On the rise of the cost of living and the ones who really carry the can

Going back to how to spend it you have plenty [On billionaires spoiling artists and the hard life of the super-rich, May 26], from 2000 to 2007 the super-rich (dwellers of the 95th percentile of the income distribution) saw their real wages increase about 9% compared to an average 3% for the rest of mortals.

This field starts to fascinate me. The rich are getting richer so much faster than the rest of us that luxury goods inflation, you know, the difference in price between year 1 and 2 for those Sikorsky helicopters, Hermès goodies, gold Patek Phillipe watches and, well, other millionaire stuff (I guess I emphasised my social position as a non-well-off), is way higher than the average CPI, IPC, RPI or whatever your own government wants to call it and make out.

For snob-goods with a higher demand at higher prices, the economists have a name: ostentatious consumption. The higher the luxury goods inflation, the more elitist is the owner. Forbes even publishes a yearly Cost Of Living Extremely Well Index.

We can put anything in this chapter, from the book example of diamonds to the latest craze on art. The other day I was approaching the matter of billionaire expenditure as “where else would you put the money”? But how naïf of me, now I see why the likes of Bernard Arnault will be in business forever as long as you can keep the exclusivity aura.

It must be difficult to create a luxury brand and keep the cool when the going goes tough.

It is when on sale season I see the queues outside Gucci that I start thinking that the days of the brand are nearly over. The likes of Gucci go for market, not margin, and apparently that is the key with affluent customers, and I doubt you can revive a brand once you have been touched by the masses. Sikorsky must be safe for now then.

I couldn’t what was the argument behind governments to overcharge high CO2 emitting, SUVs or luxury cars.

I agreed with Aston Martin’s CEO Ulrich Bez when he attacked the new European CO2 laws a few weeks ago, as the average Rolls Royce Phantom lives in a garage and is less driven than a 70-year-old monk (US clergy aside). Why was the EU picking on them? Surely that is wrong.

I found it preposterous when the London Mayor let us know that he intended to introduce a £25-a-day Congestion Charge for what in the UK are called “Chelsea tractors” for its popularity amongst Chelsea farmers, if they to get in central London. It seems that Ken Livingstone’s legacy is going to be the introduction of the rip-off charge for the autumn. Why did they call it “congestion” charge if a Volvo 850 station wagon takes as much or more space than a BMW X5? Surely that is wrong.

And then the government came along with their own punishment. As always, dressed up on its best Captain Lettuce outfit, they created the new Band G for cars emitting CO2 over 225g/km, £400 at registration plus jacking yearly road tax up. Surely that is wrong.

But as usual, it took me a while but I saw the light. They charge them more, because they can pay for it. The answer to “Why do you do it?” it is obviously, “Why not?”.

The difference between the seriously well-off and the rest Joe Public is that when prices go up, Joe complains and doesn’t buy and James Money may or may nor complain, but he will always buy.

I leave you with a note from Reuters:

A Shanghai resident recently bought a Hermès crocodile-skin bag for 1.6m yuan ($213,100), Hermès said in June [2007], equivalent to 65 times the city’s average annual wage.

Until tomorrow,

.Calvin

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One Response

  1. I have long been curious about how wealth seems to gather together. If you manage to get hold of any it seem nearly impossible to keep your hands on it. Also, when you look at those that have it, they don’t seem that special. Is it just incredible good luck, criminality, or are these people really special in some way that is not obvious?

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