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

Tyler Durden's picture

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.

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Hippocratic Oaf's picture

All hail king odumbo!

TeamDepends's picture

Change you can believe in, serf.

Antifaschistische's picture

Close the Discount Window at the Fed....and the trend will start to reverse immediately.

Fun Facts's picture

A proper global serfdom requires extreme income inequality because people with no money have no political voice and no power.

This was a goal established by M. A. Rothschild and the elders of zion over 100 years ago [read the protocols].

Mission Accomplished.

Flakmeister's picture

It is actually supply-side voodoo bullshit pioneered by St. Ronnie.  The data proves trickle down was an abject failure,  then again ideologues always have had a hard time with empirically rooted reality...

Counterpunch's picture
Counterpunch (not verified) Flakmeister May 21, 2015 1:30 PM

except the same trend has happened globally.

It is not because of Reagan, it's because of the debt money/frac reserve system.

But keep unpacking those Leftist memes about how everything would be sunshine, puppy dogs, and free ice cream but for those opposed to statist/Keynesian dogma.

BoredRoom's picture
BoredRoom (not verified) MonetaryApostate May 21, 2015 4:15 PM

Everything the Chosenite media said about Obama has been a lie.

Flakmeister's picture

Sorry buddy.. just because you say so don't mean squat....

Just about every empirical measure of inequality took off in 1982...

And how would you explain US GINI ratios decreasing for 50 years under a fractional reserve system??

You are just another ideologue in denial about what the data tells you....

PS The correlation/causation is with marginal tax rates...

BoredRoom's picture
BoredRoom (not verified) Flakmeister May 21, 2015 4:18 PM

"It is actually supply-side voodoo bullshit pioneered by St. Ronnie.  The data proves trickle down was an abject failure,  then again ideologues always have had a hard time with empirically rooted reality..."

 

Trickle Down Economics = Pure Capitalism

 

 

Leave it to Democowards to attack capitalism but not even have the balls to do it openly.

Oh regional Indian's picture

The trouble is that in a pyramidical system, income equality is impossible. Any equality is a mirage, a facade of fake bonhomie at best.

The real trouble is the scale of the inequity, if you'll pardon the pun. The cream from production labour floats to the top. Flatten it too much and you have the dreaded socialism bogeyman.

The brits left india with a horrendous income inqality situation in 1947...polarized and mind fucked sociaty...till today...

The deeper things need pondering first....

https://aadivaahan.wordpress.com/2010/06/17/death-of-shame-death-of-nobi...

Beam Me Up Scotty's picture

"The real trouble is the scale of the inequity, if you'll pardon the pun."

Exactly.  If you were one of those "rich" people making $1 MILLION dollars PER YEAR, it would take you 71,000 years to reach the net worth of Warren Buffet.  And thats if you didn't pay ANY taxes.  Factor in the taxes and it would take you about 140,000 years to make $71 BILLION.  Hows that for scale of inequality???

Captain Debtcrash's picture
Captain Debtcrash (not verified) Antifaschistische May 21, 2015 12:06 PM

If we were to believe Thomas Piketty the current toast of Keynesian economics the issue with wealth inequality is simply a flaw in capitalism, r>g.  Maybe, just maybe, they should look at central banks buying the assets of the rich for top dollar.  I have all kinds of stuff in my basement that could use a central bank buyer.

Flakmeister's picture

Yep, r > g....

Astoundingly simple that even a cave man could get it...

Captain Debtcrash's picture
Captain Debtcrash (not verified) Flakmeister May 21, 2015 2:32 PM

Are you implying that you believe r>g is the reason for the increase in wealth inequality?!  I'm not saying you are but I wanted to clarify.

I think we should look at the money that is being handed to the rich through QE before looking at some possible flaw in capitalism. That’s not to say that return on capital may not be at times greater than underlying growth, though I haven’t seen any profound evidence from Piketty.  His findings are so small they could easily be statistical errors, errors from bias, or features of Keynesianism not free market Capitalism.  But before we even think about doing further study into r>g, we need to address how QE directly steals from the poor and middle class and productive rich and hands it to the financial asset owning rich.

