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The Tampa Bay Times recently reported on the disparity between public perceptions about wealth inequality versus the statistical realities. From the Times:
Our macro specialist, Eric Fry, is a thought-leader on the intersection of the wealth gap and investing. Regular Digest readers are familiar with Eric’s term, the “Technochasm,” which refers to the massive financial distance between the rich and just about everyone else, in large part due to outsized profits from technology. Today, Eric revisits the wealth gap and points toward a way you can be on the right side of this widening divide. I’ll let Eric take it from here. Have a good weekend, Jeff Remsburg |
How to Get Behind the Economy’s “Velvet Rope”
By Eric Fry
Back in 1984, I was the manager of the Hard Rock Cafe in West Hollywood. The place was the “it” bar for Los Angeles’s twentysomethings before they hit the clubs.
Almost every night, swarms of partiers (dressed like Wham! and Madonna wannabes) would start arriving around 11. To prevent overcrowding, we strung a velvet rope across the entrance and created a line that would wrap around the building.
Image Courtesy Vintage Los Angeles
I was amazed how many guys would walk up and slip $50 to the doorman to cut the line; a $20 bill just wouldn’t get the job done. (Lack of subtlety would also get a failing grade.)
I wasn’t personally in the bribe-taking business, but I learned a lot about “how the world worked.”
The lesson: The world caters to the wealthy – and leaves everyone else with shoddy goods and services (like that 45-minute wait to get into the Hard Rock).
Now, despite my success, I rarely avail myself of this “velvet rope economy.” After all, my main passion is beach volleyball, which requires only a ball, sand, and a net – no velvet ropes needed.
Really, my biggest “rich guy perk” is this job… writing for you folks.
Of course, I don’t begrudge anyone who does take advantage of the perks available to them.
That said, there is something pernicious about the “velvet rope economy.”
It seems to me to be taking over more and more of the “real economy”…
Better for Some… and Worse for Everyone Else
I’m talking about the feeling that for everything we buy – products, education, healthcare, travel – it’s getting better and better for the rich… and worse for everyone else.
When I went to L.A. Dodgers games as a kid, Hollywood royalty could afford the best seats. But now they’re cooped up in unfathomably expensive box seats that they access through separate stadium doors.
Back in my Hard Rock days, celebrities traveled in limos. Now, they’re using Uber Copters.
The rich can afford world-class hospitals when they get sick. Everyone else is lucky to get into their dilapidated local hospital… and then find themselves with mile-long bills for services their insurance (if they have it) won’t cover.
Do I need to remind you about the college admissions bribery scandal from a few years ago? That was when federal investigators caught Felicity Huffman and others using their money and influence to get their kids into good schools.
I don’t need to tell you that rich people of all stripes – not just Hollywood stars – do that all the time.
And I hate to sound like a hack comedian, but don’t get me started on air travel. First-class travel gets better and better – VIP lounges, open bars, cushy reclining seats – while everyone else gets herded through security lines… stuffed into tiny seats… and served a bag of pretzels and a squirt of soda.
“This pattern – a Versailles-like world of pampering for a privileged few on one side of the velvet rope, a mad scramble for basic service for everyone else – is being repeated in one sphere of American society after another,” Nelson D. Schwartz writes in his brand-new book, The Velvet Rope Economy: How Inequality Became Big Business.
It’s maddening.
After all, this velvet-rope economy is just the most obvious aspect of the huge and widening wealth gap we’ve been talking about here for some time…
How to Get Behind the Velvet Rope
The wealth gap has been widening for more than 50 years – and it started skyrocketing in the late 1970s.
In 1968, the top-earning 20% of households brought in 43% of the United States’ wealth.
Fifty years later, in 2018, that top 20% (households earning $130,000 or more) raked in 52% of U.S. income. That was more that the lower 80% combined.
The wealth gap looks even more dramatic when you compare the top 1% to the bottom 90%.
In 1980, the richest 1% of Americans owned about 30% of all household wealth in the country… and the bottom 90% owned about 24% of all household wealth.
But by 2012, the share of all household financial wealth owned by the top 1% had skyrocketed to more than 60%… and the share owned by the bottom 90% had plummeted below 10%.
Moreover, according to the Organization for Economic Cooperation and Development, wealth inequality among the G7 nations ranks highest in the United States. Among all developed nations, the wealth gap is bigger only in Chile, Mexico, and Turkey.
No wonder the velvet rope economy is becoming the real economy.
That’s where the money is!
Now, it may feel cathartic to get mad about this widening wealth gap.
Go ahead. I don’t blame you.
However… getting mad doesn’t solve anything.
But here’s the thing: There is no “solution” to the widening wealth gap.
No one can stop it. Not the brightest minds in Silicon Valley… nor the politicians we send to Washington.
Some folks will get behind the velvet rope… and everyone else will get left behind.
That’s why I’m so passionate about this topic – and why I created Smart Money in the first place.
It’s time for you to take hold of your finances your way; no more scrambling to follow what Wall Street says or does.
To help you do that, my colleague Louis Navellier and I have been hard at work putting together something called the Escape Velocity Event, wherein we show you how you can achieve financial freedom – even having the chance to transform a triple-digit stock move into a quadruple-digit windfall.
Regards,
Eric Fry
