It’s a wonderful time to be rich in America. I’ve never made so much money and had so much fun spending it. I’m not alone, either. If you make at least $500,000 per year, you are a 1%er, and this is a golden age.
I think Reagan’s old Budget Director, David Stockman, generally has it right. And he recently wrote the most interesting thing about the 1% and real estate. Take a listen:
“The absurd deformation evident in the latest data on housing bubble 2.0 sticks the fork in monetary central planning. On an April YTD basis versus the prior year for 30 major markets, the pattern is stunning: Among homes sold to the top 1% of households, volume is up by 20-100% in most markets. By contrast, transaction volume during the last four months was down for the entire remaining 99% of the market in 26 out of 30 cities. And the bottom 99% volume was off by double digit amounts in places like Phoenix, Orange County and Las Vegas.
Moreover, the pattern of soaring volume among the 1% is not just a regional aberration owing to the social media and technology stock boom in places like the San Francisco Bay area. Volume of top 1% home sales on Long Island, for example, was up by 72% during the first four months of 2014—bad winter weather notwithstanding. Contrariwise, volume among the less well insulated 99% of Long Island home buyers actually dropped below prior year levels.”
What the $%#^? What about the whole housing rebound story? Is this yet another distortion by the Matrix (Fed and mass media) to have us believe what they want us to believe? It certainly looks to me like yet another example of how 1%ers are benefitting from the insiders transferring wealth from the outsiders to themselves.
Let’s not stop there. Now let’s consider the fate of American startups. What startups you say? Exactly. Annual start-ups as a share of U.S. businesses fell from nearly 15% in the late 1970s to around 8% in 2011. The proportion of firms aged five years or younger has dropped steadily over the past three decades, from around 50% in the early ‘80s to about 35% in 2012. And it continues to drop. The number of jobs created by these new firms has fallen accordingly.
Older and larger businesses are doing better relative to younger and smaller ones. Why, and what’s the likely impact?
Most people understand why high-volume retail chains like Wal-Mart or Starbucks have killed smaller competitors: volume. But construction and manufacturing start-ups have also declined precipitously. The same is true for doctors, accountants, and even artisans, who increasingly end up working for big conglomerates rather than for themselves.
That suggests there’s something other than volume and economies of scale that favor big firms and undermine entrepreneurship. What could it be?
Who knows? One thing I think I know is that the 1% have gained the most from the Fed essentially injecting trillions of dollars into the stock market, which once again, amounts to the insiders helping the insatiably needy wealthy of America. The Fed has no intention of helping Main Street, and nearly everything it has done has undermined the bottom 80%.
All I can say is that I’m glad I’m in the 1%. It truly is a golden age. And I have a large stockpile of gold to prove it.