"The Biggest Redistribution Of Wealth From The Middle Class And Poor To The Rich Ever" Explained...

Tyler Durden's picture

While the growth of inequality in America has been heavily discussed here, it was Stan Druckenmiller's outbursts (and warnings that "from beginning to end - once markets adjust from these subsidized prices - that the wealth effect of QE will have been negative not positive") that brought it more broadly into the average American's mind. QE, taxes, income disparity, and entitlements are four major means by which wealth is transferred from the poor and the middle class to the rich. The following simple chart explains it all...

 

Via Shane Obata-Marusic ( @sobata416)

 

A - “the rich hold assets, the poor have debt” is how Citi’s Matt King described the distribution of wealth in the US.

B - QE has resulted in a loss of purchasing power for the US dollar. Faced with this problem, consumers in the middle class are taking on more non-housing debt in order to maintain the same standard of living. In addition, the US government – which continues to run a deficit year after year – continues to accumulate debt. Due to these facts, total debt outstanding – aka credit market instruments for all sectors - is at all time highs. More debt means more interest payments and lower savings rates. These trends do not bode well for the middle class consumer.

C - On the other hand, QE has been great for the rich. QE has inflated the prices of assets such as property, bonds, stocks, and non-home real estate:

Home prices in Detroit are going up despite the fact that the city is bankrupt. The “housing occupancy” table is meant to show what appears to be a higher than average amount of speculative demand i.e. lower than average owner occupancy rates.

The rich have most of the assets which is why the average family income of the top 0.01% increased by 76.2% from 2002 to 2012. In contrast, the average family income of the bottom 90% decreased by 10.7% over that same period.

D - Taxes as a percentage of real disposable income have more than doubled since 1980. This trend has not been kind to the bottom 90%.

Conversely, favourable tax rates on dividends and capital gains have allowed the rich to become wealthier over time.

E - Median household income has been in a downtrend since the late 90s.

In opposition, corporate profits are at all-time highs.

F - The entitlement problem is only going to get worse as more baby boomers leave the work force. Future generations will have to pay for the debt that the old and rich continue to take on.

Growing benefits and sympathetic tax rates on investments enabled the old to increase consumption by 164% from 1960-1991 .

G - In conclusion, QE, taxes, income disparity, and entitlements are contributing to “the biggest redistribution of wealth from the middle class and the poor to the rich ever” If things continue the way they are going, then millennials and future generations will pay the price:

Despite the fact that inequality in the US is nothing new:

Today, it might be worse than it ever has been:

Unless the distribution of wealth in America begins to change for the better, assets will continue to benefit the rich and debt will continue to burden the middle class and the poor.

For an economy that’s largely based on consumption, excess debt only serves to reduce expenditures and to slow economic growth over time.

Quality of life for the median American household is only going to get better if the issues associated monetary policy, entitlements, taxes, and income are addressed and dealt with.

For now, the best thing that you can do is to discuss these issues with your friends, family and colleagues and try to come up with solutions.

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Jannn's picture

Sun Zhaoxue: US Intends To Suppress Gold To Ensure Dollar's Dominance

 

http://www.ingoldwetrust.ch/sun-zhaoxue-us-intends-to-suppress-gold-to-e...

surf0766's picture

The dollar is crap and everyone but those in the U.S. know it

kaiserhoff's picture

I understand that argument.  Hell, I've been preaching out of control inflation since the end of the Reagan administration, and I have been wrong. 

Think best horse in the glue factory, or last fiat standing, but also think what destroys the poor fool with no job and a 10,000 dollar student loan.  We'll get to hyper inflation, but I may not get there with you.  This is a marathon.

Anusocracy's picture

Everything is fine.

MSU coach Dantonio got a pay raise to $4 million a year.

AlaricBalth's picture

Citibank 2005 - "The world is dividing into two blocs, the Plutonomy and the rest.

And so begins the infamous report by Citibank which was intended as an eyes only treatise for their wealthy private clients. A report deemed so sensitive by Citi that they had a high powered NY law firm strike it from the Web and threatened anyone who reposted it with costly litigation.

In "The Plutonomy Symposium Rising Tides Lifting Yachts," Ajay Kapur, Citigroup's global strategist writes almost smuggly, "the balance sheets of the rich are "in great shape, and will get much better,".

In conclusion Kapur states, "we believe that the rich are going to keep getting richer in coming years, as capitalists (the rich) get an even bigger share of GDP as a result, principally, of globalization. We expect the global pool of labor in developing economies to keep wage inflation in check, and profit margins rising – good for the wealth of capitalists, relatively bad for developed market unskilled/outsource-able labor."

8 years after this report was selectively disseminated, Ajay has proven to be quite the soothsayer. Of course with a Congress that is bought and paid for, and a Fed which has only its owners as its concern, this prediction was not difficult to foresee.

By the way. The report is still floating around and can be found.

