Plutonomies
Posted by WARREN MOSLER on October 19th, 2009
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> (email exchange)
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> On Sun, Oct 18, 2009 at 12:01 PM, Russell wrote:
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Plutonomies
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> I don’t know if the very wealthy support consumption.
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As a point of logic yes, it can be done, and we’ve been moving in that direction.
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> I was always under the impression it was the mass of the people
> not the mass of wealth. Gillian Tett supports your thinking on this.
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Yes:
The essential thesis is that plutonomies arise when there are factors such as “disruptive productivity gains, financial innovation, capitalist-friendly governments, overseas conquests and dopamine-heavy immigrants, the rule of law, patent protection and great complexity exploited by the wealthy of the timeâ€.
This description has applied to countries such as the US, UK, Canada and Australia recently: in the US, for example, the top 1 per cent control almost a quarter of the wealth. And that has big implications for consumer spending or global financial flows.
For while economists tend to watch factors such as unemployment to predict consumption, Mr Kapur thinks this can be misleading because it is the elite rich – not the middle class – who tend to drive consumption.
Last year, for example, this elite cut spending and raised saving because their assets plunged in value. However, in the next year, Mr Kapur is expecting plutonomists to make a comeback. As a result, he expects spending to reappear.
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October 19th, 2009 at 2:20 pm
Consumption is be supported by the super wealthy and most of that money is made through bonuses driven through bank profits.
The problem with relying on this type of consumption is bank profits have, until recently, relied on loans to business and households.
When would the super wealthy find a way to bypass the need to make new loans?
Looks like they have. Perhaps they are now borrowing their bonuses :)
1 Bank credit 9,158.1 9,295.2 9,257.0 9,340.3 9,333.2 9,256.7 9,199.0 9,109.8 9,119.3 9,108.6 9,026.8 9,015.7
http://www.federalreserve.gov/releases/h8/current/default.htm
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