Posted by Jay Livingston
The Times this morning has a reassuring front-page story – the rich are spending, and prices don’t seem to matter all that much.
“If a designer shoe goes up from $800 to $860, who notices?” said Arnold Aronson, managing director of retail strategies at the consulting firm Kurt Salmon, and the former chairman and chief executive of Saks.For the record, the negligible increase from $800 to $860 (a 7% increase) is actually larger than the 5% income tax increase Obama proposed on incomes over $250,000 (from 37% to 39%). This 5% increase would have wrought such disaster that Republicans, in the words of one of their leaders,* held the economy hostage to ensure that it would not happen.
Nordstrom has a waiting list for a Chanel sequined tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin “Bianca” platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars last month in the United States than it had in any July in five years.Here’s why we should all be cheered up by the good fortune of those with large fortunes.
“This group is key because the top 5 percent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending,” said Mark Zandi, chief economist of Moody's Analytics. “That was key to why we suffered such a bad recession - their spending fell very sharply.”You might think that the rich account for more spending because they have the bucks. The top 5% that accounts for one-third of spending also accounts for about one-third of income. Now Mark Zandi is a very smart economist, so I’m sure there’s some reason that it’s better for the economy when rich people buy luxury German cars than when the other 95% of us buy the things we buy.
So it’s good that the money is flowing to the top. It’s certainly not flowing to the rest of us.
The success luxury retailers are having in selling $250 Ermenegildo Zegna ties and $2,800 David Yurman pavé rings - the kind encircled with small precious stones - stands in stark contrast to the retailers who cater to more average Americans. [emphasis added]How about shoes? One of these shoes is the Nieman Marcus $750 Louboutin Bianca mentioned above. The other is a Viviana by Mossimo, available at Target for $29.99
and see which one costs 30 times more than the other -- as if you really had to look.)
Apparently, it’s better for one rich woman to buy the Bianca than for twenty-five women of average income to buy the Viviana. But I’m not sure why.
*GOP Senate leader quoted in WaPo: “I think some of our members may have thought the default issue was a hostage you might take a chance at shooting,” [McConnell] said. “Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming.”