Famous Morgan Stanley Strategist Returns, And He Has A Big Warning To The Investment Community About Inequality
In 2012 the highest-paid 1% earned 21½% of total income, according to academic Emmanuel Saez (http://elsa.berkeley.edu/~saez/). This is the highest share since the 1920s. The lift in top-end income mainly reflected a rise in business income and salary payments. Exhibit 4 shows the source of income for the highest paid 0.1%, as a percentage of total US income. The income share of the highest paid did not increase just because capital has done better than labour: it also reflects the increase in the share of salaries going to the highest paid.
All these trends were favourable the owners of financial investments and for people working in the investment industry. Neither has had it this good since the 1920s. This cycle, like the 1920s, could have ended in a depression. Instead, aggressive policy response of central banks seems to have added another leg to the cycle. However, pushing these trends to historical extremes may start to cause problems for investors, as illustrated by the debt ceiling imbroglio. More to the point, it seems plausible that these trends will reverse, at some stage, to the detriment of financial assets.