The Cato Institute’s Alan Reynolds in “Why Piketty’s Wealth Data Are Worthless” points out that in Thomas Piketty’s book, the wealth share of the top 1% begins at about $8 million (according to the Federal Reserve’s Survey of Consumer Finances in the U.S.). Mr. Reynolds also outlines data from a Zucman-Saez study that attempts to estimate top U.S. wealth shares on the basis of that portion of capital income reported on individual tax returns—interest, dividends, rent, and capital gains.
Alan rightly calls Piketty’s data, as presented in Capital in the Twenty-First Century, worthless. As Alan concludes, the Zucman-Saez data is so misleading as to be worthless.
In the case of the Zucman-Saez data, I would assume that the total of interest, dividends, rent and capital gains is in reality a miniscule component of wealth. What really counts is asset wealth as measured by real estate and portfolio value, much of which cannot be reasonably valued due to its private nature. Over the last six years, the 0.25% Fed Funds policy of the Fed has allowed Wall Street titans and big corporate interests to borrow at nothing and leverage such borrowings into fortunes as asset inflation sent high-end real estate prices and portfolio assets through the roof. Meantime, most of America—as represented by the non-working poor, hourly paid workers, middle America in general and retired Americans—saw no benefit at all and were even penalized because the savings rate on individual deposits was basically zero. Anyone wishing to understand wealth disparity need spend little time studying worthless data compiled by the academic community. Instead simply look at what the creator of asset inflation—the Fed—is up to.