Home > Main > Super-Rich products fly off the shelves: will this push the U.S. to 4%+ growth?

Super-Rich products fly off the shelves: will this push the U.S. to 4%+ growth?

December 13, 2010

Nearly the only spending that matters for the U.S. economy is upper income spending.  Lower income spending just doesn’t have enough bang to be important to GDP.   For example, the median household income was $46,326, but GDP per capita is $46,000.

In 2006, the median household size was roughly 2.5.   So in a perfectly equal world, the total GDP per household should have been 46,000 * 2.5 = $115,000.  I am not some communist saying “put the rich up against the wall”, but rather trying to determine what might impact the U.S. economy.   So how can we make sense of the difference between $115,000 and $43,326 and what implications does it have for our trading.

It turns out to have a huge impact on trading.   That extra $71,000 per household is being spent by someone, somewhere.  And we know it cannot be anyone making under $71,000, or even $100,000 from simple logic.

Some level of income needs to spend much, much more to make up for the difference between these numbers to create our total GDP.   It is pretty clear that the only people that can spend enough to make up this GDP is people in the top 10%, and the top 1% must contain the bulk of this spending.

So when I see charts like this showing true luxury products are flying off the shelves, I am not surprised.   The super rich are spending:

I haven’t gone through the math yet, but follow the logic in this post, and just substitute “Spending” for “Savings”.  The conclusion must be extremely similar: Upper Income spending is a massive driver of the U.S. economy.

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