St. Louis Fed Study Shows Rising Level of Financial Desperation Among the Poor, Hidden by Aggregates

Posted on by

Reader UserFriendly highlighted an important St. Louis Fed study, The Unequal Recovery: Measuring Financial Distress by ZIP Code by Ryan Mather and Juan M. Sánchez. It sheds light on a topic that that readers regularly debate: why are there so many signs of distress in a supposedly robust economy?

Some of the disconnect is due to rentier choke points, like rising housing costs, particularly in big cities, leading to more and more “affordable” housing being converted by gentrification or other means into upscale abodes, and ever-escalating medical costs, which creates medical bankruptcies, worry about seeking care, and too many people not getting treatments early. Another factor is misleading headline unemployment reports. Even though the press regularly brays about the strength of the job market, the high level of involuntary unemployment belies that.

The St. Louis Fed teases out another way in which rosy aggregate data masks shaky foundations. Since 2015, the lowest income households have become more vulnerable to shocks, taking on more debt as wealth (to the extent they have it) is even more concentrated in housing. The level of distress in lower-income households has also increase, defying the official story of increasing prosperity.

The authors drill into ZIP-code level data to show that even adjacent ZIPs have shown striking divergences in wealth accumulation (or its erosion) in the last few years. You can quibble with their methods (there isn’t good data on wealth) but if anything, they are almost certain to have understated how well the well off are doing, particularly given Gabriel Zucman’s findings on the extent of hidden wealth globally (6% to 8% of total wealth). And their measures of distress seems reasonable, for instance, using 80% or more of credit card limits.

The authors point out that before the crisis, analysts missed that a supposedly sound economy featured rising levels of household debt, too often funded by extraction of housing equity to preserve spending levels or at best pay down credit card debt. Falling housing prices exposed how fragile many borrowers were, taking the economy down with them. As the report says in its opening section:

Many narratives have been told for exactly why that recession was as bad as it was, but a common plot element is that declining house prices forced highly leveraged households to reduce consumption drastically. For example, economists Atif Mian, Kamalesh Rao and Amir Sufi estimated that for every dollar of housing wealth lost, households’ consumption decreased by 5 to 7 cents. While that may not seem like much out of any given dollar, the effect quickly becomes massive when added up across all home value losses suffered by all households.

I urge you to read this very accessible study in full. Late in the report, the authors set forth how easily high level data can mislead:

Given that there has been a wide dispersion in measures of wealth growth across ZIP codes since 2010, it seems fair to reconsider what the current distribution of households’ financial conditions means for financial stability. If it is the case that growth has been concentrated in the hands of wealthy ZIP codes with low leverage, then the poor and high-leverage ZIP codes that are more affected by wealth shocks may still be vulnerable. What’s more, trends in less affluent groups are masked in nationally aggregated statistics by groups with more wealth.

Imagine an economy with two people, one of whom has $1 of wealth and the other $99. Imagine further that the poorer individual’s wealth drops to nothing the next year, while the other’s remains unchanged. A nationally aggregated statistic will observe $100 of wealth in the first period and $99 in the next, which represents a 1 percent decrease in net wealth. The poorer individual, however, experienced a life-changing 100 percent decrease. Given how the top 1 percent in our country has around 40 percent of all wealth, this contrived example is not entirely unlike the real world. Life-changing shocks to net wealth at the lowest percentiles may be entirely invisible under near trivial changes at the highest percentiles.

Oddly, economists seem to regard it as news that people who are desperate find it hard to pull themselves up by their bootstraps:

Recent research by Fed economists Kartik Athreya, José Mustre-del-Río and Juan Sánchez suggests that for individual borrowers, financial distress is not a transitory phenomenon but rather a highly persistent one. To put it differently, while most people never have credit card payments over 120 days delinquent, they found that among those who at some point do, more than 30 percent spend at least a quarter of their time that way.

A high level explanation of the study’s approach:

The methodology—which is similar to that in Mian, Rao and Sufi—creates a data set of household balance sheets at the ZIP code level and examines whether the change since the beginning of the economic recovery in 2010 has been as positive as it seems at the aggregate level. ZIP codes, being nothing more than a collection of individuals within certain geographical boundaries, are thus used to represent individuals with certain characteristics.

