Wealth Inequality (Read 403 times)


Prince of Fatness

    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.

     

    Just from a personal standpoint I think that the uncertainly is worse.  I paid my last college tuition bill over a year ago but still am weary of spending a little extra money even though my other expenses have not gone up much.  Maybe I am paranoid.  I keep hearing about this improvement in the economy but until I see an increase in wages and a decrease in the unemployment rate I don't know.

    Semi-retired.

      What about WWII, the Cold War, oil crisis in the 70s, high interest rates and inflation in the early 80s, a 20%+ one day drop in the Dow in 1987, etc.?  Sometimes we act like we are the only ones dealing with stressful times.

       


      Fat butt on couch

         

        So, you're saying, uncertainty about demand.

         

        More.  Access to financing, demand, economic outlook, etc.  Also, look up the difference between a balance sheet and an income statement.  The difference is fundamental to understanding what these cash reserves mean.

         

        As we came out of the recession consumer credit card fell as people went back to cash and shied away from financing themselves through debt.  Many people lost access to credit  During the recession, access to credit became very difficult for businesses as well; perhaps moreso than consumers.  Many companies now have a new appreciation for keeping a larger reserve of cash to protect against a repeat credit crunch if the economy is not really recovered and we sink into more bad times.  With the Fed still maintaining near-zero interest rates, it's easy to see why people are not believers that we are out of the woods.

         

        L Train is also on point with regards to passive ownership.  Executives can make the decision to keep cash and not distribute as dividends.  However if you have engaged shareholders, at some point they will demand that these proceeds by paid in dividends to shareholders.  With a shift toward passive ownership, there is less pressure to convert to dividends.  I am sure this is part of the reason (especially with select companies like Apple who have a LONG history of being stingy on dividends) but it is not a blanket reason.

        "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

         


        Prince of Fatness

          What about WWII, the Cold War, oil crisis in the 70s, high interest rates and inflation in the early 80s, a 20%+ one day drop in the Dow in 1987, etc.?  Sometimes we act like we are the only ones dealing with stressful times.

           

          WWIi - Wasn't born yet.

          Cold War - Was younger then, and it was over just as I was starting a family.

          Oil Crisis 70s - I was a kid and did not pay bills.

          Inflation early 80's - In college.

          Crash of '87 - Had an infant daughter but also had no money to invest in the market so it did not have much of an affect on me.

           

          This is why I said from a personal standpoint.

          Semi-retired.

            I think that the best approach to remedying Wealth Inequality -- both the conditions under which it grows and the consequences for democracy is mansplaining on the internet.

             


            A Saucy Wench

               

              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.

               

              No there isnt an easy answer and I am not claiming there is.  Shocking as it may seem given my arguments I am fiscally conservative - as conservative was defined in the 80's not as it is defined now.

               

              It is interesting to me that any time there is a discussion about wealth inequality and poverty the vast majority seem to think the discussion is about taking hard earned money from the top  and giving it free of restrictions to the bottom so that lazy bums can live high on the hog.  (really?  try living on welfare - have fun)

               

              I do see your point on small companies.  Although there have been MANY labor laws passed in prior times where minimum company size applied so there is room to temper that.

              The welfare system is horribly broken, although not because of an entitlement mentality.  I worked with dozens of welfare families when I was in highschool and college.  I would say the rate of entitlement was very low.  But the system is so fucked up.  If you have ever worked with it you know that any step you take to get off welfare penalizes you greater than your step.  Welfare/foodstamp dollars are decreased by gross pay, not post FICA pay.   Section 8 rents are increased even as your net take home is decreased.  Expenses incurred by working are of no consideration (childcare, transportation).  It is defeating.   I watched families try time and time again to get off only to get to the point where they had to pick food, medicine or busfare - or they could give up.

               

              I read an interesting article about the catch-22 companies that try to be more socially responsible are in.  If you want to be a public company you need your shareholders to approve of what you do.  Shareholders want management with pedigree.  Pedigree is now almost unionized to the point where you CANT hire them for less than ridiculous salaries.   I dont know how you fix that.

               

              MTA: maybe you only have to pay the highest tier minimum wage if your highest paid employees make over X,  Including stock.  HAH...like THAT would ever pass lobbies.  Socially liberal, Fiscally conservative, perennially cynical.  I'm fucked

              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

                 

                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.

                 

                ---That scenario did run through my mind as well.  The whole 'downward spiral' thing if Americans continued to cut back on their spending, and the resulting series of dominoes that would fall concerning corporate layoffs, etc.   I suppose we could look to Japan as a similar example of this?  They work their a$$e$ off, and they save their a$$e$ off.  They are doing the prudent and 'fiscally responsible' things as citizens.  And yet their economy has been jammed in a recession for 30 years! ...

                 

                ---Well, I can only take care of my personal economy, so that is what I do.  I still save my a$$ off and invest.  Thankfully the US stock market did not mirror Japan's after our own buble busted in 2007!  --But where do things go from here... No easy solutions.  And the only thing that Congress has been able to agree on was this ridiculousness called "sequester?"!  We might be in trouble not too far over the horizon, as this problem seems bigger than either party can solve (thus all the can-kicking)....  I get the feeling this country is already in a bear trap, or catch-22 as it were...