Flakmeister's picture

Yawn....

The cat was let out of the bag along time before QE ever started...QE is only the endgame....

So quit projecting your ideology...

BTW, the solution the problem is not income tax but wealth taxes that become punitive above $200MM or so (4-5% p,a, 1 to 2% otherwise)...

This would combined with a modest income tax above $250,000 or so and consumption based taxes. Payroll taxes would be dropped...

MFL8240's picture

Get rid of them, screw the discount window!

813kml's picture

With the price of Kobe beef reaching stratospheric levels there has been some belt-tightening here on the estate.  Fortunately, the last chattel drive was a resounding success.  Our creative chef has paired the new dish with a tossed green salad and taken to calling it "Serf and Turf".

Excellent with some fava beans and a nice chianti...

KnuckleDragger-X's picture

You win the internet with that post......

NoVa's picture

Income Inequality is the result of Climate Change - DUH, everyone should know that - 

 

/s/

BlowsAgainsttheEmpire's picture

LOL!

 

If you think Obama is THE problem, then you don't understand THE system.

BoredRoom's picture

Obama's black, so he's only a puppet, but Bush was responsible for everything that happened on his watch, right?

wallstreetaposteriori's picture

Oh thank god, now double the minimum wage so the the mc'd employees could purchase a share or two of $SHAK.  That will fix all the problems.

813kml's picture

Scoff if you must but Shake Shack is exploring previously unknown frontiers in haute cuisine.

http://www.thestreet.com/story/13159184/1/shake-shack-shak-may-start-ser...

TeamDepends's picture

The quest to perfect the recipe for the Soylent Shake continues around the clock.

813kml's picture

Analysts anxiously anticipate announcement of a new fry sauce.

i_call_you_my_base's picture

100% fed induced. There is no question whatsoever.

Dr. Engali's picture

"As this point it is far too late for any 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."

 

Ahh, spoken like a true pessimist. All is lost you proles, so we might as well just  accept our fate. There was a time before men were neutered that they thought differently.

 

 

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.

 

~Thomas Jefferson

CompassionateConservative's picture

Thomas Jefferson was a sick slave owning paleo-Nazi therefore his words are meaningless.

Bill of Rights's picture

You must be the fuck'en retard in the family everyone talks about behind your back...

 

Educate yourself retard...

http://russp.us/racism.htm

 

LawsofPhysics's picture

Words are always meaningless, ideas and actions are not.  That is the point dipshit.

BoredRoom's picture

"Thomas Jefferson was a sick slave owning paleo-Nazi therefore his words are meaningless."

 

 

So far ony one idiot appears to agree wih you......YOU!

Apocalicious's picture

Spoken like an equally irrational optimist.

 

You really think 100 million Americans making $45 grand a year - enough to afford on average two cars, cell phones, a flat screen and cable, even if "afford" means run constant revolving credit balances - have it bad enough compared to any relative metric (historical, global, etc.) to actually revolt?

 

I choose realism.

 

Things will get much worse before they can actually start to get better. 

Dr. Engali's picture

Oh, I don't for a minute believe there will be a revolution under the current circumstances. You and I are in full agreement. However, I do believe that a day of reckoning will come, but not before some really bad shit happens.

firstdivision's picture

Want to see it reduced, reduce the crony in the capitalism we have here.

falak pema's picture

Calling Mr Piketty...

BTW : It looks like the US has decided to let the ISIS carve up Syrac along with support from Turkey; all to bring down Assad.

What a crazy game of hide n seek. This whole ISIS hydra will one day eat that hand that feeds it today ! 

ThroxxOfVron's picture

" It looks like the US has decided to let the ISIS carve up Syrac along with support from Turkey; all to bring down Assad. "


The Obama Administration with Hillary Clinton at the helm of the State Department was fully aware of and entirely complicit in the plan to 'sack' the US Embassy in Libya.  

