The ratio of wealth to income has hit a recent record, according to Credit Suisse.
The last time it was this high was during the Great Depression. And it came close two other times: 1999, the year before the dotcom bubble burst, and leading up to 2007, before the housing market crash.
Wealth has skyrocketed, driven mainly by the soaring stock market, and that has mostly benefited the rich. Income for the average person, meanwhile, hasn’t been growing much.
Credit Suisse analysts found that the ratio of wealth to income is 6.5. For more than 100 years, it has typically fallen between 4 and 5.
“This is a worrying signal given that abnormally high wealth income ratios have always signaled recession in the past,” the Credit Suisse report said.
Wealth per adult in the U.S. has risen every year since 2008. In fact, average wealth is now 19% above the pre-crisis peak hit in 2006, the report stated. And $31.5 trillion household wealth has been added to the U.S. since 2008.
While experts said it’s normal for wealth to outpace income, especially after a recession, it becomes a problem when it rises so fast that people feel overly optimistic about their wealth.
Tim Yeager, chair of the Arkansas Bankers Association, said when wealth inequality increases, the likelihood of asset bubbles also rises.
Read More At CNN.