| No Increase in Wealth Inequality for Top 1% Since 1960 Posted: 31 Mar 2014 07:17 PM PDT For all the ranting about the top 1% by the Economic Policy Institute and others, a US Berkeley study by Emmanuel Saez and Gabriel Zucman on The Distribution of US Wealth, Capital Income and Returns since 1913 shows no increase in wealth inequality for top 1% since 1960%. All of the increase in wealth inequality is not in the top 10% or top 1%, but rather the top .1 or top .01%. Here are some charts to consider. 
click on any chart for sharper image Wealth Has Been Always Concentrated  Top 10% Top 1% Led by Surge of Top 0.1% Little Recovery for the Merely Rich (Top 1% Minus Top 0.1%)
The Real 1%In regards to the above study, The Atlantic reports How You, I, and Everyone Got the Top 1 Percent All WrongFor years, I've been making the same embarrassing mistake about U.S. economic inequality. Sorry.
I've written, over and over, that the most important divide in our wealth disparity was between the 1 percent and the 99 percent. For example, when I compared the evolution in investment income since the late 1970s, I often imagined a graph like this from the Economic Policy Institute, showing the 1 percent flying away from the rest of the country.
It turns out that wealth inequality isn't about the 1 percent v. the 99 percent at all. It's about the 0.1 percent v. the 99.9 percent (or, really, the 0.01 percent vs. the 99.99 percent, if you like). Long-story-short is that this group, comprised mostly of bankers and CEOs, is riding the stock market to pick up extraordinary investment income. And it's this investment income, rather than ordinary earned income, that's creating this extraordinary wealth gap.
The 0.1 percent isn't the same group of people every year. There's considerable churn at the tippy-top. For example, consider the "Fortunate 400," the IRS's annual list of the 400 richest tax returns in the country. Between 1992 and 2008, 3,672 different taxpayers appeared on the Fortunate 400 list. Just one percent of the Fortunate 400—four households—appeared on the list all 17 years.
Now there's your real 1 percent. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| High Frequency Trading Hits 60-Minutes Scrutiny; Trading or Skimming? Posted: 31 Mar 2014 12:58 PM PDT In the wake of a 60-Minutes report on High Frequency Trading, numerous people have sent dozens of links. Let's take a look at a few of them. CBS Video |
| Damn the Bubbles, More Printing Ahead; Property Bubbles and the Perils of Easy Money Posted: 31 Mar 2014 11:27 AM PDT Damn the Bubbles, More Printing AheadFed Chair Janet Yellen was tooting her own horn today. Yahoo! Finance reports Yellen strongly defends easy Fed policies, cites U.S. labor slackFederal Reserve Chair Janet Yellen gave a strong defense of the central bank's easy-money policies on Monday, saying its "extraordinary" commitment to boosting the economy, especially the still struggling labor market, will be needed for some time to come.
In her first public speech since becoming Fed chair two months ago, Yellen cited the struggles of three American workers in backing the policies of low interest rates and continued bond-buying. She said there remains "considerable" slack in the economy and job market, a sign that further monetary stimulus can still be effective.
"I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy-makers at the Fed," Yellen said at a community reinvestment conference. Property Bubbles and the Perils of Easy MoneyMeanwhile, China Defaults Sow Property Cash Crunch Concern. The specter of default in China's trust loans market is deepening the distress of property developers that also borrowed in dollars.
Part of China's $7.5 trillion shadow-banking system, trust financing has been key to fueling the nation's 10 percent annual growth rate in the past decade by providing easy credit to companies considered too risky by banks. After trust loans to the property, solar, coal and other industries tripled in the past three years to 10.9 trillion yuan ($1.8 trillion), bondholders are becoming increasingly alarmed as the government reins in lending, housing demand cools and the economy slows.
Defaults Unavoidable
Cracks are already starting to appear. Closely held Zhejiang Xingrun Real Estate Co. collapsed earlier this month, less than two weeks after Shanghai Chaori Solar Energy Science & Technology Co. defaulted on its debt.
While China Credit Trust Co. was bailed out in January, Premier Li Keqiang has said some defaults may be unavoidable as the government shifts policy to tighten credit.
Home prices have soared 60 percent since the government provided 4 trillion yuan of fiscal stimulus in 2008 to bolster the economy after the financial crisis, prompting companies to borrow heavily to speed construction. Now, as China abstains from providing further stimulus for the economy, thousands of apartment buildings across the country sit empty. Home Prices Up 60% Since 2008Home prices in China rose 60% since 2008. How much did that contribute to official inflation statistics? The answer is 0%. Asset bubbles are ignored when calculating inflation. Instead central banks only factor in rent prices. Yet, asset bubbles spurred all sorts of financially untenable projects all dependent on Ponzi financing of debt to pay off existing debt. The party comes to a brick-wall halt the moment Ponzi financing stops or the moment the pool of greater fools runs out. Either or both happen at any moment. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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