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."

Market manipulation in financials?

Mish refers us to a piece in Minyanville. It suggests a recently introduced selective ban on short-selling is intended to support share prices in financials, so that more money can be drawn in by splitting shares and selling new tranches to the public.

To me, it feels like touting for sucker money. What happens later, when the short-selling ban is lifted? When the government (via regulators) begins to manipulate the market in this way, it looks like a sign that we are in trouble.

Should sterling now decline against the US dollar?

Mish thinks so, now we've decided to borrow our way out of a recession.

Also interesting to hear the discussion on Radio 4's Any Questions, where the assertion that Gordon had stuck to the EU's "40% of GDP" borrowing guideline wasn't challenged by anyone, despite the massive off-book PFI financing.

Conspiracy Corner

Secret Bilderberg Agenda to Microchip Americans Leaked

Thought you ought to know.

Break free

To cut down the rainforest, you need logging roads and rivers, so that you can empty the land. And to extract the wealth and freedom of a nation, you need a money system, banking, credit and debt.

Thanks to iTulip, I'm working my way through a series of YouTube postings of an Argentinian documentary. It describes how banks and multinational companies raided Argentina from the nineteenth century onwards, and how successive betrayals by popular politicians and union leaders have perpetuated the crisis.

Some years ago, I watched a documentary about an old American farmer, trying to make ends meet while crop prices fell and the bank continued sucking up interest from his debts. Finally, he did a brave, bold, heroic thing: he sold. He took the farming equipment he had acquired with a life's work, and auctioned it to his farming neighbours, who were rooting for him. Then he cleared his bank debt entirely, gave the home farm unencumbered to his son, left the big sky and went with his wife to live in a little flat in town.

I don't think I shall ever forget the dignity and restraint he showed when the bank telephoned him with hypocritical words of goodwill.

Pay off your debts, save cash (or whatever will keep its value), and don't put it all in the bank.

M4 up

FXstreet.com reports (htp: Alice) on significant increase in UK M4 money supply and lending (someone please help me with the distinction). Conclusion: inflation.

To put it in context, click here for BoE long run stats on M4.

Saturday smile