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Thread: for what it's worth - NY Elites Worried About French Style Revolution

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    Default for what it's worth - NY Elites Worried About French Style Revolution

    (snip)"NY Elites Worried about French Style Revolution

    Yves at Naked Capitalism reported today on some conversations with New York acquaintances that would either fall into or be familiar with the “elite” classes. Here is the post in its entirety.


    Normally, I don’t report on anecdotes from my immediate circle, but a set of conversations in less than a 24 hour period suggests that even those comparatively unaffected by the crisis are bracing themselves for the possibility of sudden, large-scale, adverse changes. And that sort of gnawing worry seems to be growing in New York despite being buoyed by TARP funds and covert bank subsidies.

    When out on my rounds the day before yesterday, I ran into an old McKinsey colleague, who had subsequently had impressively titled jobs in Big Firms You Heard Of before semi-retiring to manage family money. He and his very accomplished wife were big Bush donors and had been invited to both inaugurations.

    He made short order of niceties and got to the point: “We need more fiscal stimulus. Obama did too little and too much of what he spent on was liberal pork. We could and need to spend a lot on infrastructure. This is looking a lot like 1936. I’m afraid it could get really ugly. And I’m particularly worried that the Republicans will win big this fall. They’ll cut even deeper, that’s the last thing we need right now.”

    No I am not making this up, and yes, this is one of the last people I would have expected to express this line of thinking.

    Next day, I had lunch with a two long standing, keen observers and participants in the New York scene, as in very involved in some of the city’s important institutions. Both have witnessed the shift in values over the last thirty years and the rising stratification, particularly at the top end (New York has always been plutocratic, but it formerly had a large upper middle class and a much smaller and much less isolated upper crust).

    They started by commenting on my Bill Gross post, which had mentioned the appalling Steve Schwarzman contention that taxing private equity overlords more on their carried interest was like HItler invading Poland. Schwarzman is not only not retreating from his remark, he is convinced that the reason the economy is so lousy is that rich men like him are not getting their way (this is if anything an understatement of their account. Both men expect his head to be the first on a pike).

    The conversation turned to whether the US was going towards revolution or fascism. One argued for the a continuation of trends underway: that the continuing weakness of the Obama Administration (and the discrediting of other members of the elite) meant there was a power vacuum. The obvious group to exploit it is the most strident, uncompromising opportunists, an area where the extreme right has a monopoly. The other, who has ben reading up on the French Revolutions. took issue with the conventional idea that a revolution is impossible in America: “In France, the trigger was that people were hungry. We are close to that point than most think.” He stressed the desensitization to violence (video games, more and more violence) plus widespread gun ownership. And he pointed to rising and underreported crime in the city, for instance, assaults of cab drivers.

    He also noted that he believed that there were a lot of people (and he meant in the upper income strata) who were barely holding on, keeping up appearances, and hoping something would break their way. Some might get lucky, but most will hit the wall financially.

    This was an engaging and lively conversation, but it you stepped back, the content was grim. Another thread was the decay in values, that there has been two generations of parents not setting boundaries for their children. One lives next to one of the elite private schools and likes children, but called those in his ‘hood as “monsters,” describing how a boy was beating up on his nanny and he had to intercede.

    These data points don’t converge neatly, but they suggest a deep-rooted anxiety that economic and social structures are near a breaking point, and whatever comes next is not likely to be pretty."(snip)

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    Default Re: for what it's worth - NY Elites Worried About French Style Revolution

    I am not sure why this is here? (And hey, I'm Deogol remember LOL!)

    Perhaps make it a blog entry and reference it here - then comments can go back and forth on the blog?

    Perhaps that is what should happen for everyone - market the message here but keep the comment thread on the blog entry?

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    Default Re: for what it's worth - NY Elites Worried About French Style Revolution

    ^^^ well my purpose in posting his had little or nothing to do with taking the headline seriously. However, I felt that the insights the story provides into the mindset of some of the country's most influential elite were highly interesting, and potentially valuable.

    - this is looking a lot like 1936

    - a lot of people in the upper income strata are barely holding on, keeping up appearances ... most will hit the wall financially

    - they suggest a deep-rooted anxiety that economic and social structures are near a breaking point

    If I learned one thing during my years in Manhattan, it's that a comparatively tiny handful of people ( which the article refers to as 'plutocrats' / upper crust ) are actually the ones that can precipitate major changes ... changes which in turn affects everyone else !

