New Standards for the Wealthy

I read an article yesterday in the Chicago Tribune business section about how the new global rise in wealth is causing the bar to be set higher when it comes to luxury goods.

Instead of $350 stilettos or $600 handbags, the status-consious look for $1,000 shoes and $5,000 handbags.

Montblanc recently sold a $700,000 pen in New York City. It took 15 months to make, and had rubies, sapphires, and diamonds.

Luxury sales have been rebounding since the 2001 terror attacks. Last year, worldwide luxury sales topped $150 billion, of which 30% came from the U.S.

The weak dollar has caused a surge in sales from Asian tourists, and Russians, who are very status-consious. The latest source of wealth are hedge fund managers.

Last year, the top 25 hedge fund managers made $14 billion last year.

Barring any geopolitical event, the forecasts are for luxury spending to continue growing at double-digit rates.

Some experts worry that tensions may grow between the haves and have-nots. Right now, the wealth disparity is supposed to be the greatest since the Depression.

In 2005, real reported income in the U.S. was up 3.4% on average. However, it fell slightly for the bottom 90%. The top 0.1% made $5.6 million (up $908,000 from 2004). The top 0.01% made $25.7 million (up $4.4 million).

My own feeling is that a disparity is always going to exist in a healthy capitalist society. Also, like everything else in a market economy (i.e. stock prices, etc), it is subject to fluctuation.

If the disparity climbs to an extreme, then market forces will eventually narrow the gap - automatically, naturally, and better than any forced measures.