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Concerns about wealth inequality seem to have consumed
the Western World in a way last seen during the
communist/socialist fervor of the early 20th century.
The largest cause of the recent (post 80s) surge in wealth
inequality is of course not the Internet, not corrupt
executives and lawmakers,
not the overhaul of the tax
code.
It's arithmetic. How so?
Well, if you have $1000 worth of Google stock, and it
doubles, you have $2000 worth of Google stock.
If you have $1B worth of Google stock and it doubles, you
have $2B worth of Google stock.
Clearly if you count wealth not in SHARES of Google, but in
the money those shares translate, the relative proportion
of wealth changes dramatically.
Thereby the shocking, shocking growth of wealth inequality
since the 80s is NOT tax policy, nothing of the sort -- it is
simply the result of the stock market, as measured broadly
by the S&P 500 index, being 10x to 30x higher today than it
was in the early 80s, depending on which day you chose.
The latest wave is of course post the 2008 crash, since
which point the market has doubled.
With this basic intro accomplished, what can be done
about it.
Politicians like Elizabeth Warren are predictably coming up
with arithmetically unsound, and arguably (in the US)
unconstitutional proposals to confiscate wealth above
certain levels. This will probably never happen, but it
seems to me it's always better to attempt to bring up the
bottom than bring down the top, anyway.
Enter WISH Bonds.
We already know that everyone pays different interest
rates for their credit, based on their credit worthiness.
Further, we already know that drastically experimental
things are going on with rates, from quantitative easing to
negative interest rates for long term debt, all of this to
stimulate the economy at a time drastic ongoing change in
labor markets and economic structure.
WISH bonds would distribute their coupons based on credit
worthiness as well.
So if you have such poor credit that you can only get 40%
pay day loans, a $1,000 bonds would pay you a 40% coupon.
If you are Banc of America, you might get a zero or even
negative rate -- which is already happening.
So in other words, the bond pays you like you pay for debt.
In a way, we are simply encouraging direct savings here,
and accentuating its results, for the bottom of the
economic ladder, without going through an "artificial"
mechanism like an earned income tax credit or basic
income.
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Adds a layer of government inefficiency & waste. [-] |
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how so? it's just savings bonds and a rule for calculating
interest? |
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If it were worth doing, commercial entities would provide it. As it's obviously not (or it would exist) then it's going to be a loser. |
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The problem is primarily greed, and also the share-market
(not what people are DOING with the share-market, but that
it EXISTS). As with most societal issues, we need better
people, not more convoluted laws & rules & stuff. |
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One of these days I should invest in the stock
market with my vast amounts of spare cash I keep
hiding from myself. |
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//The problem is primarily greed, and also the share-market
(not what people are DOING with the share-market, but that
it EXISTS)// |
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The problem if you'd rather leave in a mud hut, maybe. |
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The problem is not the arithmetic, the problem is the market
efficiency combine with transaction costs or commissions. If I
have a million pounds and get a 10% return on it, I probably
earn close to £100,000 (say £99,400). But if I have a hundred
pounds and get a 10% return, I probably lose money on the
costs of trading. |
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completely wrong, transaction costs have been crashing and
have now been eliminated by most brokers in the US at
least. |
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More on point, wealth inequality, as calculated is all about
UNREALIZED gains in stocks. |
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//completely wrong// Hey, I'm back on form! |
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So why would someone consent to pay well above market rate for a loan regardless of the credit rating of the loaner? |
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why would someone give Germany money to get less back in
30 -- count them -- years? We live in strange times |
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I'm discussing wealth inequality as it's reported in economic
papers and the press -- and that is absolutely, positively and
irrefutably based on the growth of the value of stocks |
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Mostly they experience increased visibility of those who live
a higher quality of life and are envious of it. |
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Mostly no. Wages have not kept up with inflation
for
the median household. So keep beating that drum,
tc, but try a different rhythm. |
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In the 1950's it took one income to sustain a decent
lifestyle for a family of four. |
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These days it takes much more than that. |
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I swear between yourself, xenzag, bigsleep, doc,
and
yes, even Max and 8th, you've all become the
preachiest, stubbornest, most self-convinced lot of