And key findings:

In Table 1, the economic recovery since 2010 is divided into two periods…. the first, lasting until 2015, the Federal Reserve pushed interest rates near zero to stimulate the economy. Then, beginning in December 2015, the Federal Reserve has been lifting interest rates…..

While both periods saw similarly robust growth in terms of net wealth (7.4 percent for 2010-2015 and 6.2 percent for 2015-2018), the composition of that growth is quite different. From 2010 to 2015, financial wealth was the strongest component of growth (6.9 percent), and debt accumulation was very low (0.5 percent).

Beginning in 2015, however, U.S. housing wealth posted the largest gains (6.1 percent) and brought with it faster debt accumulation as well (2.7 percent). Should house prices drop again, households may find themselves more highly leveraged and vulnerable than they were at the beginning of 2015.

The rest of the table shows the dispersion of these growth rates across ZIP codes in our sample, ranked from lowest to highest in each category. Over the years 2010-2015, for example, ZIP codes at the 90th percentile in terms of debt accumulation saw their debt grow by 6.2 percent annually, well above the national average of 0.5 percent annually. The dispersion is even wider from 2015 to 2018.

So the Fed’s super low interest rates initially, in aggregate, did more to goose financial asset prices than help that bulwark of consumer wealth, the housing market recover.

However, one effect of super-low interest rates was that homeowners with mortgages who had reasonably good credit could refi at lower rates. A dirty secret is that the benefit of refis goes significantly to financial intermediaries. However, for at least some borrowers, the effect of lowered payment would be increased savings…which would contribute to the increase in financial assets documented in this study.

A geographical look is also sobering:

The report elaborates:

The national trend is immediately apparent in both maps: While financial distress along our measure improved across most of the country from 2010 to 2015, it deteriorated with similar yearly magnitude from 2015 to 2018.

At the same time, it is equally apparent that this national trend masks a large amount of variation within states and even within counties. To give some perspective on these numbers, the national weighted average of borrowers reaching at least 80 percent of their credit limit in our sample was 16.5 percent, 14.7 percent and 16.1 percent in the years 2010, 2015 and 2018, respectively. Those ZIP codes in the deepest shade of red, then, were deteriorating each year by around an eighth or more of the national average. Compare that to the darkest shade of blue, which marks ZIP codes that were improving each year by around an eighth or more of the national average.

That so many areas show these two extremes directly adjacent to one another points to how conditions of financial distress can diverge rapidly across neighborhoods. This effect is particularly pronounced in major population centers where ZIP codes parcel out smaller areas of land, such that they are impossible to distinguish in the national graphs of Figures 1 and 2.

Consider, for example, Hennepin County in Minnesota and, within that, the city of Eden Prairie, which is composed of three mutually adjacent ZIP codes: 55344 to the east, 55346 to the west, and 55347 to the south. The eastern ZIP code experienced almost no change in net wealth from 2010 until 2015 but a slight increase in financial distress, while the western and southern ZIP codes experienced sizable increases in net wealth and slight decreases in financial distress over the same period.

After these changes, in 2015, the share of residents in all three ZIP codes that had used at least 80 percent of their credit limit was nearly identical: about 10.6 percent. During the period from 2015 until 2018, however, the eastern and southern ZIP codes each experienced increases in financial distress of about 6 percentage points, putting them near the national mean of 16.1 percent in 2018. By contrast, financial distress in the western ZIP code remained nearly unchanged over the same time period.

Clearly, the recovery experiences of these three ZIP codes were very different, even though all of them are in the same city; they share the same community center, send their children to the same public high school, and have but one McDonald’s restaurant.

I’m not certain that income and wealth disparities in a community are that unusual; think of the tony versus the bad areas near where you live. But the fact that the differences are now extreme enough to show up in ZIP code level cuts seems significant.

And more generally, this study confirms what many readers see or sense. There are more left out of this supposedly robust economy than the pols and most economists want to believe. This study shows that averages can conceal a lot of pain. But the fact that this isn’t widely enough examined, much the less publicized, mirrors the cloistered view of the top 10% and their allies in the press.

Print Friendly, PDF & Email


  1. Jim A

    Increasing concentration of wealth mean that averages give an increasingly skewed picture of the economy.

  2. Steve H.

    > Should house prices drop again, households may find themselves more highly leveraged and vulnerable than they were at the beginning of 2015.

    Shouldn’t ‘should’ be ‘when’?

