Wealth Inequality in America

That’s the second time I’ve seen Pinketty’s name today. I’m going to have to increase my reading of lefty economists beyond the old standbyes (marx, keynes, laugher, krugman etc…).

I realize that collective theories of economics aren’t focused on individual property. But my understanding of opportunity cost is it has to do with one partie’s decision: my opportunity cost of buying lunch is $10. I lose the option of every other use of that ten dollars now and in the future if I spend it today.

So you are addressing an entire nation’s opportunity cost: if 10% of available investment capital in the US goes over-seas then that’s a potential loss here at home in theory.

I would argue the inverse actually. US firms are holding record amounts of cash on hand. Logic tells us that they are doing so because of a lack of available positive NPV projects to invest in. If their were good growth projects they would deploy that cash. So if Phillip Morris sees shrinking smoking rates in the US they are obligated to put that cash to work selling smokes to Asia for instance. If they are successful then they need to produce more tobacco and cigarettes here at home to ship to Asia. That means more jobs and taxes paid here. The problem here is slow growth (that’s worldwide) which leads to your next point.

I would argue that the wealth inequality is not the cause of the slow growth, but a symptom of the real problem with modern economics…debt. Over leveraging is the single biggest impediment to growth.

Total US debt (govt, individual and biz) is around $150T. That’s debt not “unfunded liabilities.” At a conservative average of 1.5% it costs the economy roughly $2.25T per year to service debts. The real percentage is higher since businesses and consumers borrow at rates higher than the US government’s “risk free” rate. The US GDP for 2016 was $18T. So 12.5% of our collective production went to debt service… at least.

When you think about this on an individual level it becomes much clearer. Think of three generations ago the access that they had to debt. Maybe someone really established in the upper/middle class could get a mortgage. If you were well known in the community maybe a savings and loan would loan your business money. Everyone else could use loan sharks if they were desperate… but it was cash on the barrel head most of the time.

Now picture the balance sheet of somebody back then. Likely they owned their homes or were working towards it and they had savings. People back then were solvent. They had equity > $0.

Now think about the majority of your family members and coworkers now. They likely have a mortgage, car loans, student loans, credit cards and God only knows what else. The average american family has <$1,000 saved. These debts don’t get paid off for the majority of middle America. When someone dies there may be enough equity in the house for the heirs to pay off all the debts, but usually not.

With that picture in mind it’s really no mystery why “the rich get richer while the poor get poorer”. The poor/middle class keep repeating these behaviors. So they end up chained to jobs they don’t like just to service their debts until they die. I have way more debt than I’d like and I was a finance major. I should know better. The cultural norms of shiny cars, restaurant meals (supplements) and vacations all paid for with debt keep the balance sheets of middle america in the red.

The rich are people that figured out this game and focused on buying assets. So of course they build wealth while the idiot masses (myself included) keep losing a game they don’t understand.

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So you aren’t interested in private property, rational self interest, assets, returns or markets? Why are you commenting about economics?

If I buy a hot dog cart and sell hot dogs, am I entitled to keep the profits?

What if I build a world wide chain of 100,000 hot dog carts and pay other people to run them? May I keep the profits then? All things being equal I would make 100,000 times as much as the guy with one cart. Clearly I’m not worth 100,000 times what he is as a person… that would be “unfair”?

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@Basement_Gainz

Why do you think you are the one creating the wealth and bringing value to the market in that case?

edit: Sorry I read “buy” instead of “build”, but it’s really just buyed in reality.

@basement_gainz

That’s one of the flaws of your discourse, you act as if buying something is like building something, and therefore you are the one bringing value. No one has ever built 100 000 hot dog carts in their lives. Loose usage of build and buy to justify your rationale

Now I know you’re trolling me. That’s okay, it’s the internet.

Even China let’s business owners build a business and keep some profits. Otherwise nobody would be in business. They would stay home. You need incentives for work. Even Noam Chomsky acknowledges that.

If I hire a contractor to build me a shed do I own that shed? Does GM still own my car because I didn’t build it?

