Rich, Poor See Poverty Very Differently

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WASHINGTON -- The dramatic differences between rich and poor that were on view during Hurricane Katrina also can be seen by how those two groups view the causes of poverty. The poor largely believe they were dealt a bad hand while the rich are more apt to say poverty is from lack of effort.

Polling by the Marguerite Casey Foundation also found that people of all income groups said they felt optimistic that their own children will be better off in the future. The poorest were most likely to express optimism their children will be better off.

"We have a concentration of wealth in the top 5 percent, but what is happening to the middle-class and poor people?" [asked] Luz Vega-Marquis, president of the foundation.
Associated Press, October 18, 2005

Evacuees binge on Cape:
Spend fed cash on booze, strippers
BOURNE, Massachusetts – Hurricane Katrina evacuees hastily handed $2,000 in federal relief money last month have been living it up on Cape Cod, blowing cash on booze and strippers, a Herald investigation has found.

Herald reporters witnessed blatant public drinking at a Falmouth strip mall by Katrina victims living at taxpayer expense at Camp Edwards on Otis Air Force Base. And strippers at Zachary's nightclub in Mashpee, a few miles from the Bourne base, report giving lap dances to several evacuees.
Boston Herald, October 18, 2005

The Rich Get (Much) Richer
Hooray for The New York Times and The Wall Street Journal for returning the problems of class in America to the front page. Shame on the rest of us, passive witnesses to the emergence of a second Gilded Age, another Roaring Twenties, have to a slim sliver at the top. Every serious study shows that the U.S. income gap has become a chasm. Over the past 30 years, the share of income going to the highest-earning Americans has risen steadily to levels not seen since shortly before the Great Depression.
Business Week, August 8, 2005

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Rich, Poor See Poverty Very Differently

Category: THE ECONOMY

By: Pete Kendall, October 18, 2005

A bear market is nature’s way of redistributing wealth, but apparently, at a trend change as big as this one, people just cannot wait to get in there and lend a hand.
The Elliott Wave Finacial Forecast, November 1999

The chart based on data from NYU professor Edward Wolf shows that just as The Elliott Wave Financial Forecast suggested in the November 1999 issue (see additional references below), the bear market is in the process of “redistributing the wealth.” Unfortunately, data is only available on a once-every-three-years basis, so there are no figures for 1999 and 2000, and the most recent data point is for 2001. The closest figure to the bull market peak is for December 1998. In all likelihood, the rise in share of total wealth held by the richest 1% of the U.S. households peaked in 1999 when the Dow Industrials were above 11,000. We expected the figure to approach its all-time peak of 44% peak at the end of Supercycle (III) in 1929. This may or may not have happened, but it almost surely reached a new high for Superycle (V) as the preponderance of financial wealth held by the richest 1% of U.S. households (according to Wolff, 47.3% as of 1998) reveals that this group’s wealth share had to be much higher in December 1999 than it was in December 1998 when the Dow was back at 9100. The share of total wealth declined to 33.4% in 2001 in line with EWFF forecast for the bear market. With another mini-boom in the financial markets since October 2002, the figure undoubtedly bounced back toward 40% in 2004/2005, but the re-blossoming of concern that the rich are getting “(Much) Richer,” is a direct parallel to the late 1999 when the last outburst over the widening divide was followed by a quick reversal – in the market and the gap itself.

As we noted in November 1999, the worry over unequal distributions of wealth always seem to pop up when it is about to be corrected by the markets and, at super-sized turns like this one, people and one of their primary instruments of destruction (the government) cannot help but get in there and "lend a hand." In the next phase of decline, this urge will very likely manifest itself in the form of protectionism, taxes and all manner of Robin Hood social programs that take from the rich only to drive the poor into an even more desperate state of impoverishment. The story of the Louisiana evacuees above is a perfect example. Less fortunate Louisianians were taken to Cape Cod where they have very little chance of assimilating and given $2000 in spending money out of the U.S. Treasury, a perfect post-peak, as it doesn't so re-distribute wealth; it destroys it outright.

Additional References
The Redistribution of Wealth?
The chart of the wealth held by the richest 1% of U.S. households offers another perspective on just how top heavy the bull market has become. Notice how much lower and thus relatively stable the last peak was at the end of Cycle III in the mid-1960s. The most recent figure of 40.1% is a projection for 1997 based on changes in asset prices. The figure for 1999 is not yet known, but, with most of the growth in wealth now coming directly from the stock market and the market’s thinning since the spring of 1998, 1999 will challenge 1929’s all-time record of 44.2%. Since 1997, it is known that the net worth of the world’s richest person, Bill Gates, nearly tripled to about $100 billion in July. According to Forbes’ 1999 list of the world’s richest people, near the summer highs, Gates was worth about 1% of GDP, which is roughly equal to the 50 richest Americans on its 1982 list. As a percentage of GDP, the wealth of the 50 richest Americans is 4.5 times the level of the top 50 in 1982. In the 1930s, the wealth distribution problem was “solved” by a falling market and tax rates of better than 90% for the wealthiest Americans. In the second half of 1999, the same social forces can be seen stirring, as the “growing gulf between the haves and the have-nots” has suddenly become an issue. Within days of the S&P high, the seeds of a new social movement were visible in a rash of headlines like this one: “Income Inequalities Reach ‘Grotesque’ Gap, U.N. Says.” The Republican Presidential front runner has even attacked his party for trying to “balance the budget on the backs of the poor.” As the chart shows, a bear market is nature’s way of redistributing wealth, but apparently, at a trend change as big as this one, people just cannot wait to get in there and lend a hand.

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