  3. Amfortas the hippie

    laughing uproariously at this:”Oddly, economists seem to regard it as news that people who are desperate find it hard to pull themselves up by their bootstraps”…served as the rooster crow around here, this rainy morning.
    the datasets and graphs make my head hurt, so i rarely dig into such things anymore…but this set and their conclusions gel perfectly with my more local surveillance, in the last 15 years or so…from anecdotal and direct observation, to census and other economic-ish things.
    there’s a lot of pain out there, and all the green shoots and bootstraps and other assorted nonsense used to obscure it is insulting.
    having recently read “let us now praise famous men”, and thinking about the “Fieldwork” parts of the New Deal, where sociologists and reporters and photographers were sent among the mundane to see what was really up…I think about politico-economic indicators that i use: number and condition of for sale signs over time, presence of dollar stores, and/or “resale shops”/junk shops/garage sales…the number and characteristics of people walking(no public transportation out here, so this is a real thing…ie: lot more white folks walking with grocery bags, these days)…etc etc.
    the Big Aggregate, Official Numbers are all but meaningless, to me…and not just because of their massaging and corruption to the Narrative.
    I dig that there’s been something of a revival of this kind of granular field study…paying attention to the lived experience of people, and giving the lie to the by turns rosy and cruel historia officionale.

    1. ambrit

      I’ll second your observation about people on foot, and not by choice. Until I get the family auto back on the road again, I’m one. I’m doing a lot more walking that before, mainly to the nearby small grocery store, and WalMart. An old Army backpack someone gave me a few years ago serves as a grocery ‘carrier.’ Many of the really poor here ride about on bicycles, with plastic bags of groceries hanging from the handlebars during ‘foraging’ expeditions. People ‘on foot’ here wave to each other in passing now. Most drivers look right through you. You have to be very observant when crossing intersections. On the main roads, the drivers are often quite ‘casual’ about pedestrians. The ‘back streets’ are better for foot traffic. The speed limits are lower and the drivers more observant. Over the last month ‘on foot,’ I have not been offered a ride once. The public ethos has changed, and for the worse. All of this ‘fear mongering’ has had a pernicious effect on the public’s mood.
      The number of “For Sale” signs in our inner ring suburb has visibly increased. On our block, two older women have moved to, or been moved to, “assisted living” quarters and their houses put up for sale. I know that one such, at the end of our block, bought her 1600 square foot under roof house, about 75 years old now, for around 80,000 when we bought ours, and put about 20,000 into it in renovations. (Figures from a conversation with her a few years ago.) The present asking price, is 118,000 USD. That is just below the Zillow estimate.
      Rental to college students is a fairly big part of the rental stock around here. When school lets out, numbers of houses suddenly become empty. Then those houses suddenly become “For Sale” and later, “For Lease.” A sure sign of the college crowd is a house with four or five cars parked in front or, on the lawn. The latter are usually turned in to the City quickly. There is a City ordinance against parking on lawns. For a lower middle and upper working class neighbourhood, this is important. For some reason, parking on the lawn is perceived as a sign of “trashiness.” I confine my auto repair work to the driveway. The engine compartment can be covered with a tied down tarp for ‘appearances sake.’
      For the poorer cohorts, appearance is about all that is left of the formerly common illusions of upward mobility and gentility.
      Enough ranting. Time to trot down to the main street and ride the ‘Weekdays Bus” down to the industrial zone in search of a motor mount bolt set.
      Yoiks and Away!
      As Daffy would put it:

    2. sharonsj

      I’m with Amfortas the hippie. I read numerous economic web sites for information but I rely on real life to know what is actually happening. The government statistics are all rigged or skewed and never questioned by the national media (which has yet to cover the retail apocalypse). We do not have great employment numbers. We have had–and still do–increasing price inflation. Despite the supposed increase of wealth in my area due to fracking, all I see are for sale signs, closed stores, and more dollar stores. And because I earn extra money by vending at various venues, I can attest that fewer people are spending and they are spending less.

      Middle and lower income people never recovered from the great recession. And, since we are entering another downturn, to be told that Wall Street and the economy are doing great is a complete insult to those of us who understand what’s really going on.

      1. Arizona Slim

        I recently took a walk in Downtown Tucson. In just a half mile, I counted 12 vacant storefronts. And only some of them were for rent.

