"Trickle Down" Has Failed; Wealth And Income Have "Trickled Up" To The Top .5%

Tyler Durden's picture

Authored by Charles Hugh Smith via OfTwoMinds blog,

Central bank policies have generated a truly unprecedented "trickle-up" of wealth and income to the top .5%.

Over the past 20 years, central banks have run a gigantic real-world experiment called "trickle-down." The basic idea is Keynesian (i.e. the mystical and comically wrong-headed cargo-cult that has entranced the economics profession for decades): monetary stimulus (lowering interest rates to zero, juicing liquidity, quantitative easing, buying bonds and other assets-- otherwise known as free money for financiers) will "trickle down" from banks, financiers and corporations who are getting the nearly free money in whatever quantities they desire to wage earners and the bottom 90% of households.

The results of the experiment are now conclusive: "trickle-down" has failed, miserably, totally, completely.

It turns out (duh!) that corporations didn't use the central bank's free money for financiers to increase wages; they used it to fund stock buy-backs that enriched corporate managers and major shareholders.

The central bank's primary assumption was that inflating asset bubbles in stocks, bonds and housing would "lift all boats"--but this assumption was faulty. It turns out most of the financial wealth of the nation is held by the top 5%.

As for housing--yes, a relative few (those who happened to own modest bungalows in San Francisco, Seattle, Portland, Toronto, Vancouver, Brooklyn, etc.) on the left and right coasts have registered spectacular gains in home appreciation as the housing bubbles in these cities now dwarf the 2006-07 real estate bubble. But on average, the gains in home appreciation have barely offset the declines in real (adjusted for inflation) household income.

These charts illustrate the abject failure of the "trickle-down" economic theory.The majority of the assets that have soared in value are owned by the top 5%:

 

Wages as a share of GDP (gross domestic product, i.e. the nation's total economic activity) has been declining for decades:

 

The only segment of households who have registered gain in real income over the past 20 years is the top 5%:

 

Even excluding capital gains--the source of much of the wealthiest class's income--wealth disparity has reached astonishing asymmetries: most of the gains are flowing to the top 0.5%:

 

The Clinton, Bush and Obama presidencies shared one commonality: the wealth of the bottom 90% cratered in their presidencies while the wealth of the top .1% skyrocketed.

 

Central bank policies have generated a truly unprecedented "trickle-up" of wealth and income to the top .5%. Evidence supporting "trickle down" is nowhere to be found, at least in the real world.

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ShrNfr's picture

 

what else about the Pareto distribution do you not understand?

Ghost of PartysOver's picture

An Inconvenient Truth.  The greatest wealth transfer in thte history of Murica compliments of Obama and the Federal Reserve.  Only problem is the wealth transferred from the lower and middle class to the upper class.  Wasn't there a revolution because of this?  France maybe?

FreeShitter's picture

Yep, that was when men were men and women were women, no fuckbook, and no lardassians. Think the sheep can pull it off again?

Rich Monk's picture

I see a culling of the herd whether they like it or not.

ipso_facto's picture

Maybe culling the bottom 20% of the herd would be more productive.

Chief Wonder Bread's picture

Rich cunts can only build luxury battlewagons so big that they never visit anyway at St Barts. If you see your markets saturated with supply because the serfs are drowning in debt with their garages stuffed to the gills with chinese crap, then there will be no spending on capital goods to make more crap that serfs don't need anyway and which take jobs and income from the middle class because a lot of those capital goods are robots.

So trickle down monetary or fiscal is fine in theory and as long as there's potential for it to flow but there ain't.

MalteseFalcon's picture

"Trickle down" economics is absurd on it's face.

The 0.5% have no trouble capturing wealth.

Give the money to the bottom 99.5%.

Trust me, it'll trickle up.

BuddyEffed's picture

And some schemed to trickle it up and out of the country. Unpatriotic SOBs

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) BuddyEffed Mar 30, 2017 1:38 PM

Central Planning has failed.  Even though it sounds hip, calling Central Planning based money debasement trickle down economics is not accurate.

I know that many of you are employed by people who are poor, with no money (with which to pay you), but I'm employed by people with money (who are able to pay me).  Free market capitalism works.  Central Planning fucks it up.

 

JRobby's picture

(Script audio direction; final scene - opening)

"The sound of 2 million magazines locking in simultaneously."

techpriest's picture

This is so obvious, yet so few get what you are saying. There is this major misconception that most employers are like Scrooge McDuck out of the Duck Tales cartoons, with a swimming pool full of gold. The very few people who are even close to this often get their face in a magazine because it's freak of nature rare.

