Monday, February 03, 2014

When Wall Streeters sound like pinkos

According to the NYT, Wall Street has finally started to notice the big, obvious problem with rampant inequality: As the middle class dies, businesses which cater to the middle class also start to die.
Within top consulting firms and among Wall Street analysts, the shift is being described with a frankness more often associated with left-wing academics than business experts.
Heh. That's because business "experts" are paid to tell the one percenters what they want to hear.
In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995, the researchers found.

Even more striking, the current recovery has been driven almost entirely by the upper crust, according to Mr. Fazzari and Mr. Cynamon. Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.
This will hit Hollywood eventually. Middle class people go to the movies; poor people download torrents.
While spending among the most affluent consumers has managed to propel the economy forward, the sharpening divide is worrying, Mr. Fazzari said.

“It’s going to be hard to maintain strong economic growth with such a large proportion of the population falling behind,” he said. “We might be able to muddle along — but can we really recover?”
No. No you cannot. Soon, even the muddling along will end. As Charles Pierce notes (in response to the above story):
Suddenly, lo and behold, the blog's First Law Of Economics -- Fk The Deficit. People Got No Jobs. People Got No Money -- kicks in and, unless, you're selling yachts, business goes sour because...wait for it...nobody can afford to buy anything! Hoocodanode?
This may be the first country to die of the incredibly obvious.
Pierce has skin in this game. He writes for Esquire, the magazine that tells middle class men what tie to buy.

Atrios (reading Pierce reading the NYT) adds this:
It reminds me a bit of the housing bubble, when I knew there was a housing bubble not because I was a supergenius, but because I know there was no possible way that many people had high enough incomes to pay for those mortgages in places like Southern California. If people aren't making any money, and what money they make is being skimmed off by various malevolent businesses, they don't have any money to buy stuff. It isn't complicated.
I lived in Southern California at the time. As early as 2003, I sensed that there was no longevity in a system which sent housing prices racing while incomes crawled.

This experience allowed ground-level guys like me to predict things that eluded the Wall Street supergeniuses. The ability to say "I told you so" provides some comfort, although I'd much prefer to have a country that worked the way it used to.

Unfortunately, that can't happen. We inhabit a culture that damns you as a Marxist if you tell it like it is.


Anonymous said...

I read Pierce's post this morning: the 1% tripping over the frigging obvious. LOL. Also read Walmart is hurting: their traditional customers, many of whom make up the working poor [including their own employees] are feeling the pinch since the food stamp cuts took effect. Or so Walmart says. I suspect WalMart's bottom line has been crimped long before the 'those who do not work, shall not eat' chorus began. When consumers have no money, no jobs, even cheap merchandise from China is too pricey.

Also heard someone early this morning talking up the TransPacific Trade deal/scam, complaining that 'populists' [and he muttered the term the way you would a four-letter word] were pushing against 'national interest [meaning corporate greed] because: those dirty rotten populists hate trade, doncha know.

And then, we had the venture capitalist Tom Perkins trying to convince the public that a Progressive Kristallnacht is coming, rearing its ugly head against all the poor, innocent billionaires.

These guys must be suffering blindness and guilt at the same time.

Something is bound to rear its head. And it won't be pretty.


Grung_e_Gene said...

But, each of the grifters on Wall Street told themselves if they could just take one more turn on the merry-go-round before it went of the rails, then fuck'em.

Zolodoco said...

I don't believe in a middle class lifestyle anymore, and I don't think that it's a benchmark we should keep aiming to sustain. We should tax the hell out of the rich to beef up infrastructure and public services, and stop worrying about making everyone feel like they should aim for sort of modest individual affluence. There's no real room for growth to prop that up. Policies that support a happy society in the process of stagnation or even degrowth are the only sane options. All this talk about the disappearing middle class just seems like a distraction.

Stephen Morgan said...

Even Isaac Newton got fooled by a bubble. He put a load of money into the South Sea Company, but he saw it was a bubble and cashed in for a big profit. Then prices kept going up so he put his money back in just in time to lose it all.

Gus said...

I agree with Zolodoco...this focus on "growth" is obviously unsustainable and has been since at least the 1980's (if not earlier). We Americans (and much of Europe, and now China too) have been brainwashed that having lots of stuff, a big house, and a big car (SUV) is the key to happiness. It's not. I thought this would be obvious to all by now, but propaganda can be very effective when it's multi-generational.

prowlerzee said...

What Zolodoco said. Or as my mom always says, the cart can't pull the horse, the horse has to pull the cart.

Gus, I don't believe the emerging generation is falling for any of this crap. There is a huge segment not into acquiring things, and even a trend of taking a picture of oneself with "all of my stuff" to extol minimalist lifestyle. At least urban 20-somethings often opt out of having a car.

I hope you're right, Peggysue...Occupy still exists, activists are getting arrested for protesting the pipeline, but none of it is in the news because all it would take to ignite the public is the knowledge that others are out there fighting.

Anonymous said...

I've been agreeing with Zolodoco since about 1975. Dr. Martin Luther King saw the rise of materialism over spirituality as degrading to our country.