Buying Luxury, Explaining Global Imbalances. I once tried to look these up, was unsuccessful. You are commenting using your WordPress. The Citigroup Plutonomy Memos: The rich have come back richer than ever. Comments on issue 74 — repaired post and read comments on issue That leakee not true. Notify me of new posts via email.
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So what are we talking about? In and , several analysts at Citigroup took a very, very close look at the economic inequalities within the USA and other countries and wrote two memos which were addressed to their very wealthy customers. So Citigroup did their duty and published two explosive memos, which should have become mainstream news, but eventually did not. Usually one should think that once such important documents are in the "public domain", nothing should stop them any more from being distributed and being openly discussed.
Examples of their activities can be found all over the internet. It is not necessary to include a download link in this post, as the memos are pretty easy to find with a simple google search. However, Citigroup seems to have been successful in preventing a wider discussion about the memos, due to their legal actions. This needs to stop, as every American and every citizen in the western world needs to know what people like the analysts of Citigroup really think about the inequalities which exist within the societies, how the rich should preserve their domination, and what possible "backlash" can be expected - and what the consequences are of living in a "plutonomy.
Indeed, traditional thinking is likely to have issues with most of it. We will posit that: 1 the world is dividing into two blocs - the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties in the U.
What are the common drivers of Plutonomy? Disruptive technology-driven productivity gains, creative financial innovation, capitalist- friendly cooperative governments, an international dimension of immigrants and overseas conquests invigorating wealth creation, the rule of law, and patenting inventions.
Often these wealth waves involve great complexity, exploited best by the rich and educated of the time.
There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. Consensus analyses that do not tease out the profound impact of the plutonomy on spending power, debt loads, savings rates and hence current account deficits , oil price impacts etc, i. It is easy to drown in a lake with an average depth of 4 feet, if one steps into its deeper extremes. To continue with the U.
Was the U. Not really. The Managerial Aristocracy, like in the Gilded Age, the Roaring Twenties, and the thriving nineties, needs to commandeer a vast chunk of that rising profit share, either through capital income, or simply paying itself a lot. We think that despite the post-bubble angst against celebrity CEOs, the trend of cost-cutting balance sheet-improving CEOs might just give way to risk-seeking CEOs, re-leveraging, going for growth and expecting disproportionate compensation for it.
Meanwhile Private Equity and LBO funds are filling the risk-seeking and re-leveraging void, expecting and realizing disproportionate remuneration for their skills. But does placing so much money in so few hands also pose risks? Fortunately for the investors, the analysts at Citigroup also considered these points and started to think about the plebs who, as history shows, have a tendency to be unruly, if poor. So the analysts started to think about "losers", as they call them, or the people who could need a bath, as Newt Gingrich would call it.
The Citigroup analysts basically predicted the OWS-movement. Plutonomy, we suspect is elastic. Concentration of wealth and spending in the hands of a few, probably has its limits.
What might cause the elastic to snap back? We can see a number of potential challenges to plutonomy. The first, and probably most potent, is through a labor backlash.
Outsourcing, offshoring or insourcing of cheap labor is done to undercut current labor costs. Those being undercut are losers in the short term. While there is evidence that this is positive for the average worker for example Ottaviano and Peri it is also clear that high-cost substitutable labor loses.
Low-end developed market labor might not have much economic power, but it does have equal voting power with the rich.
This tends to lead to calls for protectionism to save the low-skilled domestic jobs being lost. This is a cause championed, generally, by left-wing politicians. At the other extreme, insourcing, or allowing mass immigration, which might price domestic workers out of jobs, leads to calls for anti-immigration policies, at worst championed by those on the far right.
To this end, the rise of the far right in a number of European countries, or calls from the right to slow down the accession of Turkey into the EU, and calls from the left to rebuild trade barriers and protect workers the far left of Mr. Lafontaine, garnered 8. This is not something restricted to Europe. Sufficient numbers of politicians in other countries have championed slowing immigration or free trade Ross Perot, Pauline Hanson etc.
Then comes a key-part of the first "Plutonomy" memo: Plutonomy only works if the members of a society have the impression that they can still participate, despite the harsh inequalities, that they "can join it. Quote: A third threat comes from the potential social backlash. To use Rawls-ian analysis, the invisible hand stops working.
Perhaps one reason that societies allow plutonomy, is because enough of the electorate believe they have a chance of becoming a Pluto-participant. Why kill it off, if you can join it? But if voters feel they cannot participate, they are more likely to divide up the wealth pie, rather than aspire to being truly rich.