Grande Tetons's picture

Beyond war, inflation, the end of the technology/productivity wave, and financial collapse, 

we think the most potent and short-term threat would be societies demanding a more 

‘equitable’ share of wealth

 

Quote appears on doc found here. 

http://www.correntewire.com/sites/default/files/Citibank_Plutonomy_2.pdf

AlaricBalth's picture

That's from 2006. Interesting read eh?
From 2005 the title is The Plutonomy. Buying Luxury, Explaining Global Imbalances.

Grande Tetons's picture

I found the correct year. Thanks. Interesting reading to say the least. 

GetZeeGold's picture

 

 

.....and a set of cuff-links to rule them all.

 

MSU coach Dantonio got a pay raise to $4 million a year.

I'd advise him to put some of that into physical gold.

 

If he wants to be tracked for the rest of his life.....he should consider Bitcoins.

James-Morrison's picture

Seattle, WA has elected their first Socialist City Council-Person.

She ran on a income-equity platform and wants to raise the minimum wage to $15. 

Let's see:

Legalize Pot: CHECK

Raise minimum wage : CHECK

Now if she wants to kick-up her game, she should focus on stopping the NSA and ending the FED.  That is the plaform of a reformer.

Failing that, I believe she merely jumped out in front of the populice parade... 

BTW an once of pot in Colorado costs $400.  At the labor rate of $15/hour that is 26.5 hours of work for one ounce of pot. 

Progress?

 

Arius's picture

@AlaricBalth

below, see link to 2005 Citi's Ayaj Kapur sensitive report ...

 

http://www.youtube.com/watch?v=Lin-a2lTelg

 

it seems everybody know ... LOL

myself, I do believe with hard work you can achieve anything in this country!

Pegasus Muse's picture

Here's some more Wealth Redistribution.  The sad thing about this Spoof is it’s the Truth.

  ======

MTV Video:  OBAMACARE-Money for Nothing

http://www.youtube.com/watch?v=GObKpWdwJA4&feature=youtu.be

 

Alfred's picture

$400 an ounce? That' street price which includes a risk premium.... where's their risk?

Progess is profit.

ebworthen's picture

Burn the Hamptons, nuke Wall Street.

kaiserhoff's picture

Bless his pea pickin' heart.

Did he cure cancer or something?

Oh shit.  My bad.  There I go again with rational expectations.

I love football, but splain something to me.  Why is it that the kids are usually respectful of the coaches, zebras, and the opposing team, and the pros can't wait to show their asses?  Enquiring minds want to know...  as if we didn't;)

 

Wahooo's picture

Why would the rich want to change a thing?

Hulk's picture

and we are at mile 26 !!!

kaiserhoff's picture

Good to see you Hulk.

Where you been hidin' dog?

 

DaveyJones's picture

and you remember the story of the first Marathon...and what happened to the guy 

Soul Glow's picture

SPOILER ALERT!

He fucking died.

DaveyJones's picture

no the guy who died fucking involved love not war

and he's a lot more famous

Jam Akin's picture

You referring to that Rocky Feller who died in the saddle back when Davey?

caShOnlY's picture

Think best horse in the glue factory, or last fiat standing

Think "GOLDyuan"

saveUSsavers's picture

$10.8 TRILLION stolen from savers since 2001 (using historical mean 5.8% savings yield) h/t ZH !

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2...

Musashi Miyamoto's picture

True that. In Mexico and Canada everyone knows what the conversion rate is. Ask the clerk at a local 7-11 see what he says.

Edit. Many people, not everyone

Hapa's picture

lots of third world people treasure their dollars in their mattresses, in the face of their even weaker local fiat currency. It's going to take awhile to change perception in those parts, as long as they can still exchange it for value.

Squid-puppets a-go-go's picture

i upvoted you Jann coz ur link gave me an epiphany. One that others will udoubtedly cite as evidence of my inability to connect certain dots but anyway:

The US gov has to act quickly to reset the price of gold much higher. Every day this flow of gold from west to east continues means a greater arbitrage for asia when market forces reassert themselves.

Even if the U.S. has a temporary 'agreement' to supress gold to compensate china for a debt reset, the US has to put a stop to the haemmorhage of physical to keep some leverage AFTEr the reset

the clock is ticking.

stack with urgency my friends

caShOnlY's picture

The US gov has to act quickly to reset the price of gold much higher.

Never.gonna.happen.  That act is by itself is an admission of "gold is money" or better yet "gold is the ONLY money".  They don't care about gold.  They care about consumption, as consumption is what drives our trading partners economies and keeps the dollar safe.   Look at the TPP, all about "TRADE and CONSUMPTION".   It opens the doors of the "king consumer land" and keeps the dollar as the trade currency. 

If TPP is approved the Brics will announce a gold backed trade currency to counter the "Consumption trade dollar".

 

RaceToTheBottom's picture

I think it is a more viable possibility that China follows the same path as the US in manipulating the price of Gold

MFLTucson's picture

The American con man Obama said he was a man of the middle class and you fuckin fools belied him!

Uber Vandal's picture

I proudly voted for Kodos.

toady's picture

Damn it man! You KNOW Kang is the right one for president!

Son of Loki's picture

The Machinists union, by a slim margin, on Friday night agreed to reduced benefits in a deal that should ensure Boeing’s new 777X jet will be built in Washington state.