        On my bicycle rides around town, I like to count “for sale” signs. It’s easy to go for a 10-mile ride and count 20 signs — and may of them have been up for months.

        1. Wukchumni

          In Visalia (pop 136k) on the main commercial drag: Mooney Blvd, was one of those giant old furniture stores on a prime intersection, continually going out of business for decades, and finally came through on the bargain, and away it went 3 ago, and a newly minted fancy mixed retail building came up with room for 4 or 5 tenants and hundreds of customers cars, which has sat empty for well on 2 years pleading for somebody that desires that new building smell, but to no avail.

          It’s just one of many empty retail ventures, another one across the boulevard was one of those bullet-proof 1960’s banks with high ceilings, utterly useless for anything except the 1 month a year it was a Halloween store. I talked to one of the guys involved in tearing it down, and he told me it was one of the toughest jobs of bringing a building down he’d ever done, they built them to last.

          It has sat empty for a year and a half, cordoned off by one of those chain link fences with slats, where it doesn’t allow you to see the fiat flat dirt disaster left behind, that nobody dares contemplate a phoenix rising, not surprising.

        2. Cal2

          In San Francisco on Saturday, we counted 14 empty storefronts or for lease signs along Columbus Avenue, the “vibrant heart” of North Beach.
          A lot of that is caused by high rents, greed or the requirement to update buildings for seismic resistance, or the Americans with Disabilities Act making it too expensive to convert to food establishments, (bearing walls often have to be moved to make wide enough corridors, among other things).
          Last, but certainly not least, dozens of drugged out zombies per city block that have alighted on the city from all over the Western World, and defecate, shoot up and break into parked cars. Plus the $8 an hour parking meters at peak demand time, the final blow to small businesses.

  4. cm

    Related (from 2016):

    Suicide in the United States has surged to the highest levels in nearly 30 years, a federal data analysis has found, with increases in every age group except older adults. The rise was particularly steep for women. It was also substantial among middle-aged Americans, sending a signal of deep anguish from a group whose suicide rates had been stable or falling since the 1950s.

    The suicide rate for middle-aged women, ages 45 to 64, jumped by 63 percent over the period of the study, while it rose by 43 percent for men in that age range, the sharpest increase for males of any age. The overall suicide rate rose by 24 percent from 1999 to 2014, according to the National Center for Health Statistics, which released the study on Friday.

    1. RWood

      Addressing the corporate asteroid:

      Returning home, I realise that there is something missing from the IPBES report after all. The need for “transformative change” is identified, and the authors warn that we, “can expect opposition from those with interests vested in the status quo”.

      The struggle to describe you has proved difficult even for one of our most accomplished linguists, Noam Chomsky: “I don’t know what word in the English language – I can’t find one – that applies to people who are willing to sacrifice the literal existence of organized human life so they can put a few more dollars into highly stuffed pockets; The word ‘evil’ doesn’t even approach it”.

  5. rd

    The miracle of modern economic theory has allowed for both the Laffer Curve and “pulling oneself up by the bootstraps” to be not only truths but desirable.

    In the case of the Laffer Curve, it is most likely correct but with a very different shape and inflection point than envisioned by Mr. Laffer, namely that peak tax collection is probably at 50% marginal rates or a bit higher instead of the 10% or 20% that seems to be beloved by the right wing economists (probably because it would be difficult to get funding if you believe it is 50%).

    In the 1800s, it was widely recognized that “pulling oneself up by the bootstraps” denotes a preposterous impossible task. However, we now seem to view this as something that all mortals should be able to do with ease. So modern economic theory appears to assume that the impossible is easily attained.

    Stan Lee did not die. He simply turned into an economist creating new universes for everyone to live in.

    1. Amfortas the hippie

      back when i still got invited to local demparty soirees, I cut a bootstrap from an old pair of boots(i keep these and invert them on fence posts to give the wasps someplace to live besides the porch).
      wrote “gop economics” on it and passed it around. to my astonishment, this had to be explained.
      middle of obama’s term, and everything was wonderful, no?
      we got healthcare, the economy is booming…why was I being all debbie downer?
      i boiled and ate my bootstraps a long, long time ago.
      unironic usage of that rhetoric is a sure sign that you’re dealing with the comfortable and disconnected…or as i like to think of them, dinner on the hoof.

      related: this has been on my shelf for a while, but i just recently added it to the pile on the bed
      it’s terrifying to see the similarities…not just in material conditions and the bureaucracy and officialdom/busybodies…but in the attitudes of the comfortable, right up until they began to lose their heads.
      very germane.

