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“We Reached The Tipping Point”: Income Inequality Is Highest Since Records Began

Thursday, May 21, 2015 9:42
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(Before It's News)

While soaring stock prices do nothing to boost the economy, because as 7 years of hard facts have shown, the only thing “trickle down” QE has done is forced economists to jump the shark and demand not one but two seasonal adjustments to goal seek collapsing economic data, the S&P hitting new all time highs on a daily basis has certainly succeeded in one thing: pushing inequality around the globe, and especially in the US, to new record highs.

And earlier today the latest OECD report confirmed just that, when it reported that gap between the rich and poor in most of the world’s advanced economies is at record levels.

In most of the 34 countries in the Organisation for Economic Cooperation and Development the income gap is at its highest level in three decades, with the richest 10 percent of the population earning 9.6 times the income of the poorest 10 percent.

In the 1980s this ratio stood at 7 to 1, the OECD said in a report.

The wealth gap is even larger, with the top 1 percent owning 18 percent and the 40 percent only 3 percent of household wealth in 2012.

“We have reached a tipping point. Inequality in OECD countries is at its highest since records began,” said OECD Secretary-General Angel Gurria.

Keep in mind this only looks at earnings, which have actually slowed down in recent years, and ignores the massive imbalance in accumulated assets: assets which almost exclusively are controlled by the top 10%. As for the bottom 10%, 50% and even 90%? Well they have “liabilities.”

Sadly as this point it is far too late for hopes of a change: the wealthy are so engrained in the fabric of official decision-making, that any hope they would willingly cede their wealth, or power, is naive. As a result, the failed policies which have pushed the world to this disastrous condition will continue as can be seen by the recent launch of QE in Europe and the boost of QE in Japan, which will make the rich even richer, and the poor and hungry even madder until one day, the entire world decides it has had it and is covered in a bloody revolution against a broken status quo regime.

The OECD’s is a little more politically correct, but it too now gets the message:

By not addressing inequality, governments are cutting into the social fabric of their countries and hurting their long-term economic growth,” said Gurria.

Here is the direct evidence that it is the Fed’s policies that are causing the economic slowdown: the study found that the rise in inequality between 1985 and 2005 in 19 OECD countries knocked an estimated 4.7 percentage points off cumulative growth between 1990 and 2010.

One can only imagine what inequality did to GDP after 2005 when it really took off.

Another point Zero Hedge has made since 2010: the reason there is no inequality is the surge in part-time labor and temp jobs, which the idiot economists have consistently spun as bullish for an “any minute now” recovery. As it turns out it was just another byproduct of the Fed’s disastrous monetary policies.

According to AFP, “an increase in part-time and temporary work contracts as well as self-employment was seen as an important driver of increased inequality, with half of all jobs created in OECD countries between 1995 and 2013 falling into these categories.”

So we guess that wasn’t just yet another Zero Hedged “conspiracy theory” after all.

Naively, the OECD believes that wealth redistribution with taxation may fix the problem:

Redistributive taxes and transfers is another effective option, said the OECD as it noted that existing mechanisms have been weakened in many countries.

“To address this, policies need to ensure that wealthier individuals, but also multinational firms, pay their share of the tax burden,” said the OECD, which has been playing a key role in an international effort to crack down on tax avoidance.

Great on paper; horrible in practice for the simple reason that it is the wealthiest 0.001% who now own the legislative branch, directly and indirectly, will never agree to laws that tax them more. Case in point: Buffett who is all about boosting income tax which crushes the middle class, while staying mute on carried interest and financial asset tax. Of course: he is no idiot, and realizes that in a crony capitalist world made for billionaires, the only thing that matters are “assets.” Plus cash flow in a ZIRP (and certainly NIRP) world is a thing of the past.

And finally, while the US middle class is approaching extinction and millions are desperate to find how to feed their families, the 0.001% are spending their money on stuff like $50,000 monthly rentals. From Bloomberg:

There’s a four-story townhouse on the Upper East Side for $35,000 a month that Marilyn Monroe once called her “sanctuary,” according to the listing, and a four-bedroom duplex in Midtown for $70,000 that Oscar winner Anne Hathaway used to rent. There are rentals in iconic new buildings and in grand old hotels. For $42,500 a month, you can live in the Chelsea condominium designed by Pritzker-winning architect Jean Nouvel. For a cool quarter million, there’s the Jewel Suite at the New York Palace, decorated with glass-encased rings and necklaces by the designer Martin Katz. (Management will gladly add the baubles to your bill, said Margaret Bay, an agent at Brown Harris Stevens, who has the listing.)

In all, there were 82 apartments renting for at least $50,000 a month listed on StreetEasy during the first three months of the year, more than triple the number listed in the first quarter of 2008. At lower thresholds, luxury listings are also on the rise. Apartments renting for more than $25,000 a month made up 0.95 percent of total inventory in the first quarter of 2015, up from 0.46 percent in the first quarter of 2008. Real estate agents and wealth managers say the increase in expensive rentals is partly an outgrowth of the luxury building boom sweeping through New York City, and partly due to the shifting whims of a global elite that wants luxury digs without the hassle of a long-term commitment.

How does all of this class insanity end? Simple: watch the following documentary on the French Revolution which we first posted over the weekend, for the answer.






Source: http://silveristhenew.com/2015/05/21/we-reached-the-tipping-point-income-inequality-is-highest-since-records-began/

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