OT - Bottom 50% of America holds 1% of wealth

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Submitted by ocrenter on July 20, 2012 - 7:41am

http://www.huffingtonpost.com/2012/07/19...

This is a problem since ancient times. Since the start of societies, as time progress, the rich will get richer.

When it comes to wealth, the game Monopoly eerily parallels life. As long as someone does not land on luxury tax or income tax at every single turn, the guy with the most properties eventually force bankruptcy on the rest of the players, essentially, wealth does naturally help generate more wealth. We see this in ancient long enduring places like China and India, where after thousands of years, the top 1% owned essentially EVERYTHING.

We are already starting to walk down this same path. What do we do?

Submitted by davelj on July 20, 2012 - 8:10am.

Capital begets capital; wealth begets wealth.

One of my favorite quotes of all time:

"Turning $100 into $110 is work; turning $100 million into $110 million is inevitable." - Edgar Bronfman Jr.

Where inequality is concerned, nothing moves the dial in the absence of steeply progressive tax rates at the very top of the wealth pyramid, as well as treating capital gains and dividends more like earned income.

Submitted by EconProf on July 20, 2012 - 8:46am.

The Huffington Post piece is true, but grossly misleading.
There are essentially two ways to measure and compare economic well-being: income and wealth. Wealth is a "stock" measuring one's assets minus liabilities. Anyone can (and occassionally should) add up all their financial and real assets, at market value, and subtract their liabilities in order to get their net worth.
Income is a flow, measured over a period of time, such as a month or year.
Wealth is far more unequally distributed than income, which may be why the left-leaning Huff Post likes to concentrate on it. Furthermore, the trend is to more and more unequal distribution over recent decades as people are conned into taking on more and more credit card debt to buy goodies. Many decades ago, before credit cards, everyone had savings accounts and rainy-day money, even the poor. Now we just assume we can hit our CC if an emergency presents itself. This all helps account for the growing disparity in "wealth".
Income still looks to be very unequal in America, and appears to be
getting more so over time. But even income figures can be misleading. The measures of "income" say nothing about consumption, which is far more equally distributed. One reason is that government figures ignor "in kind" income, such as food stamps, housing subsidies, free child care, etc., all of which have exploded in scope and size in recent years. So a "poor" family may have only a $20,000 official income, but may be consuming at a $40,000 level, year after year.
Official income figures also ignor underground work, cash income, etc. Also, income government income figures always talk about before-tax income, not after-tax., a big factor with our state and federal progressive tax structure.
Economic well-being is tricky to measure, and should always include all the assumptions and definitions.

Submitted by Arraya on July 20, 2012 - 8:50am.

http://www.sciencedaily.com/releases/2012/03/120307112614.htmMarket Exchange Rules Responsible for Wealth Concentration, Physicists Say
ScienceDaily (Mar. 7, 2012) — Two Brazilian physicists have shown that wealth concentration invariably stems from a particular type of market exchange rules -- where agents cannot receive more income than their own capital. The authors concluded that maximum inequalities ensue from free markets, which are governed by such seemingly fair rules

Submitted by an on July 20, 2012 - 8:59am.

A few countries have solved this problem in the past. The two that came to mind is Cambodia and Vietnam. Cambodia killed all their wealthy and smart people (at least those who weren't successful in escaping before the massacre). Then they "redistribute" the wealth to the bottom 50%. With Vietnam, they have the police go through all the rich people's house and confiscate all wealth and "redistribute" it to the poor. I put redistribute in quotation, because it didn't really happen. The poor continue to stay more but it's just a different group of people that end up being rich.

Submitted by Coronita on July 20, 2012 - 9:12am.

AN wrote:
A few countries have solved this problem in the past. The two that came to mind is Cambodia and Vietnam. Cambodia killed all their wealthy and smart people (at least those who weren't successful in escaping before the massacre). Then they "redistribute" the wealth to the bottom 50%. With Vietnam, they have the police go through all the rich people's house and confiscate all wealth and "redistribute" it to the poor. I put redistribute in quotation, because it didn't really happen. The poor continue to stay more but it's just a different group of people that end up being rich.

lol

Submitted by briansd1 on July 20, 2012 - 9:31am.

davelj wrote:
Capital begets capital; wealth begets wealth.

One of my favorite quotes of all time:

"Turning $100 into $110 is work; turning $100 million into $110 million is inevitable." - Edgar Bronfman Jr.

Where inequality is concerned, nothing moves the dial in the absence of steeply progressive tax rates at the very top of the wealth pyramid, as well as treating capital gains and dividends more like earned income.

That's pretty well said.

