Monday, August 12, 2013

The chart of the day... from Ezra Klein's blog (of course) and shows the historical correlation between the share of national income earned by the top one percent in the U. S. and the degree of polarization in Congress.

According to Lydia DePillis, who wrote the post:

Polarization leads to gridlock, under which policies needing adjustment–like the minimum wage–tend not to get fixed. Also, without legislative oversight, agencies have more authority and are more subject to industry lobbying, which led to the quiet deregulation of the financial industry.

(Or is it the other way around: Does inequality lead to polarization? In other words, do the rich use their money to make one party's policies more favorable to the top one percent?)

I'm not sure exactly what to make of this chart, but as a trader I'd have to conclude that we may be very near the highs in both income inequality and political polarization. (And, really, how much more polarized could we possibly become?) So if I were to bet, I'd say those curves should start heading downward before too long. What would cause them to do so? I'm not sure. A Great Depression and the rise of populism correlated with the previous highs. Are we in for that again? That's hard for me to imagine. But at the same time, I can't see those curves rising forever.

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