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Does net wealth or income indicate the productivity or merit of someone?

cpwill

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:shrug: i'm giving the socratic method a try.


so they hoard their money by purchasing companies?
 

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:shrug: i'm giving the socratic method a try.


so they hoard their money by purchasing companies?

I figured it was something like that.

A portion of their money is invested in stocks which they paid more for than could be justified in most any other economic market (other than the stock market). This stock market has several times the amount of money in it than can be justified based upon the profitability of the companies represented by the stock market. The owners of these stocks rarely play any part in the managment of these companies, and only indirectly provide capital for these companies. Most stock investors choose to invest in stocks because we are taught that stocks are a good investment. Stock holders rarely exhibit any entrapranurial capability, but purchasing stocks makes them feel good. Most stock holders are simply gambling that the people who run the companies will make good decisions and will be productive. The typical stock holder knows very little about the company and really could care less - as long as the long term trend is that stock values rise. Over long periods of time most stocks rise in value because most stocks are "growth" stocks that never share their profits with the owners (no dividends), and thus the companies become larger and larger eventually choking out smaller businesses that have to give up profits to individual owners. Stocks also rise as more people have incomes that exceed their need to consume, so those people use that excess income to invest in stocks (as our society expects them to do) - resulting in stock price "inflation" - caused by too much money chasing too few goods (in this case the goods are the stocks themselves).
 

JohnWOlin

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really?

color me curious; how are they going to hoarde this money? do they have a giant vault full of gold; a-la uncle scrooge mcduck?

Sure why not?
 

JohnWOlin

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No Paris Hilton gives our enemies a reason to hate us, which feeds the war machine, which feeds the circle of life, which feeds Simba, WHICH feeds James Earl Jones who is rich and very productive.
 

cpwill

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I figured it was something like that.

:) also cuts down on how much i have to type - don't underestimate laziness :D

A portion of their money is invested in stocks which they paid more for than could be justified in most any other economic market (other than the stock market)

hm. so who made the difference?

This stock market has several times the amount of money in it than can be justified based upon the profitability of the companies represented by the stock market. The owners of these stocks rarely play any part in the managment of these companies, and only indirectly provide capital for these companies. Most stock investors choose to invest in stocks because we are taught that stocks are a good investment. Stock holders rarely exhibit any entrapranurial capability, but purchasing stocks makes them feel good. Most stock holders are simply gambling that the people who run the companies will make good decisions and will be productive. The typical stock holder knows very little about the company and really could care less - as long as the long term trend is that stock values rise. Over long periods of time most stocks rise in value because most stocks are "growth" stocks that never share their profits with the owners (no dividends), and thus the companies become larger and larger eventually choking out smaller businesses that have to give up profits to individual owners. Stocks also rise as more people have incomes that exceed their need to consume, so those people use that excess income to invest in stocks (as our society expects them to do) - resulting in stock price "inflation" - caused by too much money chasing too few goods (in this case the goods are the stocks themselves).

there aren't alternatives to the US stock market?


but okay. what do these companies that are raising money by selling stock do? do they hire people? do they increase overall standard of living by competing with other companies to provide a better product at a lower price to the consumer?

Sure why not?

because that would be immensely stupid and they didn't get to be wealthy by being that foolish. ;)


the long point is this; even the richest of the rich do not have the ability to truly 'hoard' much of their wealth from aiding the rest of us. they can put it in a bank (where it is lent out to help the rest of us start businesses or purchase homes), they can invest in the American economy (where they create jobs, increase national productivity, and raise our standard of living), or they can buy stuff, which again means jobs and wages for others. outside of literally pulling the money out and burying it in their back yard (which, thanks to inflation, means they are guaranteed to lose wealth over time - and they didn't become rich by devising schemes to make themselves poorer); it's going to be extremely difficult for the wealthy to truly 'hoard' their money.
 

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:shrug: i'm giving the socratic method a try.


so they hoard their money by purchasing companies?

The portion of the money that they use to purchase a particular stock which is above any reasonable value of the stock (based upon PE ratio) is essentally horded. Sure, that portion of the cost of the stock may on average hold it's value because our stock market seems to always be over valued when you look at the profitability of the stock market overall. But that overpayment amount does absolutely nothing to create jobs or to allow companies to expand. If I buy a stock, unless it is an IPO, none of the money goes to the company who is represented by the stock. It goes to the person I purchase the stock from. Now certainly there is some value to trading stocks, it is the fact that stocks are fairly liquid that incourages people to invest in IPO's. But that value is only to the portion of the stock price that can be economically justified by the profitability of the company.

