“Top 10% Own 67% of Total Wealth”… Worst Income Inequality Since the Great Depression
Credit Cards Also Polarized: “Only the Rich Get Approved”… Poor People Face ‘Pre-screening Rejection’
K-Shaped ‘Dual Economy’ Created by Income and Credit Gaps… A World Where Only High Earners Live
Insight Bridge AI’s Perspective: Worst Polarization Since ‘Great Depression’… Becomes Structural Risk to US Economy
“Top 10% Own 67% of Total Wealth”… Worst Income Inequality Since the Great Depression
The era of the worst income inequality in history has begun. According to research from the University of Florida, as of Q1 2024, the top 10% of Americans owned 67% of the nation’s total wealth. Meanwhile, the bottom 50% held only 2.5%. The shocking fact is that this level of income inequality is the first witnessed since before the Great Depression.
When viewed from the concept of asset ownership rather than income, the situation becomes even more severe. According to Federal Reserve data, as of the end of 2024, the top 50% of households controlled 97.5% of American assets. The top 1% alone owned 31% of total wealth.
A shocking fact is that as of 2021, the average income of the top 1% of American households was 139 times higher than the bottom 20%. This gap resulted from the top 0.01%’s income growing 27 times faster than the bottom 20% between 1979 and 2021. This is interpreted as the result of ultra-high earners’ incomes rapidly increasing alongside financial market development.
The spread of income inequality is particularly concerning. This is because the gap in wealth accumulation between generations has widened tremendously compared to the past. According to recent research, households born in the 1970s had accumulated only 60% of the assets that households born in the 1940s possessed at age 50. This is analyzed to be due to factors ranging from rising home purchase costs to increasing student loan debt, despite similar income levels.
The problem is that this income imbalance is developing into a structural form in financial markets. This is already causing problems in credit accessibility, particularly in credit card issuance. According to WSJ reports, major US banks are fundamentally changing their credit card issuance strategies. They are reducing card issuance to lower-income groups while competition for premium cards targeting high earners is becoming more intense.
Rapidly decreasing new credit card accounts this year (Source: WSJ)
Credit Cards Also Polarized: “Only the Rich Get Approved”… Poor People Face ‘Pre-screening Rejection’
According to WSJ reports, the four major US card issuers saw a 5% year-over-year decrease in new credit card account openings in Q2. Credit cards are financial tools at the forefront of credit expansion. They encourage consumer spending.
Considering that credit expansion is essential during economic expansion periods, the first decline in credit card issuance in over a year is a negative signal for the economy. According to Federal Reserve surveys, the biggest problem is that banks have tightened credit card approval standards.
Particularly, screening standards targeting lower-income groups were observed to have been significantly strengthened. In April, over 87% of credit card-related mail was delivered only to customers who passed pre-screening. This is the highest level in almost three years. The problem is that consumers with very high credit scores account for less than a quarter of the entire credit card market.
Interestingly, the opposite phenomenon is occurring in the market targeting high earners. JPMorgan Chase and Citigroup, America’s largest banks, recently launched new premium cards for high-income customers with excellent credit. American Express announced a major update to its Platinum Card this fall.
Capital One CEO Richard Fairbank stated that “the fastest-growing segment in the card business is high-spending consumers.” This suggests that banks are focusing on a specific customer segment. This strategy is leading to improved profitability. American Express opened a luxury lounge for Venture X Card customers (with a $395 annual fee) at New York’s JFK International Airport last month. It comes complete with resident cheese experts and other enhanced services for premium customers.
As a result, while American Express saw a 6% decrease in new account openings, the average fee per card increased 16% from $101 to $117 year-over-year. Despite turning away from lower-income customers, increased demand for premium cards targeting high earners led to improved profitability.
Gini coefficient showing the worst income inequality since data collection began in 1963 (Source: World Bank)
Income and Credit Gaps Create K-Shaped ‘Dual Economy’… A World Where Only High Earners Live
Banks’ focus on high earners is straightforward. High earners’ card spending is not only larger in scale but also increases fee revenue banks receive from merchants. They’re also more likely to pay their monthly card balances in full, reducing delinquency risk. Additionally, these high-asset customers can be sold loans, mortgages, and wealth management services, providing ongoing fee revenue.
High earners’ spending also offsets overall consumption contraction due to high inflation. It makes them like rain in a drought for companies, though the resulting contrasts are stark.
Looking at recent performance from Delta Air Lines and American Express, while overall airfare spending stagnated, business class purchases increased 10%. Also, short-term accommodation bookings over $5,000 rose 9%. Meanwhile, lower-income groups’ situations continue to deteriorate. According to Federal Reserve surveys, as card balances increase, delinquency rates for the bottom 10% of earners exceed 20%. This is the highest level since 2011.
The most serious problem is that these changes raise concerns. There is a deepening credit accessibility polarization based on income. Competiscan VP Sifery noted that “only a small number of consumers (with high income and credit scores) are receiving most credit card product offers, but the problem is they don’t need more credit.” This is structurally negative as market financial liquidity isn’t being supplied where it’s truly needed.
What should be noted is that these changes are creating new K-shaped patterns in terms of economic cycles. Recent corporate behavior seen in Delta Air Lines’ and banks’ performance—ignoring lower-income groups while focusing on high earners—suggests that income and consumption polarization is becoming increasingly severe.
Credit card debt seriously delinquent for 90 days or more (U.S./8 regions/vs. income) (Source: St. Louis Fed)
Insight Bridge AI’s Perspective: Worst Polarization Since ‘Great Depression’… Becomes Structural Risk to US Economy
Citigroup recently launched the ‘Strata Elite’ card to compete with JPMorgan Chase’s Sapphire Reserve and American Express’s Platinum Card. This credit card has an annual fee of $595. While it appears expensive on the surface, considering high reward rates and credits, it’s structured to provide substantial benefits.
For this reason, competition remains fierce despite high annual fees. The Sapphire Reserve card, one of America’s most popular credit card brands, recently raised its annual fee from $550 to $795. Amex’s Platinum Card, currently at $695, is expected to increase further by year-end.
While financial institutions’ focus on high earners appears to be a rational choice, it suggests they’re becoming tools that structurally accelerate wealth concentration. The problem is that this structure has self-reinforcing characteristics. High earners enjoy more benefits through premium cards with lower actual financial costs, while lower-income groups face higher interest rates and limited accessibility. This increases their financial burden.
This creates a structure that widens the wealth gap further. The fact that premium cards with $795 annual fees are succeeding suggests that America’s K-shaped dual economic structure is becoming entrenched.
What investors should note is that this level of income and consumption polarization is difficult to sustain. Income inequality is already at its most severe level in history. Consumption polarization resembles patterns just before the 1920s Great Depression, where a small number of wealthy individuals account for a large portion of economic activity. This increases overall system vulnerability.
This structure is likely to cause greater shock during unexpected events like financial crises. High earner-centered consumption structures are more sensitive to asset price fluctuations. As a result, rapid adjustments in stock or real estate markets could have greater impact on the real economy than in the past. Conversely, for lower-income groups already facing limited credit accessibility, crises could cause more serious social consequences. America’s economic polarization phenomenon, with the disappearance of a healthy middle-class consumption base, has reached a level that can no longer be ignored.
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