The Fourteenth Banker Blog

August 10, 2010

Further Alarm Bells Ringing Faintly

Filed under: Running Commentary — thefourteenthbanker @ 7:32 AM

Yahoo posted an article today.  Nothing new.  Just a rehash of the situation of income and discretionary resource concentration at the top.

The data may be a further sign that the U.S. is becoming a plutonomy–an economy dependent on the spending and investing of the wealthy. And plutonomies are far less stable than economies built on more evenly distributed income and mass consumption. “I don’t think it’s healthy for the economy to be so dependent on the top 2% of the income distribution,” Mr. Zandi said. He added that, “In the near term it highlights the fragility of the recovery.”

In fact, the recent spending of the wealthy may be unsustainable. Their savings rate has gone from more than 26% in 2008 to a negative 7% in the first quarter of 2010, according to the Moody’s Analytics data. They still have lots of savings. But the massive draw on that in the past two years is unlikely to continue at the same pace.

“I think we’re already seeing a slowdown in spending by this group,” Mr. Zandi says.

And that should be a worry for all of us.

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