                The Plan (big parts)→  ///  March:  Shamrock Marathon  ///  April:  24 Hour Run for Cancer  ///   May:  3 Days at the Fair (12 Hour)  ///  Nov:  New York Marathon ∞

                  Spaniel, we agree more than we disagree. (And I'm very familiar with the difference between an income statement and a balance sheet). But it still comes down to demand. You're basically citing things that, at the end of the day, all result in a real or perceived threat to demand (I'll accept too that there is the possibility of an event that disrupts a supply chain or adds an unexpected cost - but that is true in any economic environment - no investment is 100% guaranteed). Everyone's risk tolerance is different. I don't disagree with your scenarios. But today, right now, there is a ton of cash sitting on the sidelines and interest rates are at historic lows. Supply and access to capital to increase supply is not the problem. There isn't enough demand now to warrant an increase in capacity. And the outlook for demand is tepid at best. And income inequality exacerbates the aggregate demand problem.

                   

                  Set aside whether or not the truly wealthy deserve their current percentage of wealth. The fact is, too much money is in the hands of people that don't actually need it. They can't spend it. They won't invest it. The lower and middle classes spend a much higher % of their income. When their income doesn't keep pace, they spend less and suppress demand. Giving them more disposable income does more for the economy because they will spend the extra $ instead of saving it.

                   


                  Fat butt on couch

                     

                    No there isnt an easy answer and I am not claiming there is.  Shocking as it may seem given my arguments I am fiscally conservative - as conservative was defined in the 80's not as it is defined now.

                      

                    Just to make sure there is no misunderstanding I know you didn't claim there to be an easy answer, I was just pointing out the applicable Law of Unintended Consequences.  Smile

                    "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

                     


                    Prince of Fatness

                      It is interesting to me that any time there is a discussion about wealth inequality and poverty the vast majority seem to think the discussion is about taking hard earned money from the top  and giving it free of restrictions to the bottom so that lazy bums can live high on the hog.  (really?  try living on welfare - have fun)

                       

                      I disagree that the majority think this way.

                      Semi-retired.

                         


                        Fat butt on couch

                          Spaniel, we agree more than we disagree. (And I'm very familiar with the difference between an income statement and a balance sheet). But it still comes down to demand. You're basically citing things that, at the end of the day, all result in a real or perceived threat to demand (I'll accept too that there is the possibility of an event that disrupts a supply chain or adds an unexpected cost - but that is true in any economic environment - no investment is 100% guaranteed). Everyone's risk tolerance is different. I don't disagree with your scenarios. But today, right now, there is a ton of cash sitting on the sidelines and interest rates are at historic lows. Supply and access to capital to increase supply is not the problem. There isn't enough demand now to warrant an increase in capacity. And the outlook for demand is tepid at best. And income inequality exacerbates the aggregate demand problem.

                           

                          Set aside whether or not the truly wealthy deserve their current percentage of wealth. The fact is, too much money is in the hands of people that don't actually need it. They can't spend it. They won't invest it. The lower and middle classes spend a much higher % of their income. When their income doesn't keep pace, they spend less and suppress demand. Giving them more disposable income does more for the economy because they will spend the extra $ instead of saving it.

                          Well, capital access is not really about demand unless you take it so far as to say "low housing values = financial difficulty = lower spending = lower demand = credit market freeze".  They yes, it's all about demand. I'm just thinking of direct concerns, and this would be quite indirect.

                           

                          Access and supply of capital is not an issue now, but my point was that a lot of companies have changed their philosophy as to how much cash must be kept on hand in the event that we return to a situation where such resources are limited.  I am not saying this explains away all of it.

                           

                          It's a complex problem in that a lot of the lower income people already pay little to nothing in income taxes.  So how will shifting the tax structure to take more from the top and less from the bottom lead to a significant shift in disposable income?  I know people who actually get money BACK when they file their taxes (which still floors me).  Is it good to continue to encourage people to engage in what may be a level of spending unhealthy from a personal finance standpoint to prevent a correction?

                           

                          Someone mentioned it earlier but the trap we are caught in is a correction.  We had massive over-growth driven by the bubble and debt-driven spending, and there is no way to just pick back up where we left off.  Several posts above have touched on the shock that would result if everyone suddenly started acting financially smart.  Is there a way to get there without taking the shorter-term economic hit for it?  I doubt it.

                          "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

                           

                             

                            I disagree that the majority think this way.

                             

                            I agree with your statement there.

                             

                            However I think the antics of a fellow like Hannity does increase the number of folks who think that any discussion of "wealth inequality" is equivalent to the discussion of "taking money directly from, and giving handouts to the lazy poor".   (I hold the strong belief that heavily biased commentators, like Hannity on the right, and Ed Schultz on the left, merely do a disservice for this country by locking down on 100% partisan talking points and dividing people).  I think (hope) that the voices of these dividers are falling more on deaf ears these days and that more people are being objective about things now.

                             

                            But, big picture, i agree as well.  I'd say the majority of folks do not automatically associate discussions of growing wealth inequality with 'taking money from rich to give to the poor'.  Heck, look at this thread for instance, a whole lot of very responsible discussion going on.

                            The Plan (big parts)→  ///  March:  Shamrock Marathon  ///  April:  24 Hour Run for Cancer  ///   May:  3 Days at the Fair (12 Hour)  ///  Nov:  New York Marathon ∞

                              Plus, boobs.

                               


                              A Saucy Wench

                                Plus, boobs.

                                 

                                Well that always helps a discussion along.

                                 

                                Maybe that is the solution.  Print all legislative proposals on t-shirts and hire the Hooters girls.

                                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