Abridged by me from: Buttonwood: View from the top Mar 28th 2006 >From The Economist Global Agenda
FROM his perch high in The Economist's tower in St James's, this incarnation of Buttonwood has a splendid view of London's financial elite at work and play. Ajay Kapur, global strategist at Citigroup, has coined the term "plutonomy" to describe the phenomenon. The world, he says, is splitting into two blocks: those rife with income inequality, whose economies are essentially powered by the wealthy; and more egalitarian places, such as Japan, France and the Netherlands, where there is less incentive for entrepreneurial flair. Drawing on America's latest triennial Survey of Consumer Finances, published last month by the Federal Reserve, Mr Kapur notes that in 2004 the richest 10% of Americans scooped a staggering 43% of pre-tax income and held 57% of net worth, up from 39% and 51% respectively in 1995. The poorest 40% gathered just 10% of income in 2004, a little less than their 11% in 1995. The skew of wealth in favour of the rich, argues Mr Kapur, answers many of the questions that vex equity investors. Why, for instance, haven't oil prices slowed the global economy? Because, he says, the wealthy don't notice them. He also believes that the gap between the rich and the rest will widen even more, as globalisation hands the people at the top an increasing share of the world's GDP over the next few years. That means, he says, that problems such as the low saving rate are unlikely to send the dollar into free-fall or interest rates sharply higher. Thus the equity risk premia reflecting such worries may be too high. http://www.economist.com/agenda/displaystory.cfm?story_id=E1_VGSSQPP ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Message: http://www.houseoffusion.com/lists.cfm/link=i:5:203138 Archives: http://www.houseoffusion.com/cf_lists/threads.cfm/5 Subscription: http://www.houseoffusion.com/lists.cfm/link=s:5 Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5 Donations & Support: http://www.houseoffusion.com/tiny.cfm/54
