Holiday spending highlights US wealth gap: Nomura
Cyber Monday sales data might provide some good news after a slightly downbeat Black Friday, but one strategist believes consumer spending this holiday season will show that the U.S. Federal Reserve's "wealth effect" simply isn't working.
U.S. online sales increased 16 percent to $2.29 billion on "Cyber Monday" - the first Monday after Thanksgiving that is traditionally a big day for e-commerce - according to the Adobe Digital Index.
This comes after a disappointing four days for sales in the U.S. that showed a fall from last year. The National Retail Federation said Sunday that U.S. shoppers spent an average of $407.02 from Thursday through Sunday, down from $423.55 last year.
Nomura strategist Bob Janjuah believes this general picture of lackluster consumer spending is proof that Federal Reserve policy has increased the gap between rich and poor.
(Read More: Cyber Monday looks to shatter records)
"I think these policies aren't achieving the success in the real economy that they were meant to achieve," he told CNBC Monday.
"What you've seen is that (the wealth) gap has got bigger and bigger and bigger during the six years that we've had a Democrat president."
Emmanuel Saez, a professor of economics at the University of California, Berkeley, updated his research into income inequality in September which uses data from tax filings. He found that the share of the U.S.'s overall wealth for the country's richest top 1 percent is back to pre-Wall Street Crash levels. The top 1 percent's share at the end of 2012 was equal to 50.4 percent, a level higher than any other year since 1917 and even surpasses 1928, the peak of stock market bubble in the "roaring" 1920s, Saez said.
Since the financial crisis of 2008, the top 1 percent of incomes have grown by 31.4 percent while the bottom 99 percent of incomes has grown only by 0.4 percent, he said.
The Federal Reserve started adding to its balance sheet shortly after the global financial crash of 2008. After a short break it started a second program in 2010 and launched its third open-ended $85 billion-a-month program late last year. Meanwhile, the Bank of England has made similar moves despite admitting in a report in August that the top 5 percent of households had benefited the most.
(Read More: Why Apple could be the big holiday shopping winner)
Janjuah believes anything after the first round of asset purchases by the Fed has essentially benefited the owners of capital and hasn't done very much for the rest of the United States.
"We've seen that through stocks markets, through the payment of dividends, and through those people that can take leverage at the Fed window. It's essentially been paid for by that share of the economy that doesn't benefit from this directly," he said.
"If you give people whose average net worth is $50 million another $1 million, they're not going to spend it. But if you give someone whose net worth is zero $5,000, they'll tend to spend it."
Give every citizen $1,000?
Black Friday and Cyber Monday sales might be too early to confirm whether consumers are tightening the purse strings but the latest predictions do not seem to give any reason for optimism. Nicholas Colas, chief market strategist at brokerage firm ConvergEx Group believes that U.S. sales will only rise 1-2 percent this holiday season. Even a negative reading wouldn't be a surprise, he said.
"Travel to Palm Beach via private jet is quite popular this Christmas season," he said in a research note last week.
Many might believe that Fed policies just aren't working, but Janjuah said that any alternatives would need real debate and serious consideration. One alternative he gave as an example would be giving every U.S. citizen $10,000 to spend around six years ago.
"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 added.
(Read More: Winners and losers of Black Friday's megadeals)
Dario Perkins, an economist at Lombard Street Research believes quantitative easing (QE) has been helpful, but has had to counter a huge fiscal squeeze. Howard Archer, an economist at IHS Global Insight agrees and told CNBC that there shouldn't be a change in policy by central banks.
Both economists added that what is really needed is for wage growth to gradually move up and employment to increase further.
"Lower wage growth is the main factor holding back consumer spending. It could take a much larger improvement in the labor market before we see wages recover though," Perkins told CNBC.
By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81