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Comment by alexeisadeski3 | Hacker News Reader

Long story short:

The wealth of non rich Americans is almost entirely contained in their highly leveraged houses. If housing prices collapse, their wealth collapses.

In 2008, housing prices collapsed.

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Not exactly. The 25th percentile's wealth was dropping even before the recession, which suggests some additional downward pressure, although I am not sure what that could be off the top of my head.

My suspicion is that it may be due to the inflation adjusted real wage effects, which hit the bottom 25th percentile the hardest, as that is generally their only source of income, and their resulting margin for wealth storage is so much closer. [1] Honestly, real wage income has been flat since about 1965, and for many has been going down since the great recession. [2] And if you only got high school or less, well, you're just boned. [3] (Note, take sources with a grain of salt, as they're 5 minute Google searches)

[1] http://1.bp.blogspot.com/-aGE47oMJAQw/UhZtjjtKorI/AAAAAAAAJz...

[2] http://www.pgpf.org/Chart-Archive/~/~/media/A130E85DDC064B81...

[3] http://www.frbsf.org/wp-content/blogs.dir/1/files/1106bb.gif

That would explain only a slowing in the rate of wealth increase, not a decrease in wealth.

Not necessarily. Everybody has a burn rate for money, as a natural feature of living in a market economy where we do work for pay. At its minima, its the cost to meet Maslow's needs. In the worst version, if our pay goes below the absolute minima, then we'll likely be eating our wealth, looking for other support, going homeless, or dying.

Unfortunately, we also tend to be habit creatures, and our burn rate often stabilizes to our pay and our social class (keeping up with the Jones'). If our real wage starts to go down, then we often have trouble adapting, and keep burning as if we were still at the prior equilibrium (credit card debt, eating into savings, taking out loans).

This is made even worse when the source of real wage reduction is the subtle erosion of our buying power through inflation. We complain about how much things cost, but we still see our paychecks slightly increasing so it seems good, and the burn gets worse.

> some additional downward pressure, although I am not sure what that could be

I'm not an economist, so these are speculative, but seem reasonable based on the fact that we're talking about loss of wealth from households below median:

Loss of life (specifically heads of household) due to the wars (I'm guessing most military households, being young and having maximum education of high school to "some college" will be below median)

Increased energy costs (gas being a marginal cost would hit people with less marginal income harder).

Loss of jobs to automation (I'm thinking secretaries, anything that can be replaced by an iphone, etc)

Declining birth rate (last I heard total high school graduations were supposed to peawould tend to lead to oversaturated teaching jobs, also relatively low-paying.

Chrysler was in distress long before the recession.

Those describe downward pressure on income, not wealth necessarily:

None of these would lead to a decrease in wealth so quickly, except for situations in which the wealth had to be consumed to make up for loss of job / disability / sickness / overconsumption.

Re: Military families: Most people getting killed/dismembered were too young to have any wealth to lose. Even still, their wealth would actually increase upon death as the military's life insurance policies are quite generous.

Wage freezes at nominal values which did not keep pace with inflation during the 2000s, I'd guess.

Converting home equity to consumption is my guess.

Remember HELOCs?

HELOCs are back and bigger than ever!

Home-equity lending surpassed 2009 levels in 2013, with $111 billion in new home equity lines of credit (HELOCs) opened. In the fourth quarter, new lending increased 43% from quarter four 2012, according to data from Experian-Oliver Wyman Market Intelligence Reports and Experian’s IntelliView tool.

http://www.marketwatch.com/story/helocs-made-a-comeback-in-2...

Haha awesome.

Though I imagine that surpassing "2009 levels" is not very exciting. Wake me up when they surpass 2005 levels!

The chart that showed the movements of the various percentiles showed an interesting thing, where in 2003, the 25th percentile's wealth started to drop, while at the exact same time the higher percentile's wealth suddenly went up, before dropping after the recession hit. I have a feeling there's a link

2003 was when the stock market recovered.[1] The wealth of the rich is highly correlated with the stock market.

[1]http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#symbo...

What's the home ownership rate in the bottom quartile of net worth? The closes I could find was rate for the bottom 90%, which was apparently 66% in 2004.

I don't know. Probably pretty low. Which is why it shouldn't be surprising that so many have zero or near zero wealth.

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