A recent study reveals that the top 10% of earners in the U.S. took home more than half the country’s total income in 2012. That's the highest level recorded since the government began collecting the data a century ago, according to a New York Times analysis.
The study by economists Emmanuel Saez and Thomas Piketty also found that the top 1% of earners enjoyed 95% of the income gains since the recession ended. Meanwhile, incomes for the rest of us stagnated from 2009 to 2011 and grew only about 1% in 2012.
Why have incomes for most Americans hardly moved while those of the top earners took off?
It could come down to that old adage: it takes money to make money.
“Excess capital that wealthy individuals and institutions had to invest...[during the crisis] has allowed them to accumulate even more wealth than others who didn’t have excess investment capital and are struggling in this economy," Nomi Prins tells The Daily Ticker in the above video.
Prins is a senior fellow at the non-partisan (but liberal-leaning) think tank Demos, a former managing director at Goldman Sachs, and author of the upcoming All the Presidents' Bankers: The Hidden Alliances that Drive American Power.
She says wealthier Americans with cash to spare were able to snatch up foreclosed homes during the crisis at bargain basement prices and collect gains from the housing recovery that followed. Those without extra money could not take advantage of those investment opportunities while struggling to just get by, or keep their homes out of foreclosure.
Essentially the wealthy could better weather the crisis and capitalize on it.
It's the more affluent Americans that have benefitted from “the recovery in the stock market due to cheap money,” as Prins puts it. The richest 10% of households own around 90% of the stock market, according to The New York Times.
Prins says many of the advantages that wealthy households have seen since the crisis are due to policies coming out of Washington. That includes the Federal Reserve’s zero-percent interest rate policy and government subsidies for the banking system at its weakest point.
Check out the video above to find out why Prins thinks Washington is to blame.
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