Wealth Inequality (Read 403 times)


Prince of Fatness

    I think, though, that your definition of survive is different from my definition of survive.

     

    Mine too I would guess.  Lots of things go into how we define that word, which makes addressing the bottom 20% so difficult.  Defining that word would lead to addressing some potentially uncomfortable questions....

     

    How do we measure if someone is living out of there means?  Was that vacation necessary?  Should they have purchased an economy car instead of that gas guzzling SUV?  Do they need that McMansion when they could have settled in a smaller house?  How much is enough?

     

    And what about kids?  Do we put a price tag on them?  Should we have children when we cannot afford them, meaning that someone else pays?  Don't think that many want to have this conversation.

     

    How do we measure if someone is doing everything that they can to survive?  Should we?  Can we?

     

    I think that the problem is that it is not just pure economics that we are dealing with.  There are tons of social issues.  The only thing that I am pretty sure of is that taking wealth away from the rich and handing it to the poor will not work because it will encourage the wrong behavior on both sides.

     

    This rambling was not meant to be critical of anything anyone said here, just adding a few thoughts to this already thought provoking conversation.

    Semi-retired.

      I know several college graduates that are essentially doing nothing with their degrees.  Not because the economy is poor and they can find a job, but because they simply got a college degree in a field that they liked without ever contemplating needing to use that degree to get a decent job in the future.  One has an undergraduate degree in History, another in English.  One does have a degree in business, but no specialization and they really don't have the skills to get a good job and has moved from job to job ever since graduating.

       

      I know you need to try to find something that you can enjoy, but undergraduate degrees in liberal arts aren't going to pay many bills in the future.

       

      Yes!  And this should be pounded into the head of every up and coming college student!

      steph  

       

      OCD  If you don't laugh...   


        -- The reason the bubble was so big circa 2007, and the reason that when it blew, we fell so hard:  Way too many people were in Greed mentality, burning all the false equity in their homes for "stuff" of little or no real value.   Too many Americans were making plenty of money in this timeframe, but still were spending way beyond their means.

         

        The statement is true, but I think the much, much bigger issue was the behavior or our investment bankers.

         


        A Saucy Wench

           


           

          I think that the problem is that it is not just pure economics that we are dealing with.  There are tons of social issues.  The only thing that I am pretty sure of is that taking wealth away from the rich and handing it to the poor will not work because it will encourage the wrong behavior on both sides.

           

          I guess also this depends on what do you define as "taking away from the rich and giving to the poor"

           

          Is setting minimum wage at a level that you can afford without any additional assistance (no food stamps, no government housing, no parents letting you move back home)  afford food, shelter, healthcare, and BASIC necessities taking away from the rich?

          I have become Death, the destroyer of electronic gadgets

           

          "When I got too tired to run anymore I just pretended I wasnt tired and kept running anyway" - dd, age 7

            -- For the financially responsible among us, what sucks is that when this type of thing occurs and greed takes over by too many Americans, we pay the price as well when the economy collapses.

             

            But, the solution to this serious problem, is a more serious problem than we currently have.....

            You see, if every household becomes financially responsible, then sales for goods and services will decrease (to whatever degree), and when sales decrease, corporate profits decrease, and when corporate profits decrease, layoffs occur, and when layoffs occur, problems are big.

             

            (My mind is re-living 2007 and 2008 again, and I don't like it).

            Time to go running Smile

            Brian

            2014 Goals:

            #1: Do what I can do. <DOING>

            #2: 365 Hours training

             


            Fat butt on couch

               

              The statement is true, but I think the much, much bigger issue was the behavior or our investment bankers.

               

              This is why at a macro level there needs to be regulation to make sure the financial system is adhering to intelligent rules to prevent self-serving behavior to game the system and create bubbles.  Decoupling mortgages from risk by bundling them into derivatives and selling them off was a prime example.  If the banks had had to retain the risk for the mortgages they signed, we never would have seen the housing bubble.  This is a place where the government can play a role.  It also protects those making good decisions.  Smile

               

              They can also make sure information is available for people to make good decisions.  This is already done for foods, medicines, etc and I am sure some financial products.

               

              For the same reason bailing out bankers (bonuses as they crashed the economy) and uncoupling risk from decision-making at the corporate level is a bad idea, it is at the individual level as well.  Trying to get people to buy houses who probably would have been better to continue renting....using taxpayer dollars to bail out people who signed into idiotic mortgages or home equity loans...I know plenty of people who got upended in their mortgage but most of them it was simply poor decision-making and not something out of their control.

               

              People act according to their incentives.  When there is a lack of consequences or bad behavior is rewarded, things will not end well.

              "If you want to be a bad a$s, then do what a bad a$s does.  There's your pep talk for today.  Go Run." -- Slo_Hand

               

                 Is setting minimum wage at a level that you can afford without any additional assistance (no food stamps, no government housing, no parents letting you move back home)  afford food, shelter, healthcare, and BASIC necessities taking away from the rich?

                 

                Not disagreeing with your premise, but unless it's not a zero-sum game (the pot somehow gets bigger) then the answer is yes.

                 

                   Regarding why the rate of inequality is accelerating...  I have not heard anyone mention uncertainty.  When companies can't read the future, they tend to stop hiring (that is an investment in the future) and hoard cash.  That's pretty much what we are seeing now.  There is a ton of uncertainty in our current politics and economics.

