Credit Suisse (CS) released a report earlier this week that shows income inequality in America is the highest it’s been since right before the Great Depression, the Huffington Post reported.
The multi-national financial institution noted that the inequality in the ratio of wealth to household income is usually bad for the economy.
“This is a worrying signal given that abnormally high wealth income ratios have always signaled the recession in the past,” wrote CS. The report also noted that the world’s richest one percent hold 48 percent of the world’s wealth, also not a good sign for the economy.
As HuffPo pointed out, there will always be more wealth than disposable income since wealth is built over time and income is a much smaller flow of new money. But it’s when the difference between the two skyrockets, trouble usually follows.
“Right before the Great Depression, there was seven times as much wealth in the country as disposable income. Right before the dot-com and housing bubbles burst, there was six times as much wealth as income.”
Currently, the ratio is higher than it was at the peak of those bubbles. Given that corporate profits have escalated while wages have remained stagnant, we could be in for real trouble.
