k
Good use of the word ‘litterly’.