Real wealth inequality is found in the .01 percent v the 99.99 percent

I’ve been watching Michael Lewis, author of Moneyball and more recently Flash Boys, do his media tour for his new book Flash Boys talk about how the Stock Market is rigged by digital high-speed, high-frequency trading that knows you made a trade before y0u push the BUY  button. So it makes sense that we need to recalibrate and finger a new bad guy in the wealth inequality debate that is being revved up as a wedge theme for the 2014 midterm election cycle. The folks at OCCUPY got it all wrong. The One Percenters are mere schlubs in terms of wealth growth compared to the .01 percenters. See this enlighteneing post from Mish:

For all the ranting about the top 1% by the Economic Policy Institute and others, a US Berkeley study by Emmanuel Saez and Gabriel Zucman on The Distribution of US Wealth, Capital Income and Returns since 1913 shows no increase in wealth inequality for top 1% since 1960%.

All of the increase in wealth inequality is not in the top 10% or top 1%, but rather the top .1 or top .01%. Here are some charts to consider.



click on any chart for sharper image 

Wealth Has Been Always Concentrated 

Top 10%

Top 1% Led by Surge of Top 0.1%

Little Recovery for the Merely Rich (Top 1% Minus Top 0.1%)



Wealth Inequality — The Real 1%

In regards to the above study, The Atlantic reports How You, I, and Everyone Got the Top 1 Percent All Wrong

For years, I’ve been making the same embarrassing mistake about U.S. economic inequality. Sorry.

I’ve written, over and over, that the most important divide in our wealth disparity was between the 1 percent and the 99 percent. For example, when I compared the evolution in investment income since the late 1970s, I often imagined a graph like this from the Economic Policy Institute, showing the 1 percent flying away from the rest of the country.

It turns out that wealth inequality isn’t about the 1 percent v. the 99 percent at all. It’s about the 0.1 percent v. the 99.9 percent (or, really, the 0.01 percent vs. the 99.99 percent, if you like). Long-story-short is that this group, comprised mostly of bankers and CEOs, is riding the stock market to pick up extraordinary investment income. And it’s this investment income, rather than ordinary earned income, that’s creating this extraordinary wealth gap.

The 0.1 percent isn’t the same group of people every year. There’s considerable churn at the tippy-top. For example, consider the “Fortunate 400,” the IRS’s annual list of the 400 richest tax returns in the country. Between 1992 and 2008, 3,672 different taxpayers appeared on the Fortunate 400 list. Just one percent of the Fortunate 400—four households—appeared on the list all 17 years.

Now there’s your real 1 percent.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

 

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