The Fourteenth Banker Blog

August 29, 2010

Report on the Third Estate

Filed under: Running Commentary — thefourteenthbanker @ 11:03 PM

This report summarizes the situation of the Third Estate very well. From the Findings of the Working Group on Extreme Income Inequality, these key points:

  • Percentage of U.S. total income in 1976 that went to the top 1% of American households: 8.9.
    • Percentage in 2007: 23.5.
  • Only other year since 1913 that the top 1 percent’s share was that high: 1928.
  • Combined net worth of the Forbes 400 wealthiest Americans in 2007: $1.5 trillion.
  • Combined net worth of the poorest 50% of American households: $1.6 trillion.
  • U.S. minimum wage, per hour: $7.25.
  • Hourly pay of Chesapeake Energy CEO Aubrey McClendon, for an 80-hour week: $27,034.74.
  • Average hourly wage in 1972, adjusted for inflation: $20.06, In 2008: $18.52

Please click on the link for much more including fascinating statistics on CEO pay and the real value of the minimum wage today. Of course, the argument that increasing the minimum wage that much would result in more unemployment must hold true, because the above minimum wages have slumped to below real constant dollar “old minimum wage” levels. (that was a mouthful)  But really, think about it. If the real incomes of the top have increased so much, and the rest have done nothing so as to have fallen below the real value of the 1972 minimum wage, then a lot of somebodys got screwed.



  1. The point here is emotional histrionics relating to the top 400 net worth versus the bottom half of the populations net worth. Some fill in the blanks questions to add to the foregoing as guidance for ” revolutionary” methodologies to sate the angst or to cure the problem of the 400.

    What is the net worth of the top 49 % of the citizenry?

    Directly or indirectly , where are the upper 400 net worth assets invested?

    What is the asset leverage of the top 400 net worth of $1.5 trillion?

    How illiquid is the net worth of the top 400 in relation to the top 400 gross asset claims on the upper 49 % leveraged assets compared to net worth. Similarly , for the lower 50 %.

    The factual financial unwinding since 2008 demonstrates that the substantially all of the 400 net worths are highly vulnerable to degradation of asset value and incomes of the upper 49 % in particular. As a working hypothesis though, the marginal asset shrinkage of the bottom 50 % would easily create a cascade that would marginally draw in the upper 49 % as well.

    Consequently, the “revolutionary” would examine the foregoing to induce the collapse of the top 400 net worths. That is bankrupting the lot. That said, I believe a strong case can be made that the 400 , as a group, have already so placed their assets that total loss is nearly a guaranteed result unless incomes in the US rise and restore the non 400 families desire to service their debts and incur new debt to levels of low loss. A period of liquidation of hoi polloi debt without increased consumption will doom nearly all of the 400 net worths.

    The 400 elites are so imbued with their global cosmopolitan natures as to not understand that their acts have destroyed their own wealth as the liquidation of the US progresses. To avoid the foregoing on a personal basis , each elite family must deleverage assets and convert them to liquidity. That is more difficult than one would think because the core asset of each elite is their stock ownership or outstanding at value options of the financial units they effectively control. Jamie Dimon’s power resides in his position. His position resides in his stock ownership of Chase. Should the Chase stock become worthless , Dimon’s power is gone. During the 2008 crisis, the foregoing was a very probable result had the USG and FED not intervened to end the multiplicity of panics. The next financial crisis and panic, widely expected, will not protect the power assets of the 400.

    The next financial panic will obviously be induced by the collapse of US State and Local debt. Their revenues, barring vastly increased incomes and personal consumption will not begin to cover expenditures. The State and local governance units termination of expenditures will generate further state and local revenue collapses. ( Study the same problem in privately held local transit system collapses. The state took over and the process is repeating itself in public transit.)

    There will be no room for another Wall Street save other than a mass bankruptcy and recapitalization from creditors claims. The 400 financial stock holdings will largely be wiped out.

    The Federal government will be required to save both State and Local government finances and the financialization elite structures at the same time in the next panic. That will lead to systemic political dissolution in the event of failure.

    Systems kill themselves from elite suicide . Revolutionaries are only the undertakers of the dead system.

    Comment by Jerry J — August 30, 2010 @ 2:49 PM | Reply

  2. Let ’em eat cake.

    Comment by Sandi — August 30, 2010 @ 4:14 PM | Reply

  3. Jerry, I would disagree with you. Sure Dimon’s future earnings would suffer, but what of the millions and millions he has already made? Which btw is sitting in cash not stock. The rich are hoarding cash/gold like crazy right now. All younees to do is pick up the personal financial statement of any guy with net worth in excess of $50mm and you’ll know that it’s all either cash or precious metals.

    These people know what’s about to come. And I have to give them, they’re very smart……it’s the average suckers that get killed, not the 400.

    Comment by Vocalbanker — August 31, 2010 @ 11:12 PM | Reply

    • Absolutely, Vocalbanker. The great unwashed masses will come after the people scapegoated by Glenn Beck and Co. Liberals, gays, people of color, anyone not blatantly religious or not of a “pure strain” of WASPishness.
      As I’ve said before, I live amongst these people and hear their off-hand conversations. They don’t know about how Wall St. encouraged the off-shoring of their jobs in the near-sighted quest for shot=term profits, or how we are now beholden to China for the rare earth metals needed by high-tech, (so guess where the I-phones will all be built before long?) They know their wages have stagnated or gone down, but they blame that on all the brown people flooding the job market and driving wages down. At any rate, the rabble won’t go after Jamie and Lloyd and Richard Fuld.

      Comment by Sandi — September 1, 2010 @ 3:14 PM | Reply

  4. Ooops – Make that “short-term” profits…………

    Comment by Sandi — September 1, 2010 @ 3:15 PM | Reply

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