  6. Kurtismayfield

    Educational results by zip code should also show this. Here in Massachusetts we are seeing a bifurcation of data.. the well off districts skew the data upwards and hides that the lower, poorer districts aren’t doing so hot.

  7. Summer

    “What’s more, trends in less affluent groups are masked in nationally aggregated statistics by groups with more wealth.”

    They have plenty of non-aggregated stats for this study. The Fed’s economists and others have access to the same info.
    The stats by Zip Code are used by the financial sector. They know which areas to prey on for rentier schemes.
    None of this is “oversight” or years of bad math.
    It’s a systemic reorganization of the population into something more akin to Zones like in the “Hunger Games.”

  8. William Hunter Duncan

    In Minneapolis we are debating the 2040 plan, rezoning the whole city supposedly to address a housing crisis.

    Most urban planners and city officials are convinced, add density and prices will go down. I keep repeating that housing costs depend on the cost of building; housing is not widgets, flood the market and reduce cost. Simple metrics of supply and demand do not necessarily apply.

    I always point out too, the real issue is not available housing as much as it is the downward pressure on wages for 40 years. The $7 I made at Big Box Store in 1992 is $13 according to the Fed, more like $20 according to the old “basket of goods”, but officially an 85% inflation rate after 27 years.

    Median house price, $120,000 in 1992, 342,000 in 2019, a 185% increase.

    Median household income in 1992, 53,000 approx, in 2019 approx 63,000, a 19% increase.

    But when I offer up information like this, in most venues….


    As for that Fed study, I find it interesting that they chose the most affluent suburb of the Twin Cities to study. If a zip code in Eden Prairie is in distress, then it is much, much worse throughout most of the rest of Hennepin County.

    1. MIchael

      You make some very good points, some of which I agree, but also some disagree. Using Eden Prairie for an example of the study, does not show poverty, but perhaps the fact that this bubble is nearing is maximum expansion, as those living in “prosperity” through debt are reaching above their limits.

      With regard to supply and demand, I think it also depends upon who is building the new structures and by whom their owned. If the four plexes are funded publicly and not by Wall Street, and are owned by the residents then wealth concentration might be avoided. If they are owned by the banks, and rented to the masses by the rich, then wealth concentration will continue, and prices will continue to rise. The building costs will be more than using the existing structures, I but I believe the cost of capital is much bigger over time.

      1. William Hunter Duncan

        I have said as much to the planners of Minneapolis 2040. If the plan is about putting Minneapolis to work rebuilding this city, that is positive. If it is about chaining all construction to Wall Street loans, then Minneapolis will be a rentier paradise, most of that work done by the biggest developers, rents continuing to rise.

        As far as I can tell, the plan depends almost entirely on private funding for construction, which means the biggest entities will be able to buy most of the land/buildings suitable for expanding housing. Another economic downturn and any small-time builders and housing generally will go through another process of consolidation.

        The city is effectively broke, it can only juice low-income housing by offering tax breaks to builders, but that just means my property taxes have increased on average about 10% a year since 2006, when I am also on the “special-assessment” hook for new sidewalks, re-surfacing the roads in my neighborhood, water lines and sewer, etc etc; a crumbling infrastructure is pricing most people out of the market.

        As for four-plexes etc apartment housing being owned by the residents, the vast majority of Americans can’t own any housing without paying hefty tribute to Wall Street. Maybe if cities like MPLS want to explore new currencies, or supporting the “seizure” of housing from big bank control to resident owned, or some like radical departure from neoliberal debt based servitude, then maybe rents will be reduced, maybe.

        1. chuck roast

          Up next for your neighborhood…TIFs…the developer scam-de-jour. Any taxes collected go to infrastructure in their neighborhood. Need the city’s help with paying for your new sidewalks? Sorry, pal.

          I’m curious if the economic pressure on the wanna-be-rich in Eden Prairie is in due partly to rising adjustable interest rates. They probably didn’t dig that deeply into the data. Or maybe it’s the cost of sending their kids to community college.

