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Seeds Of A Revolution

 September 01, 2011 10:07 AM
 


I have written extensively about the widening income gap between the rich and poor in America. For examples, see:
  1. Which is more elitist? France or America?
  2. It's a Class War, Stupid!
  3. The Fed's (inadvertent) role in the class war
A number of mainstream figures have jumped on that bandwagon. Consider this article from the Washington Post from June that decried the filthy rich:
It was the 1970s, and the chief executive of a leading U.S. dairy company, Kenneth J. Douglas, lived the good life. He earned the equivalent of about $1 million today. He and his family moved from a three-bedroom home to a four-bedroom home, about a half-mile away, in River Forest, Ill., an upscale Chicago suburb. He joined a country club. The company gave him a Cadillac. The money was good enough, in fact, that he sometimes turned down raises. He said making too much was bad for morale.

Forty years later, the trappings at the top of Dean Foods, as at most U.S. big companies, are more lavish. The current chief executive, Gregg L. Engles, averages 10 times as much in compensation as Douglas did, or about $10 million in a typical year. He owns a $6 million home in an elite suburb of Dallas and 64 acres near Vail, Colo., an area he frequently visits. He belongs to as many as four golf clubs at a time — two in Texas and two in Colorado. While Douglas's office sat on the second floor of a milk distribution center, Engles's stylish new headquarters occupies the top nine floors of a 41-story Dallas office tower. When Engles leaves town, he takes the company's $10 million Challenger 604 jet, which is largely dedicated to his needs, both business and personal.
Henry Blodgett recently wrote Remember "The American Dream?" What A Bunch Of Crap where he decried the lack of opportunity in America by pointing to the correlation of intergenerational earnings, which is a point that I made some time ago by referencing an OECD study that came to the same conclusion.


Now Bill Gross, who can hardly be characterized as a pinko commie, lamented the death of the American Dream in his latest missive (emphasis added):
This impending divorce in America is not about sex or sleeping around, but more about romancing the now stone-cold notion that anyone could be a millionaire in the good old U.S. of A. if only they worked hard enough. Our Statue of Liberty proclaimed "give us your tired, your poor…" and sent many of them West to build a little house on the prairie or strike it rich in the goldfields of Sacramento, California or Skagway, Alaska. Many of them did and a century later, the option-laden fields of Silicon Valley provided modern-day examples of rags to riches fairytales come true. But this odd couple marriage of rich (and poor hoping to be rich), now seems on rather shaky ground. Instead of boundless opportunity, the nursery rhyme describing Jack Sprat – who could eat no fat – and his wife – who could eat no lean – appears to be the starker of the two realities. There are the poor and there are the very rich, with the shrinking middle class resembling Mr. Sprat rather than his wife.
How Wall Street owns America
The truth is that the top 0.1% really controls most of the wealth in American and even the merely affluent are just making do. Consider this commentary from an experienced wealth management professional. Here is his characterization of the bottom of the top 1% in America today - these are your Horatio Alger stories:
The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well.
Those in the bottom half of the top 1% are actually rather insecure and not exactly living the life of the rich and famous (emphasis added):
I've had many discussions in the last few years with clients with "only" $5M or under in assets, those in the 99th to 99.9th percentiles, as to whether they have enough money to retire or stay retired.

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