Inequality revisited

"...both the income share earned by the top 1 percent of tax returns and the tax share paid by that top 1 percent have once again reached all-time highs," says Russell Roberts at Cafe Hayek, quoting the Tax Foundation.

As we've seen recently, there's more than one way to interpret the facts. At what point do the rich cease to inspire those beneath them, and begin to squeeze them? Doesn't it take money to make money? If so, shouldn't the lower orders be left with some after paying their bills? Is there an optimum level for the Gini Index?

UPDATE

Trevor Phillips on inequality on Britain: "People can see the economic slowdown coming. Everyone is happy to take some of the pain as long as that pain is shared fairly and what we want to do is to make sure that the burden doesn't fall unfairly on some groups rather than others."

Inequality

An anonymous spam-rant comment on one of my recent posts claimed that 1% of Americans owned 50% of the wealth, and this was destroying the system. Is it really a problem? I've had a quick trawl for information on inequality.

• Gini Index/Coefficient of inequality explained here
• Wikipedia lists countries by inequality here
• The CIA Factbook gives the Gini Index of the USA as 45 (in 2007), the UK as 34 (in 2005)
• Increase of USA's Gini coefficient since 1967 here

Here's some relevant articles and posts:

Richest 2% Own Half World Wealth; Bottom 50% Own 1% - UN Report (5 December 2006)
"the richest 1% of adults alone owned 40% of global assets in the year 2000"

The wealth gap is widening again (Daily Mail, 26 June 2008)

Why is the 'wealth gap' a bad thing? (MSNBC says it's not, what matters is opportunity)

Wealth gap widens (CNN, 29 August 2006)
"In the early 1960s, the top 1 percent of households in terms of net worth held 125 times the median wealth in the United States. Today, that gap has grown to 190 times..."

Wealth Gap Is Increasing, Study Shows (ScienceDaily, 9 August 2007)
"The poorest ten percent of families actually had a negative net worth---more liabilities than assets..."

*** Sackerson's Prophet Prize for this: ***
Globalization Has Increased the Wealth Gap (interview with Nobel prize-winning economist Joseph Stiglitz , author of "Globalization and Its Discontents", posted 15 January 2007)
"I think we are in a precarious position. We might be lucky and wander our way through this mess. There is a significant probability, however, that global interest rates could rise. If that happened, households with a large amount of debt would find it very difficult to meet their mortgage payments, and home prices would go down, which would lead to a reduction in consumption. Last year Americans consumed more than their income, something that is obviously not sustainable. The only way they could get away with it was by taking out money from their houses. But if home prices go down, they won't be able to do that any more. So there is a significant risk of a large economic slowdown. And government, by piling on so much debt and having such a large deficit, does not have much room to maneuver."

Why the wealth gap keeps growing (essay by Paul van Eeden, 17 November 2006)
"The fact is that people all over the world are getting poorer -- not because of free enterprise, open markets or globalization but because government created monetary inflation robs them of their living standards. The only ones who can immunize themselves are those with sufficient capital and that is why the rich get richer and the poor get poorer."

Comments, please

I had the last comment here come through tonight, but although it's long and features words in capital letters (usually a bad sign), I read it. Shame it's anonymous, and maybe it could do with editing, but aren't there elements in it with which you could agree? Is he (I assume he, for some reason) right about wealth distribution in the USA?

UPDATE

That rant has indeed been copied and pasted as the author suggests, with slight variations. I've done a little digging via Google (there's about 1,600 instances) and the earliest date-stamped version I can find so far is 26th February 2008 here, though quite likely there's earlier ones.

I don't know what he's got against Oprah.

The "1% own 50%" claim startled me - looks like England in the 19th century. Anybody able to confirm the inequality data? And will the sucking-up of wealth by the rich destroy the economy, as the ranter claims?

Here we go

Two from Karl Denninger in the last two days:

Monday, he reasserted his belief in DE-flation; but as I've been saying for some time, maybe the real issue is the divide between haves and have-nots, and he deals with that, too. No point being rich if you daren't go out.

Yesterday, he sounded the bells for a possible crash today. Maybe this is when Robert McHugh's prediction is fulfilled.