St. Louis Fed: Wealth Inequality is more sever than income inequality

[ksen]

http://www.stlouisfed.org/publications/re/articles/?id=2539

Wealth inequality is a much greater dilemma, but it is often unaddressed in the public debate outside of tax proposals. The heavy concentration of financial assets on the balance sheets of the rich will only worsen the already severe wealth inequality without greater democratization of ownership of capital.11

So what's their solution?

A large portion of the U.S. population remains financially illiterate and misses the potential gains provided by financial assets. Financial education initiatives could use some of the energy devoted to the fierce policy debate surrounding income inequality in the U.S.

Financial education.

Srsly?

Yeah, some financial education would be good to help people understand the financial ramifications of some of the decisions they make. But how is financial education supposed to fix the main problem that most people don't have enough disposable income to invest in financial assets? How is financial education supposed to help people that are stuck in the world of payday advance loans having to pay 300+% interest? How is financial education supposed to help people whose paychecks get eaten up by bank fees should they have something unexpected happen between paychecks? How is financial education supposed to help someone that experiences a catastrophic medical event?

Financial education seems like a pretty simplistic answer that doesn't do much at all to address the dilemma of extreme wealth inequality.

 

[Harry Bosch]

http://www.stlouisfed.org/publications/re/articles/?id=2539



So what's their solution?

A large portion of the U.S. population remains financially illiterate and misses the potential gains provided by financial assets. Financial education initiatives could use some of the energy devoted to the fierce policy debate surrounding income inequality in the U.S.

Financial education.

Srsly?

Yeah, some financial education would be good to help people understand the financial ramifications of some of the decisions they make. But how is financial education supposed to fix the main problem that most people don't have enough disposable income to invest in financial assets? How is financial education supposed to help people that are stuck in the world of payday advance loans having to pay 300+% interest? How is financial education supposed to help people whose paychecks get eaten up by bank fees should they have something unexpected happen between paychecks? How is financial education supposed to help someone that experiences a catastrophic medical event?

Financial education seems like a pretty simplistic answer that doesn't do much at all to address the dilemma of extreme wealth inequality.

Maybe it's chicken before the egg issue, but someone who doesn't know how to manage money will blow it regardless of their income.

 

[dystopian]

Financial education seems like a pretty simplistic answer that doesn't do much at all to address the dilemma of extreme wealth inequality.

But if everyone just learned how to game the system like the rich do, then they too can get a bigger piece of the pie. Don't you see! Everyone could have the biggest piece of the pie if they just knew how to slice it better.

...wait. Something about that seems off.

 

[Nice Squirrel]

A large portion of the U.S. population remains financially illiterate and misses the potential gains provided by financial assets. Financial education initiatives could use some of the energy devoted to the fierce policy debate surrounding income inequality in the U.S.

And this is why we MUST privatize Social Security.

 

[Loren Pechtel]

Yeah, some financial education would be good to help people understand the financial ramifications of some of the decisions they make. But how is financial education supposed to fix the main problem that most people don't have enough disposable income to invest in financial assets? How is financial education supposed to help people that are stuck in the world of payday advance loans having to pay 300+% interest? How is financial education supposed to help people whose paychecks get eaten up by bank fees should they have something unexpected happen between paychecks? How is financial education supposed to help someone that experiences a catastrophic medical event?

Financial education seems like a pretty simplistic answer that doesn't do much at all to address the dilemma of extreme wealth inequality.

Most financial problems are self-inflicted.

When you live at the edge you're going to get in trouble eventually. You have to live a bit below your means, life will be much more comfortable.

If you're above the poverty line you almost certainly can live below your means.

 

[ksen]

Most financial problems are self-inflicted.

lol

When you live at the edge you're going to get in trouble eventually. You have to live a bit below your means, life will be much more comfortable.

If you're above the poverty line you almost certainly can live below your means.

Sure, sure you can. Easy-peasy.

 

[Emily Lake]

How is financial education supposed to help people that are stuck in the world of payday advance loans having to pay 300+% interest? How is financial education supposed to help people whose paychecks get eaten up by bank fees should they have something unexpected happen between paychecks?

While it certainly wouldn't help with every possible scenario, financial education could probably help prevent people getting into situations where they use payday loans at 300% interest, and could probably help teach them how to budget so that an unexpected event doesn't cause them to run afoul of bank fees. Even on a shoestring budget, you can get by - if you have a budget.

No, it's not an answer to all the problems, and it's not going to fix the root cause. But it's certainly not going to hurt.

 

[ksen]

Maybe they could use the McDonald's budget!

 

[+or-1]

Yeah, if I didn't make enough to keep up with my rent, utilities and keep food on the table I'd be totally interested in learning how to budget and invest money I don't even fucking have.

Can you say "out of touch with reality?" I knew that you could.

At least I suppose I would then understand how completely fucked I really was.

 

[Loren Pechtel]

lol

When you live at the edge you're going to get in trouble eventually. You have to live a bit below your means, life will be much more comfortable.

If you're above the poverty line you almost certainly can live below your means.

Sure, sure you can. Easy-peasy.

It might not be that easy but you almost certainly can.

Over the decades I've seen many people post budgets trying to show that there is nothing they can cut--and there always is. It's more common over on FatWallet, I have yet to see such a budget not get rapidly shredded.

 

[bilby]

Clearly the main reason why poor people don't buy blue-chip securities for their retirement is because they don't understand finance.

Not having any money is no excuse for not making wise investments in growth assets.

Oh, wait.

Shit.

 

[Metaphor]

It's a mathematical certainty that wealth inequality is going to be greater than income inequality. It's nothing to do with financial education; it's an inevitable outcome of income inequality. (The only way it couldn't happen is if consumption expenditure matched income exactly for all households forever, and therefore wealth for all households was zero).