A new study on the Federal Reserve Board site provides some interesting data from several years' worth of Survey of Consumer Finances data. The data is not new, but it is stark, and worth paying attention to. The study is a working paper entitled The Finances of American Households in the Past Three Recessions: Evidence from the Survey of Consumer Finances.
While the working paper is focused on modeling what has happened to various parts of our population since the 2007 SCF (this is not an analysis of the return to the 2007 panelists in 2009, which will be out later in the year), what I'm presenting here is actual SCF data. It comes from Tables 5 and 7.
| 1989 |
2001 |
2007 |
||
| All households | ||||
| 1. Percent of households holding debt: | 72% |
75% |
77% |
|
| 2. Percent of households holding mortgage debt: | 40% |
45% |
49% |
|
| 3. Median ratio of debt to income: | 0.5 |
0.8 |
1.1 |
|
| 4. Percent of HH with debt payments >40% of income |
10% |
12% |
15% |
|
| Households by Income Percentile: | ||||
|
1. Percent of households holding debt: |
||||
| Bottom 40% | 53% |
60% | 61% | |
| Next 40% |
82 | 84 |
87 |
|
| Top 20% | 91 |
88 |
89 |
|
|
2. Percent of households holding mortgage debt: |
||||
| Bottom 40% | 16% |
20% |
22% |
|
| Next 40% | 47 |
53 |
60 |
|
| Top 20% | 72 |
76 |
79 |
|
|
3. Median ratio of debt to income: |
||||
| Bottom 40% |
0.3 |
0.5 |
0.7 | |
| Next 40% |
0.6 |
0.9 | 1.4 | |
| Top 20% | 0.6 |
0.9 | 1.2 | |
| 4. Debt payments >40% of income | ||||
| Bottom 40% | 19% |
22% |
23% |
|
| Next 40% | 8 |
9 |
14 |
|
| Top 20% | 3 |
3 |
6 |
|
| Age of Head: | ||||
| 1. Percent of households holding debt: | ||||
| <45 years |
84% |
86% |
85% |
|
| 45 to 64 years | 78 |
81 |
85 |
|
| >64 years | 38 |
43 |
48 |
|
| 2. Percent of households holding mortgage debt: | ||||
| <45 years | 45% |
48% |
48% |
|
| 45 to 64 years | 48 |
56 |
61 |
|
| >64 years | 15 |
21 |
28 |
|
|
3. Median ratio of debt to income: |
||||
| <45 years | 0.6 |
0.9 | 1.3 | |
| 45 to 64 years | 0.5 |
0.8 | 1.1 | |
| >64 years | 0.2 |
0.4 | 0.7 | |
|
4. Debt payments >40% of income |
||||
| <45 years | 10% |
11% |
14% |
|
| 45 to 64 years | 10 |
12 |
15 |
|
| >64 years | 9 |
15 |
15 |
|
Do you notice the trend? An increasing proportion of us are helping to make the FIRE sector -- the shareholders in the finance, insurance and real estate businesses -- wealthy.
Nearly half of retirees have debt, up 1/3 from 1989, and median debt has n tripled. Nearly 3 in 10 retirees have mortgages, and 15% of retirees (or is that of the retirees with debt?) have over 40% of their income devoted to debt payments.
Among our young people -- <45 years of age, 85% have debt, and at the median, their debt is 1.3 times their income, more than double the ratio 18 years earlier.
A wealth concentrating machine. The FIRE sector -- the banks, the insurance companies, the real estate interests -- are have been permitted to create a giant wealth machine, too big to fail.
But not too big to correct. There ARE things that can be done. I encourage you to take a look at Mason Gaffney's new book, After the Crash: Designing a Depression Free Economy. (read the interview linked at http://www.masongaffney.org/, or find the book at schalkenbach.org's bookstore.
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