Like if a company can be reasonably expected to make $1,000,000 next year, and if there are one million shares, and if a realistic expectation is to make a return of 10% in exchange for the risk involved with stock ownership and the value of money to the company, then the total value of that companies shares shoud be $1,000,000 times 10 (a PE ratio of 10). When that stock has a PE ratio of 30, then it is overpriced by a factor of 3. So two thirds of any investment made in the stock is essentially vapor. That vapor has little value to our economy, even though potentially that vapor may be converted back into hard cash for the stock holder (assuming that the company remains profitable and that it's stock continues to sell for three times its true economic value).

There is a heck of a lot of vapor in our economy. That vapor problem is one of the reasons that we had the banking crises. Banks would loan $100,000 on a morgage, and then claim that the morgage is ultimately going to make them $50,000 so they would immediately value the morgage at $150,000 based on potential unrealized profits. They would then report that they had made $50,000. But that $50,000 was just vapor because the reality was that $100,000 morgage was actually going to loose the bank thousands of dollars because it was highly likely to go into default. So then the banks had to "write off" not only the amount that they actually lost, but also the $50k of vapor profits that they origionally claimed to have made.

So a large portion of the total amount of stock holdings is indeed "hording" and serves little economic value to the companies.
 

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:)

hm. so who made the difference?

The sucker they bought the overpriced stock from.

there aren't alternatives to the US stock market?

Sure, but owning a stock is a heck of a lot easier than starting a company. Our economy would be much stronger if our wealthy had the inititive to start and manage companies than just to simply buy already existing companies.

but okay. what do these companies that are raising money by selling stock do? do they hire people? do they increase overall standard of living by competing with other companies to provide a better product at a lower price to the consumer?

IPO's certainly hire people. But most stock trades are not to fund IPO's.

I never indicated that there was no value to our economy in stock ownership. I only indicated that the value of stock ownership is less to our economy than the value of actively creating or managing a company.

the long point is this; even the richest of the rich do not have the ability to truly 'hoard' much of their wealth from aiding the rest of us. they can put it in a bank (where it is lent out to help the rest of us start businesses or purchase homes), they can invest in the American economy (where they create jobs, increase national productivity, and raise our standard of living), or they can buy stuff, which again means jobs and wages for others. outside of literally pulling the money out and burying it in their back yard (which, thanks to inflation, means they are guaranteed to lose wealth over time - and they didn't become rich by devising schemes to make themselves poorer); it's going to be extremely difficult for the wealthy to truly 'hoard' their money.

So where do the rich get their money? And what do they do with the rents that they recieve from the money that they loan to the non-rich? And why do the non-rich have to borrow money from the rich just to have possession of typical middle class belongings (like cars and houses)? Have you ever seen a rich man holding a hammer? Is it really the rich who create stuff or is it the guy who uses the hammer? Is it possible that if Mr. Middleclass didn't have to pay Mr. Rich so much in rent (either to rent property or to rent money), that Mr. Middleclass could finance his own home purchase? Is it possible that the wealth deposited into the bank could be owned by lots of middle class people instead of just a few rich dudes? Is it possible that they next time I need to purchase a new car I could write a check for it out of my own account instead of having to borrow the money?
 

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Paris Hilton. Say no more. :doh

I wonder what the fixation with Paris Hilton is?

the libs use her as a poor example of why there ought to be confiscatory estate taxes as if she represents most of those who have estates subject to the looting next year.
 

JohnWOlin

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:) also cuts down on how much i have to type - don't underestimate laziness :D



hm. so who made the difference?



there aren't alternatives to the US stock market?


but okay. what do these companies that are raising money by selling stock do? do they hire people? do they increase overall standard of living by competing with other companies to provide a better product at a lower price to the consumer?

because that would be immensely stupid and they didn't get to be wealthy by being that foolish. ;)


the long point is this; even the richest of the rich do not have the ability to truly 'hoard' much of their wealth from aiding the rest of us. they can put it in a bank (where it is lent out to help the rest of us start businesses or purchase homes), they can invest in the American economy (where they create jobs, increase national productivity, and raise our standard of living), or they can buy stuff, which again means jobs and wages for others. outside of literally pulling the money out and burying it in their back yard (which, thanks to inflation, means they are guaranteed to lose wealth over time - and they didn't become rich by devising schemes to make themselves poorer); it's going to be extremely difficult for the wealthy to truly 'hoard' their money.

Let me give you a few examples of why the rich get richer:
-If you have a lot of money in your bank account what does the bank do? They reward you! They give you all kinds of monies yaaaay! If you dip below the set amount you should have in your bank account what do they do? They punish you--they charge you $10+ SHAME ON YOU FOR NOT BEING RICH

-90% of stocks in United States are owned by people earning over 300k a year

-IN 2005, there were 9 million American millionaires, a 62% increase since 2002. but...
IN 2005, 25.7 million Americans received food stamps, a 49% increase since 2000.