misfits that clouded these halls with pet economic
theories about why the world should work the way
you prescribe. |
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You say the sweetest things |
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//why would someone consent to pay well above market rate// |
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My assumption was that these would have to be government
bonds ... in which case, this idea would be a variation on the
theme of using the public treasury to redistribute wealth towards
somewhat poorer people, (provided in this case that their saved
capital is above zero) ... which is fine by me in moderation, but
WHO ARE YOU AND WHAT HAVE YOU DONE WITH THE REAL
[theircompetitor]?? |
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Next week, [8th] will post an idea in which some kittens are quite
nice after all, [xenzag] will forgive Mr Trump and
[MaxwellBuchanan] will find Jesus. |
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Wouldn't this incentivise large, cash-rich organisations to take out short-term loans which they then default on in order to weaken their credit-rating, so that they can then invest their billions of spare cash in a high-yield WISH bond? |
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Yes [hippo], that would be one way to game this. Another might
be for loan sharks to loan needy people twice as much money
as they asked for, on the condition that half the loan be invested
directly into these bonds, whose returns would flow right back to
the sharks without touching the sides. |
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In both cases, the basic concept would be the same, namely,
"kophon prosopon", the phrase coined by Appian when
describing the gaming of anti-poverty measures by wealthy
Romans around 100 BC. |
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// I swear between yourself, xenzag, bigsleep, doc,
and yes, even Max and 8th, you've all become
the preachiest, stubbornest, most self-convinced lot of
misfits that clouded these halls with pet
economic theories about why the world should work the
way you prescribe.// |
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I resemble that remark. Which doesn't alter the fact that
there is no meaningful inflation, or that wealth inequality
is a result of stock prices, which in large part are a result
of liberal, not conservative Fed policy. The two
income change goes back to the post war period. |
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I'm not debating that the economy has not changed
massively -- of course it has -- and will continue.
I've said that literally for decades. I'm not debating that
it sucks for Apalachia, or won't suck for Texas if they
manage to ban oil. |
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We have a group on Facebook, counting roughly 10,000
people -- all made up of Soviet Union
immigrants that came here in the 80s, many have
grandchildren. As you may realize, most of them are
Jews, which as you know normally skew significantly more
liberal. |
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You will be hard pressed to find one among them that has
different political opinions than me. It's
because we've been inoculated against this socialist shit
(if you'll pardon the expression), and you
haven't been. |
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As to the yellow vests in France -- (and sorry [bigsleep], I didn't see that point earlier) -- well that is exactly my
concern for America -- we see that the significantly larger safety net countries in Western Europe struggle to appease
their populations, and yet somehow we have a substantial portion of the population imagine that by widening our
safety net to that level or beyond, we can solve our problems. |
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mmm, yes, because a movement like "Occupy Wall Street" could *never* gain traction in the USA, could it?
You're shifting the goalposts - it's not about the 'safety net', by which I think you mean things which people in other countries see as basic rights, like a minimum wage, maternity pay, etc., but rather it's about income inequality which is a very different thing |
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sorry, I don't see how -- I was responding above the Ray's
annotation only. |
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I think otherwise throughout this thread I talked only
about
wealth inequality, NOT income inequality, wealth
inequality
, to repeat myself, largely a
result of stock values. Why those stocks have risen is
another discussion -- in large part, certainly in the last
decade, it's been central bank policy -- and certainly also
the changes in the economy. |
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Income inequality is an entirely different animal. |
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It doesn't take socialist shit to restrain assholes like
Shkreli from raising the price of drugs that have
been on the market forever by a factor of 56x. |
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It doesn't take socialist shit for companies to pay a
living wage. |
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It didn't take socialist shit to make ends meet in the
1950's and it
shouldn't now. |
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I'm not jealous of the rich. I'm jealous of the life my
parents had, despite not being anywhere close to
rich. Unlike your experiences in the FSU which
shaped your perspective both in ways you are and
are not aware of, we had a REAL middle class in this
country. |
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//jealous of the life my parents had//...