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    Default Re: for what it's worth - NY Elites Worried About French Style Revolution

    when journalists use anonymous sources, are we still required to take them seriously?

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    Default Re: for what it's worth - NY Elites Worried About French Style Revolution

    ^^^ as I posted from the 'git-go', ... for what it's worth !

    However, for any dancers who do care about future economic trends as they may pertain to their own club income potential or their own investments, there are at least a couple of 'read between the lines' predictions that can be gleaned from this anecdotal evidence. The first is that the economic upper crust are very unhappy with the prospect that their carried interest earnings from hedge fund investments will be subject to significant tax increases. This portends that an increasing amount of money will be leaving NYC / US stock markets and re-appearing in offshore tax havens / foreign stock exchanges. The second is that the economic upper crust is starting to experience a rising degree of 'paranoia' in regard to possible negative interaction with 'regular folks' ... which will undoubtedly prompt them to spend more time behind their gated communitys' security fences and less time in strip clubs !

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    Default Re: for what it's worth - NY Elites Worried About French Style Revolution

    Quote Originally Posted by camille27 View Post
    when journalists use anonymous sources, are we still required to take them seriously?
    You mean like the CBS Rathergate story?

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    Default Re: for what it's worth - NY Elites Worried About French Style Revolution

    ^^^ it appears that some others have also figured out that the 'big money' is exiting NYC in favor of the secured suburbs ...

    (snip)Forget Anna Chapman, the Russian-born Manhattan socialite deported last month over charges of spying for Moscow: hordes of other gorgeous, smart Russian girls are on the prowl. Unlike the crimson-haired Chapman, their quarry is rich American men, not state secrets.

    But their stalking grounds are the tony Hamptons, the Long Island mecca whose social scene Chapman both frequented and used as a codeword to identify another spy as she delivered a fake American passport. As Long Island’s playground for the ultra-wealthy gears up for its final flings of the season, the prize this summer for the hundreds of young Slavic beauties who have invaded the village of Southampton, N.Y., is an American banker flush with cash.

    transaction; I see it all around the clubs.”

    Up and down the flower-box lined Main Street, past Nello Summertimes and Sant Ambroeus (two trendy restaurants), Complements Lingerie, London Jewelers and Intermix (a boutique awash in slinky dresses), dozens of impossibly beautiful 20-somethings—sometimes in bikinis, sheer caftans, bling-y jewelry and heels—can be heard speaking Russian as they stroll by.

    "They all have the watch” (typically Cartier), “the bags” (an Hermès Birkin), “and the shoes” (Louboutins), said Brad Boles, an interior designer in Manhattan who spends time in Southampton. “They’re a little rougher around the edges than the ones that came out of St. Tropez" eight years ago, he said. “But they're incredibly beautiful, and incredibly intelligent. Their target is to find young, hot, hedge funders and guys in loveless marriages.”

    True, said Zhenya Garbunova, a waitress at 75 Main Street, a trendy new restaurant-cum-club. “I’m not going to deny that some girls do this. But American girls are doing this as well.”

    Drawn by A-list celebrities, multi-million dollar “cottages” and pristine beaches, wealthy Russians have been coming to the Hamptons for nearly two decades. In 2004, the flamboyant Anna Anisimova, the billionaire daughter of a Russian metals oligarch, paid a then-record $550,000 to rent the Southampton mansion of songwriter Denise Rich, the ex-wife of disgraced commodities trader Marc Rich.

    But the phenomenon of socially ambitious but unmoneyed Russians haunting Southampton has taken off this summer, with gaggles of college-age girls from Moscow and the regions taking seasonal jobs at local restaurants and clubs in hope of meeting that right man.

    “They all work for me,” said Zach Erdem, the owner of 75 Main Street. Mr. Erdem said he was employing around 20 Russian girls this summer as waitresses, including 10 “imported” on work visas. “They are all hard workers, they never complain, they respect you,” he said, adding that most of them had stayed in his Southampton house before pooling their money to sleep cheek-by-jowl on mattresses in a tiny, $500-a-month apartment nearby.(snip)

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    Default Re: for what it's worth - NY Elites Worried About French Style Revolution

    and now we have 'monster' French financial icon Societe Generale telling uber-rich clients to prepare for potential 'global collapse' ...

    (snip)"In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

    Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

    "As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

    Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

    Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

    (UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

    The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

    Inflating debt away might be seen by some governments as a lesser of evils.

    If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

    The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.

    SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.

    Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.

    SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.

    Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said."(snip)

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