The uneven costs of recession

Populist rants have increased in frequency during the global recession, as public opinion indicates a growing belief that the costs of the economic slowdown disproportionately have been borne by the lower and middle class, while the upper class skates by unscathed. I've previously argued that the response to the downturn--whether fiscal or monetary--has indeed largely benefited the rich and the large (or "Too Big To Fail"). Sometimes, as in the case of TARP, this favoritism is clear and intentional. Other times, in the case of Fed-induced dollar debasement, it is more insidious via increasing consumer price inflation (as I discussed in my recent "Letter to the Senators").

Either way, the true effects of governmental response are beginning to become more clear, as displayed in an Associated Press item published yesterday.

The luxury sector is rebounding better-than-expected this year thanks in large part to wealthy Americans replenishing their wardrobes after a year of self-denial and nouveau riche Chinese indulging in a worldwide spending spree, according to a new study released Monday.

Sales of designer clothes, fine leather goods, jewelry, watches and other indulgences around the globe is forecast to surge 10 percent to euro168 billion ($236.7 billion) in 2010, recovering from a disastrous 2009 when sales declined 8 percent to euro153 billion, Bain & Co. said in its annual review of the sector commissioned by Italy's Fondazione Altagamma association of high-end producers.

"It is really impressive how customers have rebounded in their approach to these purchases, in particular in the United States and in Europe," said Bain partner and luxury goods expert Claudia D'Arpizio.

This return to opulence comes even as the national unemployment rate hovers stubbornly around 10%, with some estimates pegging the real rate above 17%. It's hard to feel bad for the wealthy Americans' so-called "self-denial" when much of their recent spending has come on the backs of unemployed workers. While they fruitlessly search for jobs, the unemployed have also seen the value of any savings decline as the dollar continues its Fed-forced freefall.

Of course, it's not all good news in the land of luxury--the market for private islands continues to suffer terribly. What a shame.

[Yahoo!]