Submitted by ocrenter on July 20, 2012 - 9:39am.

flu wrote:
AN wrote:
A few countries have solved this problem in the past. The two that came to mind is Cambodia and Vietnam. Cambodia killed all their wealthy and smart people (at least those who weren't successful in escaping before the massacre). Then they "redistribute" the wealth to the bottom 50%. With Vietnam, they have the police go through all the rich people's house and confiscate all wealth and "redistribute" it to the poor. I put redistribute in quotation, because it didn't really happen. The poor continue to stay more but it's just a different group of people that end up being rich.

lol

hey, that pretty much happened in China too.

the point is ultimately the PEOPLE do make a choice, and in the case of China, Vietnam, and Cambodia, the 99% of the have nots choose Communism. In hindsight it wasn't a very smart choice, but when income inequity is so great, Pol Pot and Mao and Ho Chi Minh then start to look very good to the population at large.

Submitted by briansd1 on July 20, 2012 - 9:43am.

I don't know... Maybe it was poetic justice for Russian princes to end up penniless taxi drivers in France after the Revolution.

Submitted by ocrenter on July 20, 2012 - 10:03am.

briansd1 wrote:
I don't know... Maybe it was poetic justice for Russian princes to end up penniless taxi drivers in France after the Revolution.

key theme here is eventually the inequality becomes so great that revolutions are triggered.

but given the default is wealth gradually shifts to the very few, inevitably, a revolution becomes necessary after another few hundred years.

Submitted by an on July 20, 2012 - 10:14am.

ocrenter wrote:
hey, that pretty much happened in China too.

the point is ultimately the PEOPLE do make a choice, and in the case of China, Vietnam, and Cambodia, the 99% of the have nots choose Communism. In hindsight it wasn't a very smart choice, but when income inequity is so great, Pol Pot and Mao and Ho Chi Minh then start to look very good to the population at large.


Yes, the people will make a choice and if they make the wrong choice, look at what happened? The rich people either get killed or fled the country. They're not going to stay and put up with the crap. There are plenty of other countries that are much more willing to welcome them and their wealth with open arms. This also is not new. It happened before. That's why there are plenty of Chinese in Cambodia and Vietnam. This also is why there was a big migration of North Vietnamese to South Vietnam in 1945. This is also why there's a big exodus of all those who can out of Vietnam between 1975-1985 (at any cost, including many death).

Submitted by ocrenter on July 20, 2012 - 10:18am.

AN wrote:
ocrenter wrote:
hey, that pretty much happened in China too.

the point is ultimately the PEOPLE do make a choice, and in the case of China, Vietnam, and Cambodia, the 99% of the have nots choose Communism. In hindsight it wasn't a very smart choice, but when income inequity is so great, Pol Pot and Mao and Ho Chi Minh then start to look very good to the population at large.


Yes, the people will make a choice and if they make the wrong choice, look at what happened? The rich people either get killed or fled the country. They're not going to stay and put up with the crap. There are plenty of other countries that are much more willing to welcome them and their wealth with open arms. This also is not new. It happened before. That's why there are plenty of Chinese in Cambodia and Vietnam. This also is why there was a big migration of North Vietnamese to South Vietnam in 1945. This is also why there's a big exodus of all those who can out of Vietnam between 1975-1985 (at any cost, including many death).

the key is a system in place to prevent the extreme wealth distribution. it is good for everyone, especially the wealthy.

Submitted by sdrealtor on July 20, 2012 - 10:24am.

flu wrote:
AN wrote:
A few countries have solved this problem in the past. The two that came to mind is Cambodia and Vietnam. Cambodia killed all their wealthy and smart people (at least those who weren't successful in escaping before the massacre). Then they "redistribute" the wealth to the bottom 50%. With Vietnam, they have the police go through all the rich people's house and confiscate all wealth and "redistribute" it to the poor. I put redistribute in quotation, because it didn't really happen. The poor continue to stay more but it's just a different group of people that end up being rich.

lol

classic!

Submitted by Coronita on July 20, 2012 - 10:34am.

ocrenter wrote:
flu wrote:
AN wrote:
A few countries have solved this problem in the past. The two that came to mind is Cambodia and Vietnam. Cambodia killed all their wealthy and smart people (at least those who weren't successful in escaping before the massacre). Then they "redistribute" the wealth to the bottom 50%. With Vietnam, they have the police go through all the rich people's house and confiscate all wealth and "redistribute" it to the poor. I put redistribute in quotation, because it didn't really happen. The poor continue to stay more but it's just a different group of people that end up being rich.

lol

hey, that pretty much happened in China too.

the point is ultimately the PEOPLE do make a choice, and in the case of China, Vietnam, and Cambodia, the 99% of the have nots choose Communism. In hindsight it wasn't a very smart choice, but when income inequity is so great, Pol Pot and Mao and Ho Chi Minh then start to look very good to the population at large.

