The current economic downturn is proving to be more pervasive than past recessions. In fact, one of the most sacred assumptions of how the U.S. economy works, that the rich only get richer, is no longer holding up.

“There’s an extraordinarily negative wealth effect impacting the rich,” says Joseph Brusuelas, a director at Moody’s (Stock Quote: MCO).

Bye-Bye Blahnik
First, there’s the decline in the stock market, of which the affluent (the top 5% richest households) own more than half. From the market’s peak in mid-2007 to the first quarter of this year, U.S. stock holding, which include stocks, mutual funds and pension funds, plummeted by $7.6 trillion, according to Moody's

Second, the wealthy are scaling down spending. High-end department stores like Neiman Marcus, Saks (Stock Quote: SKS) and Nordstrom (Stock Quote: JWN) are all posting sales declines in this recession. “If you go out to Greenwich and go to Saks Fifth Avenue, you’ll be a very lonely girl,” says Brusuelas. Even the Manolo Blahnik store in Manhattan (luxury shoes made famous by Sex and the City) recently held a more than 50% sale off its Italian-made stilettos.

“Looking forward, there may be more of an elastic response in the spending habits of the wealthy due to volatility in the markets,” says Bruseulas, who notes that every $1 lost in equity results in a two-cent loss in spending.

A Cultural Shift?
If the value of the stock market is in for a long-term correction, consumption by the affluent may continue to shrink, says Brusuelas. So where does that leave us as a culture and as a society is largely influenced by the tastes and lifestyles of the rich? “The wealthy as cultural bellwethers is no longer viable now,” says Brusuelas. “My guess is the cultural bellwether now is 35 years old, female, has two children and has a midlevel management job in Kansas City. Her concerns and her interest are cultural touchstones going forward.”

So maybe we’ll replace the Real Housewives series on Bravo (Stock Quote: GE) with reruns of Roseanne?

Stay tuned.