Financial Inequality & the 1% - Where Did All the Money Go?

"It was the best of times, it was the worst of times...," wrote Charles Dickens in the 1800s. The same could be said now. Apparently for the top 1% of America it's the best of times. One of my questions since the crash of 2008 has been "Where has all the money gone?" According to the Congressional Budget Office the top 1% of U.S. households almost tripled their after-tax income from 1979 to 2007. For us middle class folks, after-tax income grew 40% and the lower end of the economic scale increased also, but only by 18%.(Modesto Bee 10-27-11 Rich getting richer more quickly)

But let's wait a minute. Hasn't wealth in America (& the world) always been unequally distributed? Yes and let's start by looking at what the definition of 1% really consists of.  First, according to Joyce Apleby, emeritus professor of history at UCLA, there's income and there's wealth. To be a one-percenter you have to earn more than $700,000 a year (income) and have assets (wealth) of more than $9 million.

Ok, now we understand the basics of 1% economics. What's the economic truth for the rest of us? Have we middle class Americans been operating from an illusion that we could become rich? Yes and no. "From 1776 to the present, the bottom 60% of the U.S. population has never had more than 11% of the country's wealth." Hmm...Of course if you've done the math this 60% doesn't account for 39% of us.

Back to the question of, "Where did all the money go?" Well, well we know the banks got a lot of money. The investment bankers and hedge fund guys that is. But, I don't really think there's a simple answer to this question. We have a dream in America that hard work, luck and opportunity opens the door to fortune. That dream is a good one because it creates HOPE and in every generation the dream becomes true for a few. This "worst of times" economic recession is a wake-up call to look at the economic inequalities that have always been present, for the 99% to to keep the hope, the hard work and to hold the 1% accountable to a financially more equitable system for all. 

Modesto Short Sale or Foreclose? Which Should You Do?

California has been hard hit in this "great" recession but Modesto, in Stanislaus County ranked at the bottom, the very bottom of the just-released Brookings Institution analysis of homes in danger of going into foreclosure. Since the recession hit over 69,000 homes have been lost to foreclosure. Most of the new defaults are B of A as they're playing catch up on lost paperwork.

I know many people in our area, like you and me, that in normal times pay their bills promptly and are mortified they can't do so now. This embarassment or shame about not being able to make their mortgage causes people to delay taking action. Job loss, lost income, huge credit card debt (debt is our responsibility) and being upside down on their loans, (53% of residential properties in Stanislaus and San Joaquin are) can lead to avoiding the whole issue, but that is dangerous for your long term financial health.

The question for those of you that are in default is what is the right choice - short sale or forelosure? Here are 3 things you need to pay attention to:  1) Don't stick your head in the financial sand and ignore the fact action will need to be taken on your mortgage. If you do you could be forced into foreclosure. 2) AShort Sale will harm your credit for approximately 24 months as opposed to 7 years for a foreclosure. California is a state that cannot go after you once the short sale is complete. 3) Make sure you hire a Short Sale expert with a track record of closes and I recommend Kim Kelly of K2Sells. Kim is in the Palm Desert area, but handles short sales throughout California. And, she doesn't just handle them, she CLOSES them and has been doing so for 3 years.