Troll away. I’m actually having fun.

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If having money sheltered from taxes is so bad, why are there so many government sanctioned options commonly available? eg- IRAs etc.

No expert I, but would hazard to guess that, on balance, giving Americans tax breaks to increase their dismal savings/retirement-funding rates will, in the long run, cost the govt less than the tax receipts lost at the front end.

I am not.

You are still repeating over and over the same lingo that doesn’t address the issue. Might as well copy-paste reaganisms at this point.

What’s the real issue?

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Companies are greedy and should share more profits from their razor thin margins.

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Original post: 80% of americans own an unbelievably small portion of the wealth.

Poor 1% and their razor thin margins

One word: Shareholders

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And to expand on that- Having control over your own money. Too many people willingly forfeit control of what little they do have.

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They own an unbelievably small portion of the wealth because they make very bad decisions. Read Rich Dad Poor Dad. It’s okay because politically Kyosaki is a liberal.

He has a multiple PHD dad who’s broke and a rich mentor with an 8th grade education. It is a game changer for everyone raised middle class who thinks they know money.

If you read that book I will mail you $5. No joke. Post a pic of you with the book.

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Chief among their bad decisions was choosing to come from families that lacked intergenerational wealth.

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Jasmin wholeheartedly believes the production of one’s labor belongs solely to society. He will refuse time and time again to think in any terms that contradict that. Good luck…

On a side note, I’m curious what you do? You are clearly very knowledgeable and I hope you stick around.

"In economics, the cycle of poverty is the “set of factors or events by which poverty, once started, is likely to continue unless there is outside intervention”.

The cycle of poverty has been defined as a phenomenon where poor families become impoverished for at least three generations, i.e. for enough time that the family includes no surviving ancestors who possess and can transmit the intellectual, social, and cultural capital necessary to stay out of or change their impoverished condition. In calculations of expected generation length and ancestor lifespan, the lower median age of parents in these families is offset by the shorter lifespans in many of these groups.

Such families have either limited or no resources. There are many disadvantages that collectively work in a circular process making it virtually impossible for individuals to break the cycle. This occurs when poor people do not have the resources necessary to get out of poverty, such as financial capital, education, or connections. In other words, impoverished individuals do not have access to economic and social resources as a result of their poverty. This lack may increase their poverty. This could mean that the poor remain poor throughout their lives. This cycle has also been referred to as a “pattern” of behaviors and situations which cannot easily be changed."

There are more “self made” billionaires in the US than ever before. In order to earn a 10 on their “self made” scale you had to basically come from nothing (Oprah, George Soros). Someone forgot to tell them the US is unfair.
https://www.google.com/amp/www.forbes.com/sites/afontevecchia/2014/10/03/there-are-more-self-made-billionaires-in-the-forbes-400-than-ever-before/?client=ms-android-verizon

69% of US adults are overweight/obese: Bad Decisions
This costs individuals and society billions.

5 million use hard drugs often: Bad Decisions

1 million kids drop out of HS/year: Bad Decisions
https://www.google.com/search?q=high+school+dropout+rate&oq=high+school+dropout&aqs=chrome.1.69i57j0j5j0.7428j0j4&client=ms-android-verizon&sourceid=chrome-mobile&ie=UTF-8#xxri=5

20 million have felony convictions: Bad Decisions

14 million single parent households: Bad Decisions.
45% divorce, 35% never married, 1.7% widowed
https://www.google.com/amp/www.ibtimes.com/national-single-parent-day-2016-facts-quotes-about-14-million-moms-dads-without-2338631%3Famp%3D1?client=ms-android-verizon

Average Consumer Debt: BAD DECISIONS
Source: nerd wallet/fed reserve
Credit cards $16,061 $747 billion
Mortgages $172,806 $8.35 trillion
Auto loans $28,535 $1.14 trillion
Student loans $49,042 $1.28 trillion
Any type of debt $132,529 $12.35 trillion

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vs.

Plus some folks from Harvard’s Economics Department…