        2. Amfortas the hippie

          even way out here, the movers and shakers are beginning to yammer about 5 year plans, and “doing something”…mostly feelgood business oriented things…like letting walmart set up shop(!!) and “public/private partnerships”(!!!)and outsourcing the landfill(after 10 years of permitting and buying land and getting their ducks in a row to do it ourselves(somebody got offered a kickback. mark my words))
          nobody is ready to listen to the crazy hippie guy who’s been right about everything for 24 years(Cassandra in a coalmine). i float local currency, actually small business loans(like the antiusury way the arab world does it, or india), local ordinances to favor local ag and local small manufacturing…but i’m not one of the 20 or so old men who own everything(this concentration isn’t seen as a problem, of course), so what do i know.
          the last time there was this sort of ferment in the back room at the lions club meeting, we imported austin’s zoning ordinances and fredericksburg’s rent(wealthy town down the road a piece), to the detriment of the majority of local people.
          they talk about a housing shortage, but neglect the numerous houses that sit empty because the zoning and lack of capital prevents renovation…and the same 5 guys alone have the ready capital to buy them all up on the courthouse steps, when the legacy owners eventually fall into arrears with their taxes.
          there are honest people in elected office(the long term mayor is awesome), but they listen to these slumlords and slave drivers.
          I’ve learned to be very suspect when these kinds of rumblings begin.

          1. William Hunter Duncan

            Here in Minneapolis and Minnesota TIFs are a thing, a bi-partisan willingness to make regular citizens and a future generation pay for billionaire sports facilities etc.

            In Minneapolis the situation is less a handful of white guys owning everything, and more about a very diverse and progressive city leadership attempting utopian changes by way of more-or-less market orthodoxy, with a tinge of techno-cornucopianism and a dash of social engineering – set the zoning and let the market run with it, we will all be driving automated/elec cars except for those many who are going to give up driving because the ever more crowded city will be so ecologically calm and comforting.

            As a working-poor white guy I don’t get much traction talking like this, more or less predicting the trend of things accurately in the delusions of my fellow citizens, but I take comfort at least in feeling like I am not particularly surprised by much of anything, and so maybe am a bit more prepared for the inevitable than most.

          2. JBird4049

            And so I find that the Pope is Catholic and that water is wet.

            I am always constantly amazed at the extent and depth of willfully self-imposed ignorance and folly.

            All of this economic and social decline has happened in the last fifty years with the rot easily visible in the last twenty; the collapse’s noticeable acceleration is so very hard to hide from; yet, most of our collective “leadership” and a large part of our society is successful at this.

            I guess that hiding from the not so metaphorical collapse is easier than going for a walk and see the empty stores and abandoned homes, or talk to the homeless.

    2. UserFriendly

      Note what the study specifically said about Eden Prairie; the part inside the 494 loop on the border with Edina is doing great (i’d be shocked if it wasn’t), the part further out by Chanhassen isn’t doing so hot, and the part in the south is somewhere in the middle. Having grown up in ‘the bad part’ of a similar well off suburb I don’t find that at all surprising.

    3. JBird4049

      I always point out too, the real issue is not available housing as much as it is the downward pressure on wages for 40 years. The $7 I made at Big Box Store in 1992 is $13 according to the Fed, more like $20 according to the old “basket of goods”, but officially an 85% inflation rate after 27 years.

      If the minimum wage high point in 1968 had been adjusted for both inflation and productivity growth as it had been for the previous two decades, today’s minimum wage would be (very) roughly $21-23. That is slightly higher than California’s current $10.50. One could rent an apartment (a dump, but still) in the Bay Area.

      I wonder. Government benefits like SSI, SSDI, and regular SS as well as SNAP increases are tied to governmental statistics. If inflation is undercounted, those adjustments are as well, which seems to have been happening for a few decades. The only economic statistics that seem to be reliable to this non-expert to be the cost of housing by HUD and the labor participation rate (not the unemployed rates except maybe U-6) However, statistically analysis ain’t really my thing, honestly. Still, I have been checking the government’s numbers over the decades as a hobby and they look increasingly mirage like.

  9. Anonymous

    It has been, for a long time, unendingly disturbing to me how readily economists and pundits put faith in the “nominal” values of govt stats regarding household financial well-being, without giving a good look at the statistical distribution. It seems like an article of faith, among those who profit from the data, that the distribution is a nice, tight bell-curve. I suspect, however, as implied in the St Louis Fed study, the data exhibits a pretty strong binomial distribution, distorting the perception of financial well-being.

