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-- SOURCE: 01-04-18 The Heisenberg Report - "Dear America: Here’s What Egregious Wealth And Income Inequality Looks Like" --

We’ve spent a lot of time talking about inequality in these pages.

This discussion is particularly relevant now for two reasons.

  1. the policies adopted by central banks in the wake of the financial crisis have exacerbated inequality
  2. Donald Trump’s tax plan, variously pitched as a “middle class miracle”, amounts to little more than a handout for the wealthy

Taking those in turn, the policy response to the financial crisis served to inflate the value of financial assets and those assets are disproportionately concentrated in the hands of the wealthy. One of the most important things to understand about this dynamic is that it’s not linear. Here’s how Salient’s Ben Hunt described the situation in a recent note called “The Pecking Order“:

The goodies of a trebled stock market aren’t evenly distributed. Who owns stocks? If we’re talking about households, leaving aside pension funds and endowments and other institutional investors, it’s the rich, mostly. And that household share of the Central Bankers’ Bubble doesn’t increase linearly with wealth, but exponentially, meaning that the really rich own a lot more stocks than the merely rich, so the really rich have gotten a lot richer than the merely rich.

So to the extent investors have seen their E*Trade accounts and 401(k)s inflate on the back of nine years of central bank profligacy, it’s important that those folks understand that while they are richer in an absolute sense, they are poorer in relative terms almost by definition.

Of course that assumes you actually own stocks. And as we’ve shown time and again, that is not a safe assumption for large swaths of the American electorate. Here’s the breakdown by net worth:


And here’s the chart from the GAO that lends the lie to Trump’s “how’s your 401(k)?” bullshit (that’s a slogan he’s now testing out at rallies):


Recall the following from a Heisenberg piece published over at DealBreaker last month:

It seems highly unlikely that Trump’s base is benefiting from the inexorable rally in equities. And even if they are benefiting, financial assets are disproportionately concentrated in the hands of the rich.

If Jeff Bezos is getting exponentially richer than Steve Mnuchin during this rally, well then you can extrapolate what that means for the likes of Gwynne Abrams, an unemployed nanny in Henderson, Nev., who told the Washington Post how she recently scraped together $78 in nanny money to donate to Trump’s “cause.”

At least Steve gets the satisfaction of knowing that even if Bezos is now 333 times richer than him thanks to the Amazon rally, the money Jeff spends is literally signed “Mnuchin”. I don’t think you’re going to see “Gwynne Abrams, Certified Nanny” scrawled on your dollar bills any time soon.

Indeed, that’s the punchline here. As shown in the second chart above, less than half of Americans have a 401(k). As for Trump’s base, consider this from the GAO:

Overall, approximately 14 percent of workers in the lowest income quartile participated in a program compared to 57 percent and 76 percent of those in the third and fourth income quartiles, respectively. Similarly, according to the W-2 adjusted data, 22 percent of workers in the lowest income quartile participated in a program compared to 67 percent and 84 percent of those in the third and fourth income quartiles.

The people Trump claims to be fighting for simply don’t benefit from his beloved stock market rally.

As far as the second point enumerated above goes, you already know the story there. No matter what you might have heard from the administration, and no matter what you may have read on any other blog that’s struggling mightily to reconcile their populist message with the fact that Trump is anything but a middle class advocate, the tax plan overwhelmingly benefits the rich – point blank, period. Here’s NPR’s quick summary of the independent analysis conducted on the tax bill:

In 2018, the Republican tax overhaul would give all of these income groups a tax cut, on average. But both by percentages and total dollars, the benefits would be far greater for higher-income households. Households making $1 million or more per year would get an average tax cut of $69,660, a 3.3 percent boost in after-tax income.


In 2027, the Republican tax overhaul would raise taxes on 53 percent of households. Still, as in 2018, both by percentages and total dollars, the benefits would be far greater for higher-income households. Households making $1 million or more per year would get an average tax cut of $23,190, a 0.9 percent boost in after-tax income.


With that as the backdrop, we wanted to bring you some charts from a new presentation by Deutsche Bank’s Torsten Slok and co. called “US Income And Wealth Inequality.”

There’s no accompanying color (i.e., it’s just a slideshow), so we’ll just take them in turn and state the obvious.

First, here’s how tax cuts have increased inequality over the years:


You tell us: is “this time different”?

Next, have a look at the increase in the percentage of total household wealth owned by the top 10%:


The top 10% of families in the US own $51 trillion – or three quarters – of total household wealth.

Now take a gander at how the very rich are getting richer than the “merely” rich:


As Deutsche notes, “the top 1% earn 22% of total income, up from 8% in the 1970s.”

Moving right along, “these are your incomes under Republicans”:


Yep, you can definitely count on the GOP to look after Trump’s base. Can’t you tell?

As far as total wealth goes, the top 0.1% now enjoy the largest wealth share since the 1920s:


As for the rest of you … well…


How are those financial assets looking for the bottom 90%? Oh, they no longer own any…


“No soup for you!”

Meanwhile, here’s a “good” lookin’ chart:


This just goes on, and on, and on. For the time being, allow us to drive the point home about the stock market one more time.

And here’s a chart that shows you why that base (assuming he’s still clinging to the idea that the “forgotten men and women” are his constituency) is probably wondering why he keeps tweeting about stocks:


Any questions?