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This is incorrect -- wealth inequality only improves during recessions. [0] https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/W

This is incorrect -- wealth inequality only improves during recessions. [0] https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/WFRBST01134

mancerayder 4y ago
Careful. The graph you linked shows that inequality going up and beyond after each and every recessionary trough. And the %age owned by the 1 percent is higher in that recovery period, than it was before the drop began. Put in another way, that support the assertion that recessionary cycles make the inequality worse. You're just pointing to the acute phase of the recession, when the evidence is in the years immediately after. I think this can be explained because assets can be purchased more cheaply during these periods, leading to a greater share owned to be possible, and thus making the wealth slice of the pie by the 1% to be even more valued.
- lend000 4y ago
  I think the problem is that every recession on that chart has been "bailed out" in some form by Fed monetary policy, mostly to the benefit of asset holders, and usually far too early or excessively. The increasing overall trend can be attributed to anti-progressive tax brackets (the wealthy pay 20% while the middle class pays 30-45%). But even in an increasing wealth inequality environment, a proper recession should at least decapitalize the stupid among the wealthy and benefit better capital allocators, which is beneficial. Better to have productive Elon Musks getting rich in the aftermath of economic turmoil than SBF's and Adam Neumanns.
  - saghm 4y ago
    > Better to have productive Elon Musks getting rich in the aftermath of economic turmoil than SBF's and Adam Neumanns Of all weeks to pick him as an example...
    - lend000 4y ago
      Not arguing with you there, LOL. If he's out of his prime and keeps it up, I imagine it'll negatively affect his wealth significantly (as it should).
- banannaise 4y ago
  It's also denominator abuse. Most of the assets of the top X% are financial instruments whose nominal value drops sharply in a recession. Those who have liquidity rarely shed those assets. So their relative wealth looks much lower for awhile, but when everything recovers, very little has changed. Meanwhile, they get the opportunity to buy cheap assets from those who did not have liquidity, which worsens both asset consolidation and wealth inequality.
notjoemama 4y ago
I found this paper relevant, titled "Wealth Inequality and Return Heterogeneity During the COVID-19 Pandemic"; specifically this part of the abstract: "We show that portfolio heterogeneity and asset price movements are the main determinants of wealth returns and inequality, whereas saving-rate heterogeneity and within-class return differences played a minor role. As the stock market continued to outperform the housing market, the return of the wealthy has risen faster than that of other households, reinforcing the wealth concentration at the top." Oh, and the time limitation in the graph you reference only goes back to 1989. The recessions since the 80's have involved increasing federal bailouts and don't result in the kind of long term impact of organic corrections required to support the statement "wealth inequality only improves during recessions". With the fed stepping in and propping up failing corporations, that statement is only true for the narrow window of time at the start of the correction to where the stock price drops precipitously. Once the market responds to the bailout it is no longer a true statement because the most wealthy have taken advantage of the price decrease while individuals with smaller net worth eventually, but only, recover what they lost. Taking a step back, I find your statement odd. Do you truly believe that or did you post that comment knowing it to be untrue in the hope to generate more discussion and push your user rank up in this system? Conspiratorial thinking on my part, but it only took me 15-20 minutes of reading to conclusively prove your statement untrue, and I'm not an economist. In light of that, it just seems...odd.
lliamander 4y ago
I think that probably assumes a recession in which inflation is otherwise low or absent. High rates of inflation (any inflation, really) disproportionately affect those for whom their only form of wealth is cash.
listenallyall 4y ago
It kind of exposes "wealth inequality" as a bullshit idea. What would be better for society, unskilled laborers earning a livable wage and a handful of $100 billionaires, or, post-recession, those same wage-earners earning 20% less but the billionaires net worth all cut in half. A simple example for sure but the goal should be to raise the living standards at the bottom, not to limit (or even care about) what the top top top net-worths (or incomes) are.

This is incorrect -- wealth inequality only improves during recessions. [0] https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/WFRBST01134

mancerayder 4y ago

Careful. The graph you linked shows that inequality going up and beyond after each and every recessionary trough. And the %age owned by the 1 percent is higher in that recovery period, than it was before the drop began. Put in another way, that support the assertion that recessionary cycles make the inequality worse. You're just pointing to the acute phase of the recession, when the evidence is in the years immediately after. I think this can be explained because assets can be purchased more cheaply during these periods, leading to a greater share owned to be possible, and thus making the wealth slice of the pie by the 1% to be even more valued.

lend000 4y ago
I think the problem is that every recession on that chart has been "bailed out" in some form by Fed monetary policy, mostly to the benefit of asset holders, and usually far too early or excessively. The increasing overall trend can be attributed to anti-progressive tax brackets (the wealthy pay 20% while the middle class pays 30-45%). But even in an increasing wealth inequality environment, a proper recession should at least decapitalize the stupid among the wealthy and benefit better capital allocators, which is beneficial. Better to have productive Elon Musks getting rich in the aftermath of economic turmoil than SBF's and Adam Neumanns.
- saghm 4y ago
  > Better to have productive Elon Musks getting rich in the aftermath of economic turmoil than SBF's and Adam Neumanns Of all weeks to pick him as an example...
  - lend000 4y ago
    Not arguing with you there, LOL. If he's out of his prime and keeps it up, I imagine it'll negatively affect his wealth significantly (as it should).
banannaise 4y ago
It's also denominator abuse. Most of the assets of the top X% are financial instruments whose nominal value drops sharply in a recession. Those who have liquidity rarely shed those assets. So their relative wealth looks much lower for awhile, but when everything recovers, very little has changed. Meanwhile, they get the opportunity to buy cheap assets from those who did not have liquidity, which worsens both asset consolidation and wealth inequality.

notjoemama 4y ago

I found this paper relevant, titled "Wealth Inequality and Return Heterogeneity During the COVID-19 Pandemic"; specifically this part of the abstract: "We show that portfolio heterogeneity and asset price movements are the main determinants of wealth returns and inequality, whereas saving-rate heterogeneity and within-class return differences played a minor role. As the stock market continued to outperform the housing market, the return of the wealthy has risen faster than that of other households, reinforcing the wealth concentration at the top." Oh, and the time limitation in the graph you reference only goes back to 1989. The recessions since the 80's have involved increasing federal bailouts and don't result in the kind of long term impact of organic corrections required to support the statement "wealth inequality only improves during recessions". With the fed stepping in and propping up failing corporations, that statement is only true for the narrow window of time at the start of the correction to where the stock price drops precipitously. Once the market responds to the bailout it is no longer a true statement because the most wealthy have taken advantage of the price decrease while individuals with smaller net worth eventually, but only, recover what they lost. Taking a step back, I find your statement odd. Do you truly believe that or did you post that comment knowing it to be untrue in the hope to generate more discussion and push your user rank up in this system? Conspiratorial thinking on my part, but it only took me 15-20 minutes of reading to conclusively prove your statement untrue, and I'm not an economist. In light of that, it just seems...odd.

lliamander 4y ago

I think that probably assumes a recession in which inflation is otherwise low or absent. High rates of inflation (any inflation, really) disproportionately affect those for whom their only form of wealth is cash.

listenallyall 4y ago

It kind of exposes "wealth inequality" as a bullshit idea. What would be better for society, unskilled laborers earning a livable wage and a handful of $100 billionaires, or, post-recession, those same wage-earners earning 20% less but the billionaires net worth all cut in half. A simple example for sure but the goal should be to raise the living standards at the bottom, not to limit (or even care about) what the top top top net-worths (or incomes) are.