I guess it’s popular to use Marxist themed references because their validity has no value in US but I’ll tell you this – getting rid of workers or reducing their salaries or not increasing their salaries with pace of the inflation is one of the most fundamental balance sheet manipulations that ANY business entity can engage in and show profit with no effort at all.
Again, profit is more than just being able to sell for more than it took you to make. Just as there is relationship between record Dow number and $80B a month by Feds of new money there is also relationship between high levels of unemployment and record profits from major corporations.
Do they “steal” it or not is matter of perspective but one label or the other does not make a difference.
Here’s how I understand wealth creation (simple examples):
When a person takes a piece of wood off the ground and via his skill with a pocketknife and his artistic vision, carves it into a sculpture that someone pays $20 for, he’s in effect created $20 worth of wealth. Note, I say “$20 worth”, not $20. Think of that $20 as basically the poker chips that are used to track wealth, not the actual wealth itself.
The money supply is basically the number of poker chips that are available to the players- the government tries to ensure that the proper number is out there to accurately reflect the amount of wealth that exists and is being created by people like our guy with the pocketknife.
Where a lot of people get sort of mixed up is at the point when this wealth that’s been created intersects with free markets, and the actual number of poker chips that it’s worth gets assigned to it, and the value of the wealth is actually realized when it’s sold.
Now, look at everything you wrote, and then try to explain how the rich are supposed to be taking* more of a risk* than the poor go through every day.
If the rich don’t want to take the risk, they don’t have to. The poor are forced to make life-and-death decisions every day, because they don’t have the safety net woven from money.
The free market isn’t supposed to be fair, it gives outsized rewards to people who perform better with the risks they take, and luck as well. Believe it or not quite a few interviews I’ve read with billionaires, they point out that at least part of their success is luck, because others just as competent as them failed to make it big because of a bit of bad luck.
Ideally you redistribute a portion of wealth to the poor to keep standard of living up, but you need the outsize rewards to fuel the system which ultimately makes everyone wealthier. See: all failed economic systems.
You dont have to sell anything to increase wealth.
When US Government issues $100B of treasury notes and banks and investments firms gobble it up this $100B shows up on their balance sheet as increase in assets.
Nothing of use created and nothing sold yet, economic indicators show increase of assets.
When AIG sells credit protection (CDS) to Goldman Sachs for some reference asset they both increase assets on their balance sheet – AIG will receive periodic premium and Goldman will free up funds they keep in reserve to cover possible default on those assets.
Nothing of use created and nothing sold yet, economic indicators show increase of assets.
The other difference is my examples show increase in wealth in BILLIONS and your example is what… couple of bucks.
I didn’t call you a blowhard. I said you made a claim that wasn’t backed up. That happens around here all the time. But if you want people other than the true believers to be convinced of your argument, you do need to back it up. And implying that others are just too uneducated for you to bother with doesn’t do much to bolster your claims either.
I didn’t mean “too uneducated” - more like, I don’t know what people profile is in terms of existing knowledge so it can happen when explaining for one may not be sufficient for dozen other. Add to that inevitable simplifications and the task of backing it up becomes impractical.
Ultimately wealth means “anything of value”, be that goods (physical or otherwise) or services. AIG selling Goldman Sachs credit protection is definitely wealth creation- they’re selling a service.
I think you’re getting confused by the scale of a lot of financial transactions, and by the fact that there are a lot of things which seem odd- like the idea of buying and selling debt.
Oh, and Lightnin’ you’re getting confused by the fact that the word “risk” has multiple meanings. In the context of poor people, it means a direct personal risk of calamity due to job loss, medical bills, etc… Financially, risk means the likelihood that the given investment will lose value. They’re two entirely different usages- they’re not even remotely comparable. For example, if a rich guy and a poor guy both invest $10 in the same financial instrument, their actual financial risk is identical, since they’re both investing in the same thing- both run the same risk of losing that money. The personal risk of investing that $10 is very different to them however.