 

Boeing and the Machinists had been waging a test of wills over the deal, which includes a pension freeze and higher health care expenses.

 

http://www.nbcnews.com/business/boeings-machinists-union-oks-benefit-cut...

cynicalskeptic's picture

The American con man Obama said he was a man of the middle class and you fuckin fools belied him!

As if the alternatives offered would have been any better?  

The Republicans pander blatantly to business while the Democrats do so as well while throwig a few cumbs to the masses.

The American political system has been co-opted by the wealthy and powerful.  Two parties pretend to have differences - on things that really DON'T matter - while both serve their corporate masters.  BOTH parties have enthusiastically embraced 'Free Trade'  (the wholesale offshoring of American jobs) while giving lip service only to 'job growth'.  It would have been easy to link TARP to job repatriation (bring BACK all the DP and call center jobs financial firms had offshored and forbid further offshoring) but NOOOOOOOOOOO.........

Look at how ANY third party alternative is treated by the existin power structure and you'll understand the agreement in place to 'split the spoils' and keep competitors out.  It preserves the illusion of a Republic and choice for the voters while acting as an oligarchy. 

gwar5's picture

Yes, the alternative was fucking waaaay better!  

 

For starters, with a Republican in the White House the liberal press would be forced into telling the truth again and not cover up the huge lies like NSA mass surveillance, the fucked up real economy, the huge unemployment numbers, IRS political targeting of individuals, arms to al-Qaeda, Benghazi, arms to drug cartels, Solyndra, and the current huge wealth redistribution going to the rich, courtesy Obama. 

Secondly, just through the change of adminstrations you would slow down the machinery and stop the socialist momentum because it would take them a year to get up to speed. You would slow down Obamacare (redistribution) by changing HHS secretaries, etc.

And why do you still believe the discredited propaganda that only the GOP are for the rich even as that canard is once again laid waste by the above article? Obama has presided over the greatest transfer of wealth in recent history (all time?). How can that propaganda still work like a cloaking device on people like you?

Delay, delay, delay and live to fight another day. Give up like a sheep and you will get slaughtered.

 

 

 

 

 

 

 

rwe2late's picture

 gwar5

your argument rests on questionable premises.

beginning with the "liberal" press?

Support for global militarism, TBTF handouts, and martial laws is not "liberal". Neither is it "conservative". The media has evolved into a mouthpiece for its corporate sponsors and government. Characterizing the media problem as one caused by having a "liberal"(or "conservative") ideology is misleading.

Would the 'new' lobbyist-loving neo-liberal Democrat party (Clinton, Feinstein et al) really seriously object to the same policies of financial corruption, militarism, and martial laws that they regularly vote in favor?

Nowadays, Democrat objections to "Republican" policies

appear no more real than Republican objections to "Democrat" policies. I perceive distinctions without real difference.

Anyhow, some will imagine scenarios whereby Obama prevented worse. Others will imagine scenarios with Republicans preventing worse.

But for me, I have had enough with these lesser-of-two-evils scenarios. The sooner such evil offerings are seen as actually no choice worth accepting, the better we will all be. That's my imagined scenario.

Rafferty's picture

And Romney or McStain were better options?

The game is rigged. TPTB allow only approved candidates to stand.

GetZeeGold's picture

 

 

The deck was stacked with progressives......we didn't stand a chance.

caShOnlY's picture

The American con man Obama said he was a man of the middle class

No CON there: when he was elected he was a man of the middle class.  And just like Slick Willie he too will eventually be worth over 100 million after giving some world wide speeches.

The CON is all he promised and never talked about again.  Remember how he was going to revise NAFTA? .....lol   His job is to protect the interests of the wealthy by selling the sheeple empty promises.

jomama's picture

he merely parroted what he was told to say.

kaiserhoff's picture

Great piece, and ZH has been in the lead on this from the beginning, but let's not forget the importance of cronyism, Indonesian Style, just giving big chunks of money and power to the favored few, enforced by government guns.

Which American President was born in Indonesia?  I forget.

Tulpa's picture

There were rumors that Martin Van Buren was really born in the Netherlands, but probably not the Dutch East Indies.

kaiserhoff's picture

I learn something here every day.

I'm sure the Messiah will testify on a stack of Korans, that he was born in Hawaii, almost a state, and a great place to golf, if you have your own damned airplane at taxpayer expense.

Anyway, who can doubt him?  He was there, so he should know, right?  Right?

Just passing strange that not a single, doctor, nurse or orderly remembers a white woman giving birth to a black baby, back in Guess Who's Coming to Dinner, days.

Aw, hell, no one remembers him at Columbia either.  Doo doo happens.  More all the time.

 

CuttingEdge's picture

Obama will be remembered for a very long time - as the man who destroyed the US middle class by wiping out their disposable income with his ACA.

And that Obamaturd is the biggie splashing the pan for 2014, methinks.

 

Patriot Eke's picture

He's a fall guy.  The man might as well have been elected with a red shirt on (multiple meanings there of course).