How is the United Socialist State of America 2012 different?

Submitted by Coronita on July 20, 2012 - 10:39am.

ocrenter wrote:
AN wrote:
ocrenter wrote:
hey, that pretty much happened in China too.

the point is ultimately the PEOPLE do make a choice, and in the case of China, Vietnam, and Cambodia, the 99% of the have nots choose Communism. In hindsight it wasn't a very smart choice, but when income inequity is so great, Pol Pot and Mao and Ho Chi Minh then start to look very good to the population at large.


Yes, the people will make a choice and if they make the wrong choice, look at what happened? The rich people either get killed or fled the country. They're not going to stay and put up with the crap. There are plenty of other countries that are much more willing to welcome them and their wealth with open arms. This also is not new. It happened before. That's why there are plenty of Chinese in Cambodia and Vietnam. This also is why there was a big migration of North Vietnamese to South Vietnam in 1945. This is also why there's a big exodus of all those who can out of Vietnam between 1975-1985 (at any cost, including many death).

the key is a system in place to prevent the extreme wealth distribution. it is good for everyone, especially the wealthy.

Our extreme wealth distribution is no where near the extreme wealth distribution in asia.

And if you want an example of forcefully trying to redistribute wealth and allowing a bloated government pig, look no further than...Greece..

Submitted by ocrenter on July 20, 2012 - 10:48am.

flu wrote:

Our extreme wealth distribution is no where near the extreme wealth distribution in asia.

And if you want an example of forcefully trying to redistribute wealth and allowing a bloated government pig, look no further than...Greece..

I'm certainly not arguing for forceful redistribution of wealth through allowance of bloated government pig.

the problem of socialism is very apparent. it absolutely creates economic stagnation and for the lack of better word, laziness. the problem of capitalism is also very apparent in that the default is eventually you end up with extreme wealth distribution. and extreme wealth distribution then lead to revolutions.

I don't think just calling the US the United Socialist States of America really help the matter.

At issue is can we jump out of this capitalism vs socialism trap and find a better way to prevent extreme wealth distribution.

Submitted by an on July 20, 2012 - 10:58am.

flu wrote:
Our extreme wealth distribution is no where near the extreme wealth distribution in asia.

And if you want an example of forcefully trying to redistribute wealth and allowing a bloated government pig, look no further than...Greece..


Totally agree. Also keep in mind that a lot of countries in Asia don't really have a social safety net like we do. So, the poor over there area really poor. The poor over here are living much better than middle class people in Vietnam and Cambodia. While the rich over there have Billions in their Swiss account.

Submitted by an on July 20, 2012 - 11:11am.

ocrenter wrote:
At issue is can we jump out of this capitalism vs socialism trap and find a better way to prevent extreme wealth distribution.

I'm not sure if extreme wealth distribution is what hurt people. I think the poverty of the people at the bottom was what brought on Vietnam, Cambodia, and other revolutions/wars. I'm pretty sure Communism wouldn't have taken hold in Vietnam if the North Vietnamese had food, clothing, and jobs. The war didn't happen because the rich were extreme wealthy. The war happened because the poor in the north were so poor (no food, no job, etc) that they gravitate to what Ho Chi Minh said. I'm almost certain that if they had jobs,food, and clothing, they wouldn't have bothered with Ho Chi Minh and his bullshit.

Submitted by briansd1 on July 20, 2012 - 12:03pm.

Actually, I think foreign intervention in China, Vietnam, Cambodia is what brought on revolution. Without the destabilizing factors of foreign intervention, there would have been more continuity.

Russia was a different. The aristocracy could have reformed; but they even opposed reform attempts by the Emperor.

Submitted by no_such_reality on July 20, 2012 - 1:34pm.

ocrenter wrote:

the key is a system in place to prevent the extreme wealth distribution. it is good for everyone, especially the wealthy.

That is why estate taxes (yes death taxes) are good. Along with transfer taxes and gift taxes when you start passing wealth thru trusts to the next generation

The republican base are morons on the estate tax issue.

Submitted by Hobie on July 20, 2012 - 1:49pm.

How can you have a discussion with such a warped way of thinking?

Any why is the govt better qualified to distribute the after tax savings that I earn?