The murder of the servicemen and operatives there was sanctioned and allowed by the co-operative and accomadative Obama and Clinton so that they would have a cover story for supplying a cabal of trans-national 'terrorists' with a massive cache of US weapons, munitions, vehicles, Gold, and US dollars.

Obama and Hillary didn't 'let' anything: they planned it or sanctioned and assisited and/or supported in it.

SInce the event in question both Obama and Clinton have done nothing but lie about it and try to cover up their involvement. 

Fast & Furious was just a limited/dry run for a series of very much larger illegal international weapons and funding dirstribution scheme to the trans-national criminal/terrorist organiations Obama and Clinton explicitly authorize, direct and/or suport.

El Vaquero's picture

70k/mo in rent for a fucking duplex?  That's fuicking retarded.

 

On the brighter side, I have some potatoes that are flowering this year.  That means true potato seed for me.  Potatoes, being tetraploids, do not always breed true, which means that I get some extra cultivar variety next year.  Not bad for using "seed" potatoe that I got by going around to co ops and whatnot and asking for the potatoes with the eyex growing. 

TeethVillage88s's picture

Well the might be a direct relationship between wealth extraction & Economic Leakage as our Dollars flight out of US Hands to the Hands of Foreigners or those operating off shore.

For instance I see new highs in 1984, 1986, 1989, 1994, 1997, 2001, 2006, 2011, 2012:

https://research.stlouisfed.org/fred2/series/GINIALLRH

Then look at both Credit to GDP and Debt held by Foreigners and Current Account Balance... and manufacturing employment top in 1981... as this sets off declining velocity of money stock.

Bank Private Credit to GDP for United States
2011: 55.47615 Percent (Data spans from 1961 to 2011)
http://research.stlouisfed.org/fred2/series/DDDI01USA156NWDB

Federal Debt Held by Foreign & International Investors as Percent of Gross Domestic Product, 2014:Q4: 34.75940 Percent of GDP,
http://research.stlouisfed.org/fred2/series/HBFIGDQ188S

http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm (wow huge trend, $31 Trillion in Foreign Property in USA vs $24 Trillion)

Current Account Balance: Total Trade of Goods for the United States©, 2013: -703,911,000,000 US Dollars,
Sum Over Component Sub-periods (2013 was last data), Annual,
http://research.stlouisfed.org/fred2/series/BPBLTD01USA637S

https://research.stlouisfed.org/fred2/series/MZMV
https://research.stlouisfed.org/fred2/series/M2V
https://research.stlouisfed.org/fred2/series/M1V
https://research.stlouisfed.org/fred2/series/MULT

Someone is draining the Carcass that is the USA.

Both USA & UK have the highest Current Account Deficits of 193 countries. Amazing. No wonder not all people are benefiting from the Wall Street Surge in Profits.

Bill of Rights's picture

Ladies and Gentleman, Mr Frank Sinatra!

 

" And now the end is near "

CompassionateConservative's picture

White Americans make too much as it is.  I agree with Warren Buffett that income taxes need to be drastically raised on working Americans.  They need to pay their fair share.  I would say raise their taxes to the moon and give them tax breaks if they turn in their guns and open up their homes to untaxed and undocumented workers.  If they refuse we could just put them in camps.  This is what Ronald Reagan, the best conservative ever, would have done if it would have worked in his day.  Sigh, we'll get there one day.  #endwhitepeople

LawsofPhysics's picture

Exactly what Hitler would do if he was black..

ThroxxOfVron's picture

"White Americans make too much "

 

You are a fool and a racist bullshitter.

Tens of millions more whites live in poverty in the US than there are blacks living in it.

YOU should direct your anger where it rightly belongs: at the corrupt corporatist government and the wealthy politically dominate banking and military industrial complex backers of the crooked captured politicians..

 

El Vaquero's picture

Psst!

 

(That post was parody)