Billionaire Bubble
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Forbes’ 35th annual billionaires list published Tuesday was a shocker. No, not so much that the rankings had changed (Musk rose from #32 to #2), nor that the global number of billionaires rose by 22% to 2,755 during the worst year of our lives. It wasn’t even that those 2,755 billionaires added $5.1 trillion to their wealth last year, since at some point huge numbers lose their meaning. The real shocker was that they had $7 trillion to begin with. In other words, the wealth of those 2,755 billionaires rose by 73% in the past twelve months. Was this past year good for you, too?
We know that raising tax rates on the ultra wealthy by a few percent wouldn’t make a significant difference to the Treasury in the scheme of things, not that we’d be opposed to doing so. The uber rich have legions of tax people dedicated to reducing their taxes down to peanuts every year, and paying a few more percent wouldn’t kill them. But wealth disparity in this country is getting real, and the unintended consequences of the gap--public health, crime, poverty, incarceration rates, and much more--aren’t pretty. Robert Schiller, economist and Nobel prize winner, claims that rising inequality in the US is the biggest challenge we face.
Let’s put that newly created $5.1 trillion in wealth, or nearly $2 billion per billionaire, in perspective. If those trillions were divvied up among the bottom half of the US population, every man, woman, and child below the 50% mark would receive $30,000. Imagine how the lives of those 164 million people would be transformed. This illustration is intended as a thought experiment, not a prescription, but you get the idea.
The last two calamities we’ve faced--the financial crisis of 2008-2009 and the ongoing Covid pandemic--have generated a huge rise in economic inequality. In both cases we bailed out large corporations at the expense of the working class, though our response was a bit more equitable the second time around. Still and all, if we’re going to do a bailout, why not bail out the people, who will in turn spend the money to support corporations? This isn’t intended as nonpartisan criticism--it’s bipartisan criticism. We can do better.
Stephen Morton is a global macro investment manager and co-founder of Inyo Capital, a financial advisory. To subscribe to "Market Sleuth," please visit our profile here.