-ADJUSTED FOR INFLATION, the federal minimum wage has fallen 42% since its peak in 1968.
IF THE $5.15 HOURLY minimum wage had risen at the same rate as CEO compensation since 1990, it would now stand at $23.03.

But hey let's shed a tear for the rich because they have to settle for the Mercades and can't get the Bentley.
 

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Most money that the very rich possess is old money not acquired in this life. Some of the heirs of the biggest industries in the world aren't even actively involved in shaping those industries anymore, they are just inheriting the assets of their forefathers who did all the work.

I don't think that means they don't deserve to have the money per se. If I work hard in life and establish a very wealthy, productive company, I will naturally want the benefits of that to be passed on to my family and others whom I wish to care for. Just because recent generations have not done the work that their forefathers did, does not mean their forefathers would want the passed-down benefits of their hard work to be forsaken.
 

JohnWOlin

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So what is it man you can't have it both ways, a few post ago you were afraid the poor were raping the rich of their riches and now they got old money?
 

Orion

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So what is it man you can't have it both ways, a few post ago you were afraid the poor were raping the rich of their riches and now they got old money?

What? Are you talking to me?

I didn't make another post in this thread.
 

cpwill

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Let me give you a few examples of why the rich get richer:

the rich generally, over time, do get richer. of course, so do the poor.

and, of course, 'the rich' and 'the poor' aren't static class categories, but often functions of age. most folks don't stay in the same 'class' their entire lives; we begin working and our skills and experience are at such a level that we can only demand a low to moderate price on the market; over time we build those skills and experience and our compensation grows accordingly. income returns, for example, demonstrate that of those who file in the bottom quintile, the vast majority do not stay there; in fact you are as or a little more likely to move from the bottom quintile to the top quintile as you are to stay on the bottom; and of those who stay on the bottom the wide majority can be attributed to behavioral factors (ex: there is a very wide overlap between our 'static poor' and single-parent households).

-If you have a lot of money in your bank account what does the bank do? They reward you! They give you all kinds of monies yaaaay!

inflation typically averages out at around 3%; which means that any account which isn't generating at least that is - in fact - losing money. but i would love to see any examples you have of savings accounts generating 3%? i will be opening an account with that institute forthwith. :)

but again, what happens to all that money in the bank? it goes to give people mortgages, financing for start-ups, and the like.

If you dip below the set amount you should have in your bank account what do they do? They punish you--they charge you $10+ SHAME ON YOU FOR NOT BEING RICH

no, shame on you for being both irresponsible and stupid. if you live above your means that is nobody's fault but your own; and as the healthy number of 'wealthy bankruptcies' shows, it is a trend that cuts across all incomes.

-90% of stocks in United States are owned by people earning over 300k a year

interesting, source on that?


and do you know who those people typically are? give you a hint; if you guess "ceo's and rich lawyers", you're wrong.

80 percent of today's American millionaires are first-generation rich. Drs. Stanley and Danko listed other characteristics of these 8.2 million millionaire households. Fewer than 20 percent inherited 10 percent or more of their wealth. More than half never received as much as a dollar in inheritance. Fewer than 25 percent received "an act of kindness" from a relative greater than $10,000, and 91 percent never received, as a gift, as much as $1 from the ownership of a family business.

Being first-generation rich is not new for Americans. Drs. Stanley and Danko say, "More than 100 years ago the same was true. In The American Economy, Stanley Lebergott reviews a study conducted in 1892 of the 4,047 American millionaires. He reports that 84 percent were nouveau riche, having reached the top without the benefit of inherited wealth."...[/i]

-IN 2005, there were 9 million American millionaires, a 62% increase since 2002. but... IN 2005, 25.7 million Americans received food stamps, a 49% increase since 2000.

so our people are moving into wealth at a faster rate than they are moving into poverty? that makes sense; but i like how you expand the years for food stamps in order to exaggerate the increase; got actual comparable numbers (millionaires since 2000, or food stamps since 2002)?

i did find i did find this: According to TNS Financial Services' 2004 Affluent Market Research survey, there are an estimated 8.2 million American households with assets, excluding primary residences, worth over $1 million. That's a 33 percent increase over the 6.2 million millionaire households in 2003.

so i guess 2002-2003 was one helluva year?

ADJUSTED FOR INFLATION, the federal minimum wage has fallen 42% since its peak in 1968.
IF THE $5.15 HOURLY minimum wage had risen at the same rate as CEO compensation since 1990, it would now stand at $23.03.

and thank goodness it doesn't, eh?

why don't people ever complain about sports stars salaries? care to compare the growth in minimum wage to the growth in the salaries of our top professional atheletes? those evil atheletes, stealing from the poor like that....

