Wednesday, January 22, 2014

Who are the 1%?

Krugman makes an observation that I've made several times on this blog -- there are too many people in the 1%:
White-collar professionals, even if married to each other, are only doing O.K. The big winners are a much smaller group. The Occupy movement popularized the concept of the “1 percent,” which is a good shorthand for the rising elite, but if anything includes too many people: most of the gains of the top 1 percent have in fact gone to an even tinier elite, the top 0.1 percent.
And who are these lucky few? Mainly they’re executives of some kind, especially, although not only, in finance. You can argue about whether these people deserve to be paid so well, but one thing is clear: They didn’t get where they are simply by being prudent, clean and sober.
Krugman is certainly part of the 1%, but maybe not the 0.1%, and he does not see himself as a malefactor of great wealth. A married, mid-career professional couple will find themselves making over $250,000, comfortable by any standard and likely in the 1% or close, but such a "prudent clean and sober" couple is not driving inequality in the US. That's being driven by the Finance industry, which is growing primarily on debt and derivatives. The latter can be outlawed, and the former can be more accurately priced by banning securitization and forcing sound credit management by requiring debt to be held on the issuer's books to maturity. Manage resulting credit contraction through fiscal action.


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