job fair

Get the best Credit Tips at Credit Visionary

The Commercial Journal’s Justin Lahart has an interesting piece today about how fund managers are starting to worry more about earnings inequality.

America’s rich-and-poor gorge has been a longstanding political problem. Just recently, as an example, it was the bedrock of Costs de Blasio’s progressive (and triumphant) mayoral project in New York.

But in terms of investors, “even if they’ve actually discovered the expanding gulf between America’s haves and have-nots bothering, inequality is not something fund managers have actually stressed over professionally,’ Lahart reports.

Until now, perhaps. From the Exchange Journal:

Bill Gross, manager of the world’s biggest mutual fund by possessions at Pimco, in a recent note said he thought boosts in inequality had made the U.S. less efficient. ‘Developed economies work best when inequality of earnings are at a minimum,’ he wrote. A number of fund managers at a Heard on the Street conference last month likewise voiced concerns, among them Kynikos Associates ceo James Chanos, who stressed individuals have less incentive to participate in the economy if they’ve actually concluded ‘the game is not really reasonable.’

When inequality increases as an outcome of, state, corruption, it plainly causes economic damage. But for the U.S., where much of the boost in inequality results from market mechanisms like changing pay patterns for knowledgeable workers and rising international competition for lower-skilled jobs, its effects are more unclear.

Well that’s nice. Of course, Lahart is smart to point out the flip-side of this argument. State business raised wages or paid higher taxes and their profit margins fell. We might see even more income equality, however ‘it would likewise leave less money flowing down line, something that’ll get hold of fund managers’ attention.’

Here’s the chart that accompanies the story – Lahart tweeted it out last night. Really convincing.

RT @ jdlahart: Below’s the graph that goes with my inequality tale

– Linette Lopez (@ lopezlinette) November 11, 2013

Read the full report at the Commercial Journal »

Join the discussion about this story »