"The rich are not only getting richer — they are becoming more dangerous." That's according to Robert Frank's new book — The High-Beta Rich: How the Manic Wealthy Will Take Us to the Next Boom, Bubble and Bust — which argues that the spending binges of the top 1 percent have become "the most unstable force in the economy."
Frank, a writer and blogger for The Wall Street Journal, talks with NPR's Neal Conan about how some of the inhabitants of Richistan — the land of private jets, yachts and million-dollar watches that Frank explores in a previous book — have lost their fortunes, and taken average Americans with them.
Interview Highlights
On why the richest Americans are so dangerous
"Before I started this book, I just assumed that wealth was like an escalator in America, that the 1 percent were always just getting richer and the rest of us were not. In fact, when I started to look at both the people and the statistics on wealth, what I learned is that the 1 percent has become the most volatile and unsteady part of our economy; that you have these people crashing in and out of the 1 percent due to the changing nature of the way wealth is created today, but also [due to] the culture of spending and borrowing that we've seen on things like shadow yachts [the boats that follow the yachts of the super-rich, carrying their cars and helicopters] and zombie jets."
On zombie jets
"A zombie jet is a jet that has been purchased by a person that at one point was worth ... $100 million, maybe $200 million, maybe a billion dollars, and they borrowed the money to buy the jet, and then jet prices fell. Their own fortunes fell, and basically the jets were upside down. They were worth less than the actual loan value.
"So the banks didn't want them back. The people who owned them didn't want them back. So as a result, you've got all these [private] jets that are flying around, thousands of them ... that the owners haven't been able to pay for and the banks don't want back."
On how the behavior of the super-rich has changed over time
"When you look back at the 1 percent or the wealthy, however you want to define them, before 1982 they were the flat line on the income scale. They were the most conservative in America. When times were good in America, the 1 percent didn't do quite as well. When times are bad, they didn't do as badly as everyone else.
"Suddenly, in 1982, the year I call the magic year for wealth, the 1 percent, which used to be like the teetotalers of our economy, became the binge drinkers.
"And when times were good, they did two or three times better than everyone else. When times were bad, they did two or three times worse. So if you look at the last three recessions, the top 1 percent lost two to three times in income what the rest of America lost. And, you know, part of it has to do with more and more of today's wealth is tied to the stock market, whether it's executives who are paid in stock or somebody who's starting a company and takes it public with an IPO.
"And the stock market is more than 20 times as volatile as the real economy."
On riding along with the repo men of Richistan
"We went around, and we took a plane, and we took a yacht. And for anybody who has any kind of envy or resentment against the rich, I highly recommend this experience.
"... In 2010, they had taken more than $100 million worth of stuff. And the real art to being a high-end repo man is to not have the wealthy lose pride or lose face, and to sort of pretend like, 'Well, I'm sure you're paying for it, and I'm sure everything's fine. But I'll just put this plane in storage, and then when you work it out with the bank, you know, you can let me know.'
"... For most of the middle class — they get their cars taken or whatever — it's more about just force. It's more about taking it. Here, there's this sort of subtle negotiation, and it's become a very profitable industry, not just for him, but for all these other repo men who take jets and yachts and even thoroughbred race horses.
"These wealthy people are used to getting their way, so if they don't react to the subtle negotiation, they basically say, 'Look, no one's taking my stuff.' And so [repo men have] been shot at, they've been run over by Mercedes, you know, they've had all kinds of things happen to them. But it was interesting. You know, we were at this private jet terminal in Orlando, Fla., and to be with them as they stormed into this private jet terminal and took a plane is exciting, but it's also a sign that, you know, wealth has changed.
"I mean, the fact that these guys even exist is a sign that wealth is different in America."
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