But hey let's shed a tear for the rich because they have to settle for the Mercades and can't get the Bentley.

why do people always assume that recognizing economic reality makes you 'for' the rich? is it because you are motivated by being 'for' the poor irregardless of the evidence, and thus must impute to those who oppose your means opposition to your motivations?


want to help the poor? free the economy up. get rid of the corporate and payroll tax. reduce regulation that makes it harder to start a business and hire people. reduce the uncertainty inherent in a market where the federal government plays at will. really want to help the poorest amongst us? this will blow your mind - get rid of the minimum wage.
 
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JohnWOlin

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nflation typically averages out at around 3%; which means that any account which isn't generating at least that is - in fact - losing money. but i would love to see any examples you have of savings accounts generating 3%? i will be opening an account with that institute forthwith

Ally and Schwab have 2.90% 5 year CDs but that wasn't my point. Many banks will give you decent interest and cash rewards just for having for example, 50k in your bank account.

no, shame on you for being both irresponsible and stupid. if you live above your means that is nobody's fault but your own; and as the healthy number of 'wealthy bankruptcies' shows, it is a trend that cuts across all incomes.

No doubt, but we can't really judge if someone goes below the limit or overdraws because of their spending habits, in fact banks develop sophisticated algoirthms just to make sure they can squeeze you if at all possible. Also, if someone overdraws, how does it make sense to charge them $9 every single day they are overdrawn, doesn't that just make it harder for them to get back in the black?

Also lol at defending the rich on bankruptices. You can be rich and not feel like paying out your bills because even the rich I suppose can live past their means (just look at football players who falter for example) and that's just their way of getting out of paying what they should. They are still rich, just less responsibility.

why don't people ever complain about sports stars salaries?
Yeah they are outrageous. It's outrageous that football players and celebrities will charge insane fees to attend charities too.

get rid of the minimum wage.
So are you suggesting if there was no minimum wage that employers that do pay min wage would pay more than min wage?
 

Kushinator

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the rich generally, over time, do get richer. of course, so do the poor.

and, of course, 'the rich' and 'the poor' aren't static class categories, but often functions of age. most folks don't stay in the same 'class' their entire lives; we begin working and our skills and experience are at such a level that we can only demand a low to moderate price on the market; over time we build those skills and experience and our compensation grows accordingly. income returns, for example, demonstrate that of those who file in the bottom quintile, the vast majority do not stay there; in fact you are as or a little more likely to move from the bottom quintile to the top quintile as you are to stay on the bottom; and of those who stay on the bottom the wide majority can be attributed to behavioral factors (ex: there is a very wide overlap between our 'static poor' and single-parent households).

Income mobility has displayed a sub par performance compared to the rest of the post industrial world; especially when we compare the results to those welfare states you admittedly despise. The American dream, is essentially that.... A dream.

so our people are moving into wealth at a faster rate than they are moving into poverty? that makes sense; but i like how you expand the years for food stamps in order to exaggerate the increase; got actual comparable numbers (millionaires since 2000, or food stamps since 2002)?

Income mobility has reached an eroding precipice (considering the shrinking middle class); average income climbing in the face of falling median income.

why don't people ever complain about sports stars salaries? care to compare the growth in minimum wage to the growth in the salaries of our top professional atheletes? those evil atheletes, stealing from the poor like that....

Low skill wages will continue to fall in real terms as a nation begins to consume outside its productive capacity. As stated by previous poster, the real minimum wage has fallen even with a nominally increasing minimum wage; which begs me to ask what is all this "abolish the minimum wage" argument?

want to help the poor? free the economy up. get rid of the corporate and payroll tax. reduce regulation that makes it harder to start a business and hire people. reduce the uncertainty inherent in a market where the federal government plays at will. really want to help the poorest amongst us? this will blow your mind - get rid of the minimum wage.

Care to identify for the forum various regulations that make it harder to start a business? Who needs licensed, bonded, and insured contractors:shock: Lowering the minimum wage will only induce low skilled labor demand, and with it the "perks" of such an economy abundant with low skilled workers. Brilliant!:doh
 

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Some of it maybe.

A lot of it is simply in various accounts. I keep hearing how companies are "hording" money, I assume that most of that money is in bank accounts. Since the rich own a disporportionate share of stocks, they indirectly own a very large share of this horded money. I also recently saw that a particular Ivy League college (think it was Princeton but I dont remember for sure) had an endowment in the billions of dollars. Who controls this endowment? I am sure it aint the Ivy League janitor.

I don't think it's banks , you do recall Bear Sterns don't you.
Also the bank bailout od 08'
 

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I wonder what the fixation with Paris Hilton is?

the libs use her as a poor example of why there ought to be confiscatory estate taxes as if she represents most of those who have estates subject to the looting next year.

The fixation is money nothing else.

Oh and it's inheirtance tax they are interested in ,not estate tax and it's gone.
 
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