What is far more common, is that the employer and employee make a deal where the employer offers his equipment, office, branding, etc. to the employee, and in return asks for 10-50% of what the employee makes for the company, less overhead. If it gets to be much more than that (i.e. the owner is earning seven figures while no one else is making six), the employer will find out really damn quick that he can't keep any quality employees, and at best he might get some people who will sue him as a stepping stone to a job with a more sensible employer.

The bottom line is, if you want to help the 99%, make it easier to employ people, such that the 1% becomes the 5%. That gives workers options, with many more employers bidding on them. Currently, we have neocons/neolibs who are trying to make the 1% into the 0.1%, so that nobody has options, and therefore are unable to leave a bad deal.

BuddyEffed's picture

"What is far more common, is that the employer and employee make a deal where the employer offers his equipment, " ...to workers in a offshore country.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) BuddyEffed Mar 30, 2017 9:50 PM

Well said techpriest.  And if Scrooge McDuck gets too carried away someone else will be there to offer a better deal (competition) and take his business away.  Free markets work.  Government interference doesn't.

Giant Meteor's picture

Profounnd truth here, and I liked very much your conclusion .. especially ..

"Currently, we have neocons/neolibs who are trying to make the 1% into the 0.1%, so that nobody has options, and therefore are unable to leave a bad deal."

Concur, and well said.

Verniercaliper's picture

There are no free markets....powerful actors capture the regulators and rig the system. Every time, everywhere, throughout history. The people who employ you will replace you with software or an H1B worker in a heartbeat. That's why they're rich. We're going to end up with a guaranteed minimum income system whether we like it or not....there are simply not enough jobs to go around and the number of jobs is falling. Government is here to stay, so we may as well make it serve as many of us as possible.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) Verniercaliper Mar 30, 2017 9:46 PM

Then Venezuela "we may as well make it serve as many of us as possible" welcomes you to their paradise of a fully Central Planning run system. 

I'll keep fighting against Big Government and for freedom and liberty - which brings prosperity to anyone who applies themselves.

Mtnrunnr's picture

How many times do we have to learn this lesson?

HillaryOdor's picture

Which lesson is this? Ask the average leftist what "trickle down" means and I guarantee you 100% of the time you will get an answer about tax cuts for "the rich." You won't hear anything about keynesianism, zirp, monetary policy, or the fascistic nature of the US economy where political connections earn more than innovation. All these things imply a government working in concert against the common man, not because of tax revenue but because of policy. From the leftist instead you will hear the opposite, that we need more government revenue because the government supposedly works for the people and it's just the greedy rich  private sector holding everyone back. But the description is the same,  trickle down.  Words have no meaning anymore.  So who needs to learn what lesson? Saying the two words trickle and down is not a lesson. It's not an argument. It's actually pretty meaningless.

Chief Wonder Bread's picture

omg I was actually trying to be rational lol

btw, who is going to be "giving" the money?

(never go full retard)

Rabbi Chaim Cohen's picture

They key to understanding is to look where the steady, lock-step growth ended. Hmm, let's see... Wow within a couple of years after the gold standard was abolished and we started down the inflationary, fiat implosion pipeline.

Enough is never enough when you need to finance and foment a new world order by deconstructing, selling off and sabotaging a massive working machine.

Chief Wonder Bread's picture

that's when the debt build-up began to serve our rabbinical masters

Cognitive Dissonance's picture

Interestingly 'they' see it the same way.

So are you the culler or the culled?

Kayman's picture

Central Banking is theft. Plain and simple. Debt grows, economies stagnate, the working class are skinned, and the Welfare goes to the top maggets and bottom feeders.

You don't need a Revolution. You only need the producers to sit back and let the Welfare classes party on. It's going to be one hell of a hangover. The Roman Empire and the British Empire didn't die overnight.  They ate themselves alive, one leg at a time.

stubb's picture

The Roman Empire took hundreds of years to fall. The British Empire fell in 30 years tops. The Soviet Union fell in a couple weeks. Like a lot of other things these days, the velocity of empire collapse is accelerating in a highly non-linear manner. 

Tsipras the Great's picture

It's like they are distracted or something

MEFOBILLS's picture

 The greatest wealth transfer in thte history of Murica compliments of Obama and the Federal Reserve

 

It was Bill Clinton that undid Glass Steagall - which then allowed housing bubble.  It was Bill Clinton, that allowed the press to consolidate, leading to todays' corporate presstitutes.  It was Bill Clinton that gave China MFN, which then leads to the great off shoring.  It was Bill Clinton who undid provisions of Nafta, which helped the Mexinvasion gain force.

