Widening Divide

Now we're back on the train, yeah
Oh, back on the chain gang
--The Pretenders

Peter Atwater shows a nice graph in this article that pictures the widening chasm between the haves and have nots.

The Bloomber Consumer Comfort Index is used as a proxy for social mood. I knew little about this index prior to Peter's piece but upon examining the methodology it appears to garner reasonable face validity as a social mood proxy.

His point is that if you take approx 2003 as a frame of reference, then the CCI has since been consistently lower than movements in the S&P 500. Moreover the gap between the CCI and the SPX has been widening. In particular, uptrends in the SPX are not being mirrored by uptrends in the CCI.

If we accept the assumption that the SPX is a reasonable proxy for the welfare of the well-to-do, then this graph portrays the growing disparity between the rich and the rest. Government policies, particularly those of the Federal Reserve, have clearly targeted higher stock market prices as a path to broad economic recovery. These policies have indeed jacked stocks higher, but these higher stock prices are not trickling down to improve the condition of the masses.

The next time President Obama or someone in his administration blames someone else about the widening chasm between rich and poor, don't be duped by the rhethoric. This administration is playing a direct role in exacerbating income disparity in this country.

position in SPX