It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.
Have we entered into a permanent new phase in America where the rich have it and flaunt it while the poor simply get by as each day gets harder and harder? Commonsense says that if someone was smart enough to become rich in the first place, they would only be able to add wealth over time. I have a friend that arrived in America, penniless with his father from China, now his wealth is beyond fabulous.
He told me the first "stick" (one million dollars) was the hardest to earn.
Be that as it may, the masses may not want to hear that as their individual world sinks deeper into the economic abyss. Sadly, the people with power to make a difference have made it worse and now use the current economic reality as a rally cry to ditch this crazy experiment known as capitalism. Of course, America has never been "rich" the way Europe used to be rich; our system has allowed mobility that was impossible in those rigid societies.
Nonetheless, talk of revolution is in the air.
I think this is the most dangerous moment for capitalism in America since the height of the movement in the 1930s and 1940s. It has different names and mostly no name this time around, but a lot of catchphrases like "income inequality" and the newest "work life balance" designed to discourage the accumulation of individual wealth and individual effort at chasing that wealth. In short the idea is to demonize financial success and then dismantle it through taxes and other schemes.
The problem is that these schemes are picking up steam and could become more than a ripple.
Last week's op-ed by Nick Hanauer stating he sees "pitchforks" against "zillionaires" continues to reverberate. The co-founded or funding source of more than 30 companies including Amazon.com says it's only a matter of time before the masses attack. Making his commentary intriguing is that he seems to welcome such an attack. Speaking "frankly," he comments on not being the smartest or hardest working guy and only being a mediocre student. He just says he has a tolerance for taking risk and good intuition about what will happen in the future.
In other words, maybe he doesn't really deserve his billions.
Moreover, intuition says the country has had enough and wants to get even. I have to note that Hanauer might suffer a special kind of guilt, considering that a large chunk of his wealth comes from selling aQuantive to Microsoft in 2007 at $6.0 billion. In July 2012, Microsoft wrote-off the acquisition for $6.2 billion - meaning the company was worthless in the first place.
Be that as it may, Nick isn't the only rich person worried and it's not just an American issue. Li Ka-shing, the richest man in Asia, says he can't sleep for worry about Hong Kong's growing income gap.
Some quotes to students at Shantou University include:
"The howl of rage from polarization and the crippling cost of welfare dependence is a toxic cocktail commingled to stall growth and foster discontent."
"…Trust, the bedrock of an enlightened society, is crumbling before our eyes."
Interestingly, the 85-year-old tycoon wants the HK government to introduce dynamic and flexible wealth redistribution policies that strike the right balance between promoting equality and economic objectives.
The income inequality issue wouldn't be an issue if the same tide was lifting all boats. Instead, the tide has been a tidal wave with anti-business rhetoric, regulations and taxes stalling the greatest economy in the world. There are 4.6 million job openings, the most in more than seven years, but people lack the skills to fill them. If the effort being applied to stir trouble and hurt feelings and dash hopes were put into education and knowledge development, the whole thing would be a moot point.
The stock market reflects the current tale of two cities theme.
|Low End||High End|
|RCII -25%||WSM +22%|
|DSW -41%||TIF +9%|
|CONN -36%||JWN +12%|
This morning, Rent-A-Center laid an egg and the stock will be hammered today. Once again, the stock market reflects economic reality. High-end retailers are on fire in a good way while those on the discount end of the equation are on fire in the bad way. There was a time people would have seen this as a positive sign that the folks were moving up the retail food chain for better quality stuff- that's not conventional wisdom at the moment.