Richie Rich gets Richer

2012, Economics  -  28 min Leave a Comment
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How can it be that the luxury industry is booming while across Europe there is austerity and benefits are being cut? The explanation is surprisingly simple. The rich of this world have become even richer since the economic crisis in 2009. Each year they've seen an average increase to their wealth of 6%. In some countries, this increase has been as much as 18%.

Who are these rich, how do they live, and how do they manage even in times of crisis to become richer? Many of the secret rich live in Manhattan, New York. Of the 1,000 billionaires in the world, 58 call this home. At the same time, one in seven Americans currently relies on food stamps and one in six has no health insurance. Wall Street is the heart of the financial industry, the largest stock exchange in the world. There the financial crisis started and from there it spread to the whole world. Several billion shares are traded there each day.

People used to be happy when you had made a two or three million dollar profit. Today we see large companies like Apple who record a six billion dollar profit and whose dealers are not even satisfied with that, because they were expecting seven billion in one quarter. That's not even turnover, that is pure profit. How someone with a six billion dollar profit is not satisfied? The strong performance of financial markets recently has exacerbated the wealth divide. Whilst property value increases virtually by itself, people without property are becoming poorer.

People who don't have money are not involved in the market. They've lost their jobs, prices have gone high, commodities went up, and the cost of living has gone up. Granted, if you don't have any money, you have less money now. If you have money then you have a lot more money now.

Hedge fund manager, John Paulson, made a record five billion dollars there a year ago. One can only make such high profits by entering a high risk situation. It is mostly a risk at the expense of others. For example, in the case of Greece, you bet on the collapse of a country, attempting to make the largest gains. Many think this is morally reprehensible, but it makes no difference for the hedge fund managers because they want to make their profits. They are in position of kings. The money of the rich works for them too. They begin with the capital they have, and even if they only gain a small return it adds up to more and more.