Tag Archives: inequality

Charlie Munger: U.S. Rich-Poor Gap Will Bridge Itself

Charlie Munger, Warren Buffett’s right-hand man at Berkshire Hathaway, made an interesting comment this morning on CNBC that echos what I’ve been saying about U.S. wealth and income inequality:

Recently, some lawmakers have been pushing for higher taxes on the wealthy, especially Rep. Alexandria Ocasio-Cortez, D-N.Y. Ocasio-Cortez has proposed a 70 percent marginal tax on incomes over $10 million in an effort to bridge the growing wealth gap between the rich and the poor.

But Munger thinks the divide will slowly bridge itself as interest rates are unlikely to go “much lower” from current levels. By slashing rates and implementing quantitative easing measures a decade ago, the Federal Reserve inadvertently bailed out the rich to help the poor during the financial crisis by boosting asset prices, Munger said.

“Nobody was doing that because they love the rich; they just didn’t have any other tools in the kit,” he said. The inequality that came from that “wasn’t malevolent and it was an accident and it probably won’t happen again.”

As I’ve been explaining, U.S. household wealth is currently experiencing an unsustainable bubble that is the main reason for growing U.S. wealth and income inequality. This bubble is largely driven by bubbles in stocks and bonds. The asset bubbles behind the U.S. wealth bubble are going to burst and cause a severe economic crisis. Therefore, I believe that our society should be worrying more about these bubbles rather than the temporary inequality that they create. When the U.S. wealth bubble bursts, the wealth and income inequality gap is going to shrink, which supports Charlie Munger’s assertion that the gap will “bridge itself.”

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America’s 1% Hasn’t Had This Much Wealth Since The Roaring Twenties

MarketWatch published a piece today called “It’s been almost 100 years since America’s 1% had this much wealth“:

It’s not fashionable to wear flapper dresses and do the Charleston, but 1920s-style wealth inequality is definitely back in style.

New research says America’s ultra-rich haven’t held as much of the country’s wealth since the Jazz Age, those freewheeling times before the country’s finances shattered.

“U.S. wealth concentration seems to have returned to levels last seen during the Roaring Twenties,” wrote Gabriel Zucman, an economics professor at the University of California, Berkeley.

Zucman said all the research on the issue also points to large wealth concentrations in China and Russia in recent decades. The same thing is happening in France and the U.K., but at a “more moderate rise,” the paper said.

In 1929 — before Wall Street’s crash unleashed the Great Depression — the top 0.1% richest adults’ share of total household wealth was close to 25%, according to Zucman’s paper, which was distributed by the National Bureau of Economic Research.

As I’ve explained countless times (but nobody seems to listen), growing U.S. wealth inequality is the byproduct of an unsustainable bubble in asset prices such as stocks and bonds:

What is lost on left-wing wealth inequality alarmists like Gabriel Zucman is the fact that America’s wealth inequality is not a permanent situation, but a temporary one because the asset bubbles behind the wealth bubble are going to burst and cause a severe economic crisis. My argument is that our society should be worrying more about these asset bubbles than the temporary inequality.

What is the common denominator between U.S. wealth inequality during the Roaring Twenties and now? A massive stock market bubble, which I have written about extensively:

Why isn’t Gabriel Zucman discussing the role of the Fed-driven U.S. stock market bubble in driving wealth inequality? It’s very simple: he is disingenuous and not interested in genuine solutions. His goal is to help make the United States a socialist country – end of story. I will be writing much more extensively on this topic in the near future – stay tuned.

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