Tags: luxury | retailers | economy | stimulus

Nomura's Janjuah: Weak Holiday Sales Show Fed Created Wealth Gap

By    |   Tuesday, 03 December 2013 12:19 PM

Weak holiday spending will underscore the growing wealth gap between the rich and the rest of the country, which is created by the Federal Reserve's policies, Nomura strategist Bob Janjuah explained to CNBC.

Over Thanksgiving weekend, foot traffic in stores was up, but sales were down, ABC News reported.

According to the National Retail Federation, spending over the four-day holiday is expected to total about $57.4 billion. This disappointing kickoff for seasonal shopping is almost 3 percent less than last year, and it's also the first spending decline in at least seven years, ABC says the trade group noted.

Editor’s Note:
Retirees Slammed with 85% Pay Cut (New Video)

Janjuah believes weak consumer spending is a telltale sign that the Fed's stimulus hasn't helped the masses.

“What [quantitative easing] has done, aside from QE 1, is benefited the owners of capital,” he told CNBC.

“We've seen that through stock markets, through the payment of dividends, and through those people that can take leverage at the Fed window,” he added.

Share ownership in the U.S. is very narrow, and Janjuah says that means the benefits have gone to a fairly small group, but it has been paid for by the larger portion of the economy that doesn't directly benefit.

Some have suggested that the Fed's aim is to indirectly reach the middle and lower classes via trickle-down economics, a theory in which money at the top flows to the bottom as spending increases thereby also creating jobs. Janjuah dismisses such a strategy.

“The big problem is this: If you give people whose average net worth is $50 million another million dollars, they're not going to spend it. But if you give someone whose net worth is zero [or]  $5000, they'll tend to spend all of it,” he told CNBC.

Six years ago, if policymakers had chosen to give each person $10,000 to spend, Janjuah believes they may have had a shot at actually stimulating the economy.

“Instead we chose a different route and we've ended up with an enormous skew in the distribution of wealth and therefore spending power,” he said.

Many retail experts are skeptical about overall sales this holiday season. Fox Business says retailers are going to have to turn on the charm and slash prices if they want Americans to open their wallets.

The battle is intense. Taxes have risen, unemployment remains high, and confidence has been battered by the government shutdown and uncertainty about Obamacare. The wealth effect of rising home prices and stock market gains somewhat offsets that negative environment, but that will likely be most beneficial for luxury retailers, Fox says.

Editor’s Note:
Retirees Slammed with 85% Pay Cut (New Video)

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
Weak holiday spending will underscore the growing wealth gap between the rich and the rest of the country, which is created by the Federal Reserve's policies, Nomura strategist Bob Janjuah explained to CNBC.
luxury,retailers,economy,stimulus
447
2013-19-03
Tuesday, 03 December 2013 12:19 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved