Another billionaire CEO in the news lately – though not a tech bro – is Jamie Dimon, CEO of JPMorgan Chase. As quoted in Fortune, Dimon warned a conference in Las Vegas that the US “bottom 20% didn’t get a pay raise for 25 years; they’re dying younger. Their schools aren’t good and they live in crime-ridden neighbourhoods.”
At the other end of a scale, the Wall Street Journal ran an article in late February, subsequently much analysed and expanded on, declaring “The US Economy Depends More Than Ever on Rich People”. This article quoted findings from Moody’s Analytics emphasising that America’s top 10% – those earning more than US$250,000 annually – are now spending more than ever, while other US consumers tighten their belts.
They now account for more than 49.7% of all US consumer spending – the highest level ever as far back as 1989, when they contributed only some 36% – and contribute something like one third of US GDP.
Lest one assumes that this is all thanks to Trump, the analysis makes it clear that other trends have long been driving that divergence. High inflation, a bane for ordinary US consumers, means higher yields for the rich with higher savings. Rising stock and property valuations have also favoured the rich, Peter Boockvar, CIO of Bleakley Financial Group, added in a research note, as well as some other stimulus policies. That disparity isn’t quite in the “We are the 99%” range, but it should be close enough to worry rational policy-makers. It certainly might help explain why so many voted for Trump.
Unfortunately, the consequences of refusing to address that disparity could manifest in its effect on another kind of privilege – the “exorbitant privilege” that the US enjoys as holder of the world’s reserve currency, with its knock-on effects on financing the still-enormous US national debt.
Another J.P. Morgan figure, Bruce Kasman, the bank’s chief economist, remarked on this in Singapore in March. “The term which has been in place for a very long time is that we have ‘exorbitant privilege’. That we end up paying a much lower cost for financing our deficits and debt, we have much greater capital flows and attractiveness of the dollar and assets, because of these things”, Kasman said.
He added that all this was now at risk because of the Trump administration’s interference in the rule of law, information flow, and other “rules of the game”, beyond tariff wars. With some $36 trillion of debt, or 121% of US GDP, that is potentially a huge vulnerability. Yet why would America’s poor vote to continue a system which has been pushing them even further down for years?
We now have the FT asking “Is this the start of a period of European exceptionalism in markets?” However that works out, the US might be about to pay for sustaining one form of privilege by losing another, far more important one.