Could the plutonomies die because the dream is dead, because enough of society does not believe they can participate? The answer is of course yes. But we suspect this is a threat more clearly felt during recessions, and periods of falling wealth, than when average citizens feel that they are better off.
There are signs around the world that society is unhappy with plutonomy - judging by how tight electoral races are. But as yet, there seems little political fight being born out on this battleground. The population at large might still endorse the concept of plutonomy but feel they have lost out to unfair rules.
In a sense, this backlash has been epitomized by the media coverage and actual prosecution of high-profile ex-CEOs who presided over financial misappropriation. To this end, the cleaning up of business practice, by high-profile champions of fair play, might actually prolong plutonomy. The second memo, titled "Revisiting Plutonomy: The Rich Getting Richer" deals mainly with the consequences for investments which follow the analysis in the first memo.
Quote: There are, in our opinion, two issues for equity investors to consider. Firstly, if we are right, that plutonomy is to blame for many of the apparent conundrums that exist around the world, such as negative savings, current account deficits, no consumer recession despite high oil prices or weak consumer sentiment, then so long as the rich continue to get richer, the likelihood of these conundrums resolving themselves through traditionally disruptive means currency collapses, consumer recessions etc looks low.
Secondly, if the rich are to keep getting richer, as we think they will do, then this has ongoing positive implications for the businesses selling to the rich. We see three reasons to take another look at those plutonomy stocks. Citigroup seems to be perfectly happy with the rule of the rich. They are also perfectly happy to suppress these explosive memos. What if the thoughts of OWS-protesters slip into the mainstream?
Fortunately, this is already happening. The citizens in the "Plutonomies" are expected to swallow this bitter pill. The Koch Brothers and others can buy politicians and make sure that they get their way, also thanks to the Koch-friend Clarence Thomas and his colleagues in the Supreme Court who made the "Citizens United" decision possible.
Equity multiples appear too low, the profit share of GDP is high and likely going higher, stocks look likely to beat housing, and we are bullish on equities. The Uber-rich, the plutonomists, are likely to see net worth-income ratios surge, driving luxury consumption.
Buy plutonomy stocks list inside. The key challenge for corporates in this space is to maintain the mystique of prestige while trying to grow revenue and hit the mass-affluent market. Finding pure-plays on the plutonomy theme, however, is tricky. We think the balance sheets of the rich are in great shape, and are likely to continue to improve. Yes, what could possibly "go wrong? Despite not having received widespread mainstream coverage, the Citigroup memos have been discussed in a handful TV-clips or documentaries.
When Bill Moyers "signed off" with his last broadcast in , he extensively quoted from the Citigroup memos and explicitly warned that Plutocracy and Democracy "do not mix": In addition, Michael Moore reported about the Citigroup plutonomy memos in his documentary "Capitalism - A Love Story": Finally, I have a note for you-know-who: 17 U.
In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include: the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; the nature of the copyrighted work; the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and the effect of the use upon the potential market for or value of the copyrighted work.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors. We are not taking anything down, we take up the fight against the people who believe that they have the right to be the unelected leaders of the world. For one thing, its not even clear if the Plutonomy Memos constitute protected copyright material. That means independent blogs, media outlets, etc. Independent media will be delisted from search engines and their domains could be blocked.
This week, the House will begin to mark-up the bill. Back when I worked at ThinkProgress, I repeatedly broke stories using leaked memos and other internal documents from powerful corporations.
LEAKED CITIBANK MEMO PLUTONOMY PDF
So what are we talking about? In and , several analysts at Citigroup took a very, very close look at the economic inequalities within the USA and other countries and wrote two memos which were addressed to their very wealthy customers. So Citigroup did their duty and published two explosive memos, which should have become mainstream news, but eventually did not. Usually one should think that once such important documents are in the "public domain", nothing should stop them any more from being distributed and being openly discussed. Examples of their activities can be found all over the internet.
CITIGROUP PLUTONOMY MEMOS PDF
Kalkree Secondly, if the rich are to keep getting richer, as we think they will do, then this has ongoing positive implications for the businesses selling to the rich. They further see the luxury industry catering to plutonomists threatened by anti-corruption initiatives of China and India. We are not taking anything down, we take up the fight against the people who believe that they have the right to be the unelected leaders of the world. That was true even in very dark times. But unless the spirit of the last year, here and elsewhere in the country and around the globe, continues to grow and becomes a major force in the social and political world, the chances for a decent future are not very high. Our overall conclusion is that a backlash against plutonomy is probable at some point.