The Wealthiest 20% Own 72%; The Poorest 20% Only 3%

Forbes, April 19, 2013. All Rights Reserved.

The growing disparity in wealth made the great recession worse and the recovery weaker than ever before. This nation’s wealth disparity widened more than ever before over the last five years because of the steep decline in the value of residential homes and stagnant wages for the lower and middle income groups in the U.S., explained a member of the Federal Reserve Board, Sarah Bloom Raskin, in a speech that explored for the first time a fresh explanation about the obstacles holding back economic growth.

This “financial vulnerability and marginal ability” to recover from the decline in the wealth of lower income and middle income Americans is “undermining our country’s strength,” Governor Raskin emphasized in New York yesterday at an economic conference sponsored by the Levy Institute at Bard College and the Ford Foundation. Raskin admitted to a feeling of frustration at the central bank about the inability of the Fed’s low interest rate policy together with the expansion in the money supply to alleviate this growing disparity between the wealthy and the rest of American families. She admitted there was current exploration at the Board level of the central bank that “our macro models should be adjusted,” because four years into the recovery a confluence of factors have contributed to a weak recovery.

“Inequality contributed to the severity of the recession,” Raskin said flatly, and blamed this inequality- for the “differential expectations” in the future between well-off families– with those families not so well off, who were battered by a plunge in the value of their homes, a high level of debt and a continuance of lower wages. I had never heard that theme so sharply expressed as the blame for the mediocre rate of growth we are experiencing.