…No, not it doesn’t. This is simply a exchange of one asset (cash) for another (T-Bills. The only way it increases assets is if somebody borrowed to buy the notes, and that will also show as a payment which must be made on the balance sheet.
This distinction is critical to why a strong safety net for the poor is essential. Because without it even the most seemingly insignificant financial risk is also a direct personal risk to one’s self and family.
I can’t afford to invest even 1% of my salary if I have to spend every nickel for food and shelter. I certainly can’t afford to quit my janitor’s job to go to school (if I could even afford the tuition). Starting a business is sometimes possible (although much more difficult in communities under-served by banks), but even then my financial risk is direct personal risk.
Most of the people at the top, at least in the US, never had any direct personal risk tied to the financial risks they took. Conversely, I can’t think of any American, off the top of my head, that started from truly poor circumstances (meaning poverty-level) and made it to the top few percent in one generation (it’s still possible in two, I believe, with hard work and luck - three is more typical, IMO).
OP is confused; at best he picked a poor example for the theme of wealthy-who-didn’t-create their-wealth. Bill Gates didn’t build his house with his own hands, but did you? People barter with each other to exchange valuable items.
Trees are wealth. Trees cut up to assemble into a house are wealth with further value added. Van Gogh paintings are wealth. Computer software is wealth. But single-mindedly estimating the “value” of wealth by its market price is wrong. Is Window’s value many thousands of times greater than Unix/Linux’s? Is the world’s supply of oxygen worthless because we breathe it for free?
An easier question to address. Part of the problem is that much share voting is controlled by fund managers and others who are part of the “in crowd.”
A great example. Of course, he was born 81 years ago. I don’t think there is much complaint amongst today’s liberals about the standard of wealth equality (the subject of the thread this one was spun off of) during the era when Dave was building Wendy’s - it’s more about the trend of the last 30 years or so towards a more extreme distribution.
As long as there are people or corporations willing to take loan (debt) bank will monetize it with a simple balance sheet operation as in Table 2. on the page I linked.
When you stretch tension in economy where it becomes very hard for people or corporations to return those loans (debt) - it all blows up.
How do you think all the “wealth” as understood by stock market value (Dow Jones) that was wiped-out in 2008 is now back in mere 5 years?
Debt!
Debt is value of money. Or, more willingness to take on debt –more money in economy. Will worry about making payments later.
Well, we might not have “Windows”, but we’d have some operating system. In fact, we have other operating systems despite Windows. In any event, he’s rich because he owns Windows, not because he created it. Whether he created it or not is entirely beside the point. What matters is ownership, not creation, when it comes to accumulating Bill Gate style money.
I mean somebody, somewhere, came up with the Internet. If they got one cent for every cat video ever downloaded, they’d be bajillionaires by now. But they don’t, so they’re not. Why? Because they’re not allowed to own it. (They’re not allowed to keep people from using it, unless they give them money.)
So the idea that Gates is rich because he created something is wrong.He may or may not have created something (debatable) valuable (also debatable) but even if he did, that’s not what made him rich. What made him rich was owning something - specifically, a copyright. Which in turn was created by the government.
It is blatantly obvious that US society is a collective endeavor, we all contribute to make it what it is, for the most part.
It is blatantly obvious that some in US society contribute more than others, and some make more important, by whatever measure, contributions than others.
It is blatantly obvious that society rewards some contributors more than others and that it rewards those who may contribute little or nothing all out of proportion to their contributions (inherited wealth, lotto winners of various stripes).
It is blatantly obvious that the people who make the contributions are not necessarily the ones who get the rewards.
Does anyone care to dispute any of the assertions? Because if you accept them, the obvious conclusion is, that we’re not living in a meritocracy, or anything like one, and that acting as if we were in terms of who gets the rewards (“job creators” anyone?) is completely irrational.
Plus, study the graphs over in the wealth inequality thread. They are STARK. The progressives have ALL the evidence any reasonable man or woman could ever need. All that I’ve seen from our conservative and libertarian brethren is hand-waving. It’s all they’ve got.
