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Abstract

Why is it that the rich seem to get richer over time and the poor cannot keep up with them? This is not only the situation in the U.S. but also in countries like the U.K., Germany, France and Italy. Wealth distribution is even more unequal than income distribution. For instance, in the U.S. according to the U.S Census Bureau , median net worth increased between 2000 and 2011 for households in the top two quintiles of the net worth distribution the wealthiest 40 percent, while declining for those in the lower three quintiles the bottom 60 percent. The result was a widening wealth gap between those at the top and those in the middle and bottom of the net worth distribution.

The Census Bureau’s Distribution of Household Wealth in the U.S.: 2000 to 2011, states that the median household net worth decreased by $5,124 for households in the first bottom net worth quintile and increased by $61,379 or 10.8 percent for those in the highest top quintile. Median net worth of households in the highest quintile was 39.8 times higher than the second lowest quintile in 2000, and it rose to 86.8 times higher in 2011.

Could there be a link between debt levels, especially of the long-term variety of home mortgages, and wealth inequality levels? From the 116.8 million U.S. households in 2008, 73.6 million had a mortgage in that year, or 63% of all households. 33.3% of the 73.6 million households faced foreclosure proceedings against them during the period 2005-2015. The bottom 40% of all households owned less than 0.1% of all U.S. wealth, the top 1% owned 35.5% and the top 20% owned 87% of all assets.

In servicing mortgage debt, households on a lower income level have only their income to fall back on, while the wealthier households, can -if needed- service debt from accumulated assets. This difference between households has major implications for the economic consequences of excessive lending practices. In a paper: -How the U.S. financial crisis could have been averted- , this author analyses a link between income and mortgage debt and the consequences of ignoring such income link.

The consequence is that mortgagors experience a depreciation of the U.S. dollar in the event house prices rise faster than income levels, thereby impairing their future income capacity to spend on other goods and services.



Item Type: MPRA Paper -

Original Title: How savings can lower economic growth levels: the U.S. case-

English Title: How savings can lower economic growth levels: the U.S. case-

Language: English-

Keywords: U.S wealth and income inequality, mortgage debt,household nominal incomes, average house price rises, depreciation in dollar values, national mortgage bank, early warning system-

Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; WealthE - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and CyclesE - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - GeneralE - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; CyclesE - Macroeconomics and Monetary Economics > E4 - Money and Interest RatesE - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the MacroeconomyE - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and CreditE - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies-





Autor: De Koning, Kees

Fuente: https://mpra.ub.uni-muenchen.de/78806/



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