    1. JBird4049

      It has been, for a long time, unendingly disturbing to me how readily economists and pundits put faith in the “nominal” values of govt stats regarding household financial well-being, without giving a good look at the statistical distribution.

      Despite my sincere diatribe early on this thread, I think I have some understanding of how those economists and pundits have faith in the government’s statistical bovine excrement; those used to be more accurate and society used to be economically flatter; the deliberate distorting of both the collection and analysis of the stats as well as the increasingly hourglass or even pyramidal shape of our society’s economic classes has been happening for decades. All of the oldest government employees, researchers, and educators started their careers in a very different economic, social, and political environment. Their successors and students are being taught as if it was still 1975 or maybe 1985.

  10. dk

    One of the problems with aggregation is that it makes identification of tipping points inaccurate.
    In election politics, the tipping point is 50%+1. But that can only be identified if one knows what turnout will be. Confidence margins can be wiped out by non-trivial random factors like the weather. So “fine-tuning” expenditures to avoid “over-spending” is antithetical to success with aggregates.

    Aggregations tend to be collected as “snapshots,” whose half-life of accuracy should be understood, and especially when combining datasets. And as I think the article discusses, significant trends can be obscured when aggregations are too broad, on the assumption that one region or class is much like another (zip codes in the article).

    Numbers without complete contexts have little real meaning.

  11. Sound of the Suburbs

    Problem solving involves two steps.

    1) Understand the problem
    2) Find a solution

    Post 2008 – “It was a black swan”
    That’s no good at all.

    It is a black swan if you don’t consider debt. They use neoclassical economics that doesn’t consider debt.

    They can’t work out why inflation isn’t coming back and the real economy isn’t recovering faster.

    Look at the debt over-hang that’s still left after 2008 in the graph above, that’s the problem. The repayments on debt to banks destroy money pushing the economy towards debt deflation. It’s called a balance sheet recession.

    QE can’t enter the real economy as so many people are still loaded up with debt and there are too few borrowers.

    QE can get into the markets inflating them and the US stock market is now at 1929 levels.

    They have created another asset price bubble that is ready to collapse leading to another financial crisis.

    QE just widened the gap between the markets and economic fundamentals.

    1. Sound of the Suburbs

      Using the markets to judge the performance of the economy.

      “Everything is getting better and better look at the stock market” the 1920’s sucker that believed in free markets

      Using economic fundamentals to judge the markets.

      Davos 2018 – A Chinese regulator has noted the US stock market is already at 1929 levels.

      The West’s experts can’t change the subject fast enough (49 mins.).

  12. Jay Sama

    Here on the streets of Backcountry Massachusetts, anyone who doesn’t have access to family money, a friend who gave him a gov job, or was one of the lucky few who did manage to win the education/job lottery is continuing to see his lifetime of toil and minor degrading assets, (house or car if at all that lucky) continue to disintegrate into dust and his dreams of any retirement possibility turn to zero.
    No one needs numbers for that.
    The more dire victims, the homeless and disenfranchised are dying earlier and in greater numbers, sometimes from drugs and suicide but mainly from unattended-to health issues, exposure to the cold as overfull shelters close their doors and poor nutrition.
    Many people living undercover in cars cuz it’s illegal to park in empty store lots at nite. Hunted like criminals by the cops. Those that attempt camping all winter take wicked chances with their life. Many young ones dying taking that chance out here. The shelters don’t accept anyone with substance issues. So the addicted chose their substance over safety and warmth.
    The rich hate and despise the poor and homeless. Their purebred dogs eat organic treats while homeless beg on streets.
    Many of us see our futures looking more like “The Road” everyday. Hope no longer works cuz you can only work so hard for so long before reality sinks in. We’re working the same crap jobs and getting the same crap wages we were getting at 17. You see your kids all excited thinking they’re gonna do better than their old man,they’re gonna show you. But five years into the work world, their brow is furrowed, their contenence is grim. No more fun-loving kid. Now, they start respecting you instead of criticizing you. They’re getting it. The game is rigged, no way out. Dad is still trudging all these years.
    Eventually dispair becomes your daily friend. You are barely making it, or not at all. Your idea of senior bliss just a distant memory. Body broken, mind numb. A distopian reality unfolding as you enter old age.

Comments are closed.