Richest 1 per cent and the Gilded Age redux

Sir, Alan Rohrbach (Letters, March 5) says that there is no obvious bubble. I disagree. In 1979 the richest 1 per cent of Americans took home 9 per cent of gross domestic product. Today they earn one in four of all dollars earned in the US. In 1979 the bottom 99 per cent of Americans earned 60 per cent of GDP. Today they earn 50 per cent of GDP. For the weaker sections of society the fall in income has been even worse.

The bubble is visible politically. Donald Trump draws his support from generally uneducated white southerners. Their standard of living has been decimated for the benefit of the Trump class. Fed chair Janet Yellen can’t generate 2 per cent inflation since her dynamic stochastic general equilibrium model with its Phillips curve assumption is misfiring due to the hold the 1 per cent have on the US economy.

It also appears as though corporate America has given up on investment to drive growth. Last year C-suites took $1tn out of the national corporate balance sheet in the form of buybacks. This is how the 1 per cent works.

It is all very Gilded Age redux. As Scott Fitzgerald wrote in The Great Gatsby: “So we beat on, boats against the current, borne back ceaselessly into the past.”

Cathal Rabbitte Villars sur Ollon, Switzerland

Financial Times, March 12, 2016