It was Bush that used the housing bubble to finance war.  Bush strategy was invite the world, war with the world.  NeoCons and Clinton and Bush, and Obama - basically they are all the same.

Obama was a sock puppet with neo-con hands up his ass.  He had some pet issues, like being friendly toward Islam - which made him doubly dangerous.  Obama also was not a strategic thinker - not enough brain power.... he was and is a stupid teleprompter reader, and was controlled by America's internal parasites.

Kayman's picture

MEFOBILLS

Well stated, succinct, true.

techpriest's picture

Great writing indeed!

Took me a long time, but I recently came to realize that it's not only "two parties as one," but also the two parties seems to play a game of good cop, bad cop with the populace. For example, Democrats bring in Obamacare (enriching the healthcare industry at your expense), Republicans tweak it just a touch so that the substance stays the same ("repeal and replace"), but both sides try to make it look like they "did something."

Or, Obama seized a whole bunch of land from farmers, and now apparently Trump is working with Congress to sell the rights to exploit the same land to corporations. They call it "privatization," but actual privatization would involve giving the land back.

Giant Meteor's picture

Good analogy. Some folks call that "impotence." Other's may call it other things. The reality is, as many have stated, the US and thanks to "globalization" is in a major bind, box, of which there is no real escape, other than the present bullshit and ball of confusion ..

Keep those plates in the air just a bit longer, hopin for A: a miracle or B: some other cataclysmic event, more than likely intiated by those who can never let go of power ..

Giant Meteor's picture

Nothing to add here other than, yep ...

Well done.

btn's picture

You found a few of the problem actors, but check the first two charts, note when the problems started, and keep up the search.

Giant Meteor's picture

Point taken. What you could accurately say however, the death spiral was greatly accelerated as MeFoBills laid out. Hell, Vietnam was expensive, as all banker wars are ..

We can go back even further, mid, and late 1800's, plus early twentieth century ..

Good faith and credit, lots and lots of credit (debt) .. at the same time wages went "dark" , "oil shocks" became a thing, as did "offshoring in the lexicon, a.k.a. "strip mining" the nation of it's manufacturing, the rise of financialization, and shit, it's runnin out of steam, which is why 7 years car loan bubbles, student debt bubbles, on top of the rest of the tried and true ..

Not to mention, the rise of dual income household, to make up the "difference ..

1971,  "Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls."

 

OpenThePodBayDoorHAL's picture

According to people who were there, in law school he sat at the back of the class, waited until everybody had spoken, then cleared his throat and proceeded to come out with the most banal and obvious nothingburger statements, and everyone just rolled their eyes. Mindless puppet.

Insurrector's picture

I really wish we could blame all of our problems on one person.

The president is not an emperor.  His real power in the legislative arena is in his pen - to use it or not when the bill hits his desk.

Getting tired of the ZH 'one finger' rule - the president is always to blame.

 

MEFOBILLS's picture

My other posts go all the way back in time to the Haibaru caravan routes.  Their bones are buried outside the gates of Sumer.  I don't think it is possible to dig further back in recorded time.

Yes, it didn't start with Clinton.  He was just another tentacle of the squid.  This forum doesn't lend itself to long discussions.

Giant Meteor's picture

Indeed, and let's face it, it's a long story ...

CJgipper's picture

"trickle down" is code for letting people keep the money they earn.  This zero percent interest rates stuff is the opposite; it's trickle up from the savers to the ones closest to the federal reserve.

hoyeru's picture

Riiiiiiiiiiiiiiight, Obama is the problem, not ol' Ronnie who talked about how great trickle down will be for everyone. Sure, Obama is the problem yes indeed. No wonder USA is in deep shit, you got a short short memory.

Bucket Boy's picture

Pareto Distribution on steroids thanks to CB's intentional meddling with natural processes.

aloha_snakbar's picture

Yes but it was all for a good cause, right? At least that annoying, bald little assPack dwarf Jeff Bozos gets to be the second richest man in the world...

flaminratzazz's picture

I guess the peso tanking fvked Carlos Slim?

Kayman's picture

It's all paper, it's all priced at the margin.  Do you think Bezos could sell his all his Amazon shares to some unsuspecting fool?  It's not like Carnegie selling U.S. steel. You're buying a computer company with warehouses. No barrier to entry.

cossack55's picture

Oh, I don't know. I can feel it tricklin' down my leg now.  Kind of a Chris Mathews kinda thingy

chunga's picture

I'd like to be first to blame millenials and the minimum wage being too high.

btn's picture

I'd like to be the first to congratulate you on having the appropriate level of intelligence to see a trend that started 40 years ago and blame it on those born less than 30 years ago.