                   

                  I call BS. Uncertainty argument is complete, utter BS. Any business person who says this has an agenda. There is one reason a company invests in their business and hires workers: Demand exceeds their supply. That's it. No smart business person ignores demand for more product because of some "uncertainty". Apple is not sitting on $121 billion in cash due to "uncertainty". The market has matured and demand has fallen. Giving a business more and more tax breaks will not result in investment in capacity if there is no demand. Without demand, they hoard cash. We learn this freshman year of college. Stagnant wages and unemployment suppress aggregate demand. That's why inequality at this level is unsustainable. Henry Ford was right.

                   


                  Prince of Fatness

                    Is setting minimum wage at a level that you can afford without any additional assistance (no food stamps, no government housing, no parents letting you move back home)  afford food, shelter, healthcare, and BASIC necessities taking away from the rich?

                     

                    I was thinking along the lines of individual taxation and the top 1%, should have been more clear.  A raise in the minimum wage is broader in scope than just asking the top 1% to pay more.

                    Semi-retired.


                    Fat butt on couch

                       

                      I guess also this depends on what do you define as "taking away from the rich and giving to the poor"

                       

                      Is setting minimum wage at a level that you can afford without any additional assistance (no food stamps, no government housing, no parents letting you move back home)  afford food, shelter, healthcare, and BASIC necessities taking away from the rich?

                       

                      Point taken, but the issue with this is that raising the minimum wage will have a much larger impact on local and small businesses run by people that really aren't that rich, instead of tapping into the million/billionaires.  It's a pretty effective way to freeze hiring or get jobs cut.

                       

                      There is not an easy answer.

                      "If you want to be a bad a$s, then do what a bad a$s does.  There's your pep talk for today.  Go Run." -- Slo_Hand

                       

                        One other tidbit in the whole discussion is that we are still living with artificially low interest rates.

                         

                        When (not if) interest rates begin to rise again, some of these folks with very high debt burdens are going to be in a world of hurt and we are going to see several more mini recessions as the economy deals with those defaults that are going to be coming.

                         

                        I think the rise in rates will be much more gradual than it was back in 2007, but I personally feel that the rapid rise in interest rates in 2007 and the fact that so many folks were on ARM mortgages had as much to do with the bubble bursting as anything.  With the rates artificially low right now, it is very hard for risk adverse folks to justify saving and it is very easy to justify borrowing for stuff at historical low rates.

                        Age: 45 Weight: 208 Height: 6'2" (Goal weight 195)

                        Current PR's:  Mara 3:48:09; HM 1:43:26; 10K 44:51; 5K 21:27

                          Yes, as I recall, that was Jeff's argument about how the decline of the middle class will ultimately be the ruin of us all.  In the long run, I can see how that makes sense.  I think this is also related to U.S. imperialistic policies from the beginning - finding new people to buy our goods/services.  If you believe in globalization the decline of the middle class in America will be more than made up for by the rise of a much larger population worldwide (for U.S. businesses, at least).

                           

                          (mta: This was in response to George)

                           


                          Fat butt on couch

                             

                            I call BS. Uncertainty argument is complete, utter BS. Any business person who says this has an agenda. There is one reason a company invests in their business and hires workers: Demand exceeds their supply. That's it. No smart business person ignores demand for more product because of some "uncertainty". Apple is not sitting on $121 billion in cash due to "uncertainty". The market has matured and demand has fallen. Giving a business more and more tax breaks will not result in investment in capacity if there is no demand. Without demand, they hoard cash. We learn this freshman year of college. Stagnant wages and unemployment suppress aggregate demand. That's why inequality at this level is unsustainable. Henry Ford was right.

                            Well I'm glad they taught that freshman year of college, but being in an actual position to see these decisions being made in the corporate world tells another story.

                             

                            Say demand exceeds your supply.  OK, by your argument you will immediately expand capacity to keep up.  Well, let's say it will cost you $80 million to add the physical and workforce capacity to to allow you to keep up with the projected growth rate of demand.  But, that is an investment and it won't pay off for 5 years.  So now you have a decision to make; do you gamble that growth will continue as projected and you will get value for your $80 million?  Alternatively, you could sit on your cash and increase your price...making more money at maximum output...and the price increase would bring demand closer to output.

                             

                            If you have reason to believe that forces at play may make your growth projections risky...economic downturn, market events rapidly shifting demand, changes in consumer spending, impact of the new healthcare law...you just might decide to maintain the status quo for awhile and see how things shake out before you take steps that may damage the future viability of your business.  Uncertainty makes companies hesitant to move forward as aggressively as they otherwise might.

                            "If you want to be a bad a$s, then do what a bad a$s does.  There's your pep talk for today.  Go Run." -- Slo_Hand

                             

                              This uncertainty has always existed.  Some times in our history much more so than now.  This level of cash hoarding is new.  This cash hoarding has more to do with passive ownership of stock through ETFs, index funds and mutual fund companies.

                               

                                 

                                If you have reason to believe that forces at play may make your growth projections risky...economic downturn, market events rapidly shifting demand, changes in consumer spending, impact of the new healthcare law...you just might decide to maintain the status quo for awhile and see how things shake out before you take steps that may damage the future viability of your business.  Uncertainty makes companies hesitant to move forward as aggressively as they otherwise might.

                                 

                                So, you're saying, uncertainty about demand.