The Rich in China Got Richer Thanks to Covid-19

Mish

Everyone was not adversely impacted by Covid-19, especially in China.

A Tweet Thread by Michael Pettis explains.

  1. During my Sunday seminar a student made a presentation with preliminary data on how Covid-19 has affected the wealth and the income of different households in China, ranked by income. I sort of expected a broadly linear relationship in which the rich and very rich would have...
  2. ...been unaffected or slightly worse off, the middle worse off, and the poor a lot worse off.   According to her data, however, the rich and very rich were actually better off in terms of both income and wealth (the latter, we think, mainly because they owned “better” real...
  3. ...estate), while the middle were worse off in both, and the poor were much worse off (in wealth mainly, we think, because of a depletion in savings). I expected Covid-19 to worsen income inequality, but I was surprised both by the extent to which it did and by the fact that...
  4. ...the wealthy actually continued advancing while only the middle and the poor were worse off – at least according to preliminary data. What happened in China won’t necessarily happen elsewhere, but, still, I suspect we will see similar patterns in other countries affected by...
  5. ...Covid-19. The net economic effect of the pandemic, in other words, is likely to be a very substantial transfer of wealth up the income scale. It seems to me that any fiscal or monetary response that doesn’t take this into consideration is likely to be ineffective and maybe...
  6. ...even harmful (if it worsens income inequality).

The US will see similar things but not to the same degree. 

Many successful US businesses had far too much leverage and will go under as the economic data has been nothing but grim.

  1. May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
  2. May 15: Retail Sales Plunge Way More Than Expected
  3. May 15: Industrial Production Declines Most in 101 Years

Fed Promotes More Free Money

Things are so bad in the US, The Fed asked Congress to step in with fiscal recommendations, especially more deficit increasing measures.

I commented on May 14, Panic Sets In: Fed Promotes More Free Money.

The Fed wants the asset holders to be bailed out and the Fed will try, but the US rich "in general" will not as a class all do better.

Yet, I agree with this key statement: "The net economic effect of the pandemic, in other words, is likely to be a very substantial transfer of wealth up the income scale."

Mish

Comments (23)
No. 1-8
Casual_Observer
Casual_Observer

The Fed wants the asset holders to be bailed out and the Fed will try, but the US rich "in general" will not as a class all do better.

I disagree. They will do better because they will have more concentrated power in places that matter. They also will have better access to medicines and health in general. If you want to see what true wealth inequality looks like over a long time, go to places in Asia and Africa where there is much worse wealth inequality. Developed nations are so much better off. A homeless person in America looks wealthy by comparison to some countries in Africa and Asia.

Tony Bennett
Tony Bennett

"The net economic effect of the pandemic, in other words, is likely to be a very substantial transfer of wealth up the income scale."

...

The masses need more ... or the rich (and their assets) need to get less ... or civil unrest will grow (along with more hare brained politicians).

Talked to the owner of 5 car dealerships yesterday ... received $5 million in PPP ... not sweating the rest of the year ... at all.

Sechel
Sechel

Pretty much how every crisis works>

The country is fine with throwing money at companies yet is overly worried about unemployment benefits.

Fed actions juiced up the stock market which is almost coming back irrationally.

The least skilled employees such as in meat plants are in the jobs with the most exposure and risk to the Covid-19

And one of the reason why so many think the system doesn't work for them is precisely because of these policies

tokidoki
tokidoki

There's a Chinese saying that who gets to use the money is more important than who has the money.

Jack Ma, etc, etc, might appear to be rich, but without approval from the CCP, it's doubtful they'll be able to fully utilize their money.

If need be i.e. if it suits the needs of the CCP, their wealth will be confiscated and redistributed.

Sechel
Sechel

So what you're really saying is that covid-19 is a plot by the aristocracy against
the bourgeoisie and proletariat

Stuki
Stuki

Classifying people simply according to how rich they are, completely misses the point.

Some people are rich because they can go out and fill Wembley Stadium with people paying GBP100 to hear them sing old songs. Or they are part of a team building world leading stuff at competitive prices.

Those guys' interest are as diametrically opposed as could be, to those of leeches living off of propped up assets while doing nothing productive whatsoever.

The latter no doubt love nothing more than to be counted and treated as if they have anything at all in common with the former. As I suppose being considered talented, hardworking, productive, innovative and the like, sounds more impressive, to their fragile egos, than being the useless leeches on welfare whose entire, unearned, privileged livelihood depends on nothing more than an all powerful government robbing their productive superiors, as well as children and widows, on their behalf, whch they really are, does.

While the former, bonafide rock stars, may be "rich", they are still working people. Getting paid what others are voluntarily willing to pay for what they offer in return. While hardly "working class," they are the bourgeoisie Sechel refers to. And as such, they are really just uncommonly well paid gig economy workers. Nice gigs though, for those who can get them....

As such, they are also harmed by responses aimed at "saving the system" by inflating asset values. By propping up "poppeti vaijues" and all the other pathologies of purely kleptocratic "ownership societies." “Harmed” may seem a bit relative, in relation to someone who can obtain another million or two for, literally, a song. But harm nonetheless, as they are also having their still formidable purchasing power diluted, solely in order to facilitate privileged nobodies, “aristocrats,” who never did, nor have the aptitude to ever do, anything of value in their whole life, living large simply off of the closeness to the aristocrats' welfare office which is The Fed.

It's the same story for everyone productive. They are the ones who have to produce all the value that central banks are then stealing for them by debasement, in order to have something to hand to abject nothings "making money of their home" and "portfolio." That some of the productive may still have a decent chunk left, even after the robbery, in no way alters that.

Herkie
Herkie

Not just the Chinese:

American billionaires got $434 billion richer during the pandemic (so far)

As of last November America had 608 billionaires, that is one in every 538,715 or 0.00000186% of the population. (https://www.investopedia.com/financial-edge/1110/getting-rich-what-are-your-odds.aspx)

So in three months billionaires have been handed an average of $713,815,789,470 each.

But shit, I cannot complain because I got my $1,200. To the MOON Alice!


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