Totally agree. One of the problems is that our
economies (UK and US) are totally defined by
never-ending “growth”, and yet resources and
population are essentially flat. |
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For growth to continue, we have to borrow more
and spend more per capita, so personal debt
escalates. |
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Banks essentially generate profit through debt, so
they have no incentive to reduce debts- quite the
opposite. |
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We currently live in a toxic consumerist debt-laden
storm, which can not be sustained. |
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[Ray] let me take this on one at a time: |
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// It doesn't take socialist shit to restrain assholes like
Shkreli from raising the price
of drugs that have been on the market forever by a
factor of 56x.// |
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Actually, it does, because in a free market, he can charge
what he wants, but also in a
free market, this drug could be manufactured and sold
by 50 other companies, and all he would be is out of
business. It's FDA regulations that
created this situation. |
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// It doesn't take socialist shit for companies to pay a
living wage.// |
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Outside of tipping in a restaurant or giving to charity, you
are in the habit of paying
more for things than they cost? When someone knocks on
your door and offers to mow the lawn, you chose the
higher priced guy? Why should
they give more than the market value of those skills? If
there's a societal need for a minimal living standard --
and let me stipulate that there is
-- why should a given company bear its cost, where in
fact they are HELPING to reduce that cost by giving any
wage? |
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Are companies at fault for birth rates? Sure, if they are
competing for resources, even
for low paying job resources, they will up salaries and
benefits, you don't need a government whip for that. |
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// It didn't take socialist shit to make ends meet in the
1950's and it shouldn't now.//
actually the 50s wouldn't have been the 50s without
some quite serious socialist shit. And America was
rebuilding half the planet while also
building the highway system. |
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Guess what -- when I take consulting contracts today my
rate is often 1/3 of what it
was in 1997. Because the Internet happened.
Outsourcing happened. A surge in people becoming
programmers happened. And yes,
it's much worse for coal miners. |
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I'm not saying things didn't change, will not continue to
change. I'm not saying that the
cheese has not moved for anyone, there's been plenty
of cheese movement. But ultimately people lead
significantly easier lives, in America
especially so. |
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If you're point is -- in the 50s a laborer could own a house
and his wife wouldn't need to
work, I would agree, and point out that I have a friend
whose wife doesn't work, and he
is a contractor who owns 2 homes and has put 2 kids
through college. He's never had
any meaningful number of employees -- just a small guy
that gets a lot of contracting
work. Sure, my dentist friend is better able to go on lion
killing safaris, but that was
true in the 50s too. |
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Are houses less affordable? Even as they are more
expensive, we have <4% interest
rates. I paid a 13% interest rate for my first house in the
80s, on a $23K salary. |
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Student loans? I've already discussed that here -- you can
get an instate 4 year degree
for well under 60K, less if you live at home, and KPMG is
offering people 60K to start --
by no means a financial disaster, unless they expected to
make a living making youtube
videos and their degree is English (and their level of
mastery thereof still dubious). |
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I may circulate in haute circles -- I do not know a single
20 or 30 year old, even if they
do not live at home -- who cooks on any kind of regular
basis. How do you think
UberEats became UberEats? Cause they're all eating
ramen? |
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I don't know. I don't see it, sorry. But regardless -- the
one thing that will definitely NOT fix any of that is an
enlarged safety net -- otherwise our brethren from
Europe would not have Brexit and yellow vests and
parliamentary deadlocks. |
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Please resist the urge to mansplain the economy
anymore. I understand everything you just wrote,
and have understood it for umpteen thousand
years. So no more steps at a time. No more lessons
on
capitalism or socialism or fascism or anarchism or
ismism. That’s precisely what’s so fucking
annoying. Ok Boomer? |
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You don’t think our current state has been in a
parliamentary deadlock for a decade or so? |
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Things may be different here in the Midwest, but
most people I know cook. |
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Those high financial returns don't just grow on trees.
They are taken out of the latest method to
shortchange or automate lower-pay workers. |
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Many people I know have 20~something’s and 30-
something’s living at home with them.
My son will probably be one of them someday. |
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With luck, my daughter won’t. |
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