Submitted by briansd1 on July 20, 2012 - 2:03pm.

no_such_reality wrote:

The republican base are morons on the estate tax issue.

considering how so few people pay the estate tax.

http://www.taxpolicycenter.org/briefing-...
TPC estimates that 8,600 individuals dying in 2011 will leave estates large enough to require fil-ing an estate tax return (estates with a gross value under $5 million need not file a return in 2011). After allowing for deductions and credits, an estimated 3,270 estates will owe tax. Roughly 90 percent of these taxable estates will come from the top ten percent of income earn-ers and nearly half will come from the top one percent alone (see table).

Submitted by KSMountain on July 20, 2012 - 3:11pm.

Zimbabwe is trying redistribution of the farms right? How's that working out?

Submitted by flyer on July 20, 2012 - 3:38pm.

So true, davelj.

As I know I've mentioned before, the net worth stats are alarming--and graphically show the great divide between the "haves" and "have nots."

There will, no doubt, be a revolution of some kind someday if things continue as they are. That's why I'm trying to use my wealth to make sure my family and extended family have most of what they'll need for as long as possible--that's really all any of us can do.

Submitted by davelj on July 20, 2012 - 3:58pm.

Hobie wrote:
How can you have a discussion with such a warped way of thinking?

Any why is the govt better qualified to distribute the after tax savings that I earn?

Because it's the government's enforcement of laws, property rights, etc. that allowed you to accumulate the wealth in the first place?

[To be clear, I don't think many folks are in favor of high taxes on estates of a few million dollars, but... once you start getting above $10 million - and particularly the really large fortunes - personally I think pretty high tax rates are in order. In the vast majority of cases, after all, you'll find the government's fingerprints, in one form or another, all over the accumulation of those fortunes. One wistfully wonders where Mark Zuckerberg and most of the other internet billionaires would be if the government - and our tax dollars - hadn't developed the internet...]

Submitted by Arraya on July 20, 2012 - 4:06pm.

The problem gets solved one way or another. From collapsing empires to bloody revolutions. Extreme wealth disparity has marked the end of every empire.

There are a handful of experts on what might be called the holistic, interdependent nature of complex societies. Most with, the exception of Jared Diamond, would classify global capitalism in catabolic collapse already, Diamond thinks western civilization has a 51% change of surviving - I would not be so generous.

Submitted by an on July 20, 2012 - 4:06pm.

davelj wrote:
One wistfully wonders where Mark Zuckerberg and most of the other internet billionaires would be if the government - and our tax dollars - hadn't developed the internet...]

They'll probably be right about where they are. These are truly brilliant guys and if there's no internet, they'll just invent something else. After all, Bill Gates got his Billions from Windows, not MSN/Bing.

Submitted by Hobie on July 20, 2012 - 8:20pm.

davelj wrote:
Because it's the government's enforcement of laws, property rights, etc. that allowed you to accumulate the wealth in the first place?

That simply protected what the private party created. Which is a benefit of the tax collected.

Again, why is govt better qualified to distribute earnings? So if they made the road, they didn't invent the new concept.

Submitted by davelj on July 20, 2012 - 8:47pm.

AN wrote:
davelj wrote:
One wistfully wonders where Mark Zuckerberg and most of the other internet billionaires would be if the government - and our tax dollars - hadn't developed the internet...]

They'll probably be right about where they are. These are truly brilliant guys and if there's no internet, they'll just invent something else. After all, Bill Gates got his Billions from Windows, not MSN/Bing.

I disagree completely. (And Nassim Taleb is with me here, for what it's worth.) What I see is a thin layer of very smart, hard working folks - none not particularly different from the others. The only real difference between them is "luck" and the degree of said luck. For example, take the top 25% of the graduating class of Wharton, Harvard Business School, or Pick a Class (the name and major is not important). All of these folks are very smart, motivated and hard working... the dramatic difference in outcomes is largely the result of luck. Some went into the right field, others didn't; some met the right people, others didn't, etc. But the great disparity in outcomes between them is not something inherent or the result of "harder work" or "more intelligence," it's ... luck (or as Taleb would put it, "randomness").

Even the "winners" will attest to this - they all have stories of many folks who were smarter and harder working then themselves who didn't end up in the same place.

Submitted by davelj on July 20, 2012 - 8:49pm.

Hobie wrote:
davelj wrote:
Because it's the government's enforcement of laws, property rights, etc. that allowed you to accumulate the wealth in the first place?

That simply protected what the private party created. Which is a benefit of the tax collected.

Again, why is govt better qualified to distribute earnings? So if they made the road, they didn't invent the new concept.

That's why the tax isn't 100%... we all recognize the "individual" played a very important role... but let's not deceive ourselves into believing that the individual did this on his/her own... it's preposterous.

Submitted by Hobie on July 20, 2012 - 8:58pm.

100% tax? Really? Would you go to work of all your efforts allowed you '0' take home? Doubt it.

Time for a real world check.

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