“At least you’re not getting ass-raped by an angry horse” is not an argument.
I posted in another thread a link to a story about Cheney moving significant portions of his investments overseas. It’s a wonder that nobody seems to have picked up on it.
I saw that story on DU – but it was almost a year old. What’s he been doing with his money lately?
Median wages have been stagnant or declining since the 70s with more hours, less benefits, with overtime and organized labor having been torpedoed, and a variety of statistical tricks employed to muddy the waters. What’s clear is the super rich get richer and the middle class slowly evaporates. So it goes. Maybe it’ll change someday if things get bad enough. The only thing that just stuns me is how many people have been led to go along with it, despite their personal economic problems. It’s pretty interesting when they parrot the propaganda with catch phrases like “a rising tide lifts all boats.” That’s just maddening since it used to be a catch phrase for policies which expand and enrich the middle class and then was stolen by the corporate interests in their (ongoing) attempt to destroy the new deal. They’re looking for something more like “a lifting yacht raises the tide.”
How is Cheney doing that? I thought his money had to be in a blind trust. Doesn’t it?
Part of the reason why lower-class wages have declined is because of illegal immigration. Illegal immigrants are increasing the pool of low-priced labor, which drives down the cost of it. Plus, there’s no question that competition for low priced wages due to globalization has kept wages down somewhat. The U.S.'s comparative advantage rests in high-technology, knowledge, finance, and other 21st century skills. That’s driving up the value of people who have good incomes already, and not helping blue collar workers much.
The same transition happened to farmers when mechanized agriculture did the same thing globalization is doing today. It certainly hurt some people, and a lot of multi-generational family farms were lost. But there’s no question that the change was to the long-term benefit of most Americans and the United States as a country.
That’s mostly false. The people in the top one percent are people whose grandparents drove the economy. Nowadays they’re mostly circling the wagons, holding on to the wealth they inherited, and trying to prevent any changes in the economy. The economy isn’t driven by people at the top; it’s driven by people in the middle trying to get to the top. Conrad Hilton was the one who built a hotel chain. Paris Hilton just goes to parties without her panties.
Do you have a cite for any of this? There have been idle rich since there has been wealth. Do you have evidence that the rich today are generating less wealth than the rich 100 years ago? Or 50?
I don’t think it would be safe to link to pictures of Paris Hilton without her panties.
Risk-taking? Puh-leeze. The guys who take risks are the ones that bust their butt for a company for 30 years and then discover that their jobs are gone because some investor wants to make a quick profit. Or their pensions have gone belly up and they have no health care. If Daddy Warbucks invests a bit of his money and loses it all, he’s still set for life. He may be risking some of his money, but he isn’t risking his survival like so many people at the other end of the spectrum.
I think this is indicitave of why folks who actually know economics no longer venture into these kinds of threads. Its a world view so skewed that its hard to know where to begin…or if there is even any point in beginning. I’m certainly not going too, except to point out that rich people loose their fortunes too…and they generally have much further to fall when they do so. The people taking the major risk are those who are giving the capital making it possible for those people to work their butts off for a company for 30 years. Unless companies grow in cabage patches of course.
The only reason I’m commenting is to point out that the trend in GD lately seems to be that the few really knowlegable economic folks (of which I’m not one) don’t seem to even bother with these threads anymore. Its like they got tired of beating their heads against the wall and have simple given over the field to those with at most a tenuous grasp of economics. Thats sad…sort of like I imagine on some boards the few people who were attempting to defend, say, Evolution from the howling masses finally giving it up as a bad job and moving on.
Anyway, back to the singing…
-XT
Could you give us some rich people who have lost all their money, not counting people like Ken Lay who lost due to crimes? Any rich person who isn’t a total idiot is going to have his or her money so diversified that risk taking won’t kill him. Anyone with reserves can stand downturns a lot more easily than people without any money in the bank.
Non-rich people in startups are definitely taking giant risks. VCs. not so much.
Since the 70s? So we can blame Nixon, Ford, Carter, Reagan, Bush, Clinton, Bush?
The problem with economic data is how it is parsed. For another take (though out of date for the new millenium), you can read Myths of Rich and Poor:
Google has several of their tables in the preview, where you can see the problems with “it is all going to hell” statements.
You can also find various bits on income mobility out there,
http://www.hoover.org/publications/digest/2905081.html
However - this is cherry picking by Henderson, and you can read the full article here (Danger Will Robinson - PDF):
http://www.chicagofed.org/publications/fedletter/2002/cflsept2002_181.pdf
In the article quoted above, we find the author studying how much the income of the father impacts the income of the son.
This implies that 40% of an earnings gap will remain after a generation (generation being 25 years0>
If you have a stomach for academic statistics, this is an interesting article.
Bingo. Maybe a guy like Bill Gates risked it all when he started out. But if you’re in that top 1/4 of 1%, your wealth is so diversified that you could lose 100% of any single investment and still stay in that mansion.
Off the top of my head I can think of quite a few (guys like Muhammad Ali spring to mind), but here is an article I found just doing a quick google search. I have only skimmed the article, but there are several examples in there.
There are plenty of examples of people who have managed to lose their families fortune. Rich families don’t generally STAY rich generation after generation…which is why the ones that do are so remarked on.
-XT
And here we find the key qualifier. The entertainment world and sporting world is full of stories of mega rich to mega poor, typically due to idiots making tons of cash and then pissing it all away. This is often because they did NOT earn their money by being smart, but rather for other reasons.
When you get smart people earning money, they tend to keep it. However, their children will often regress to the mean, and slowly lose the money. The main reason later generations might still have lots of money is thanks to trusts set up to keep the younger generations from losing it all on coke and hookers (or bad investments).
We need to define “the rich” here, too. Since the top five percent of taxpayers in 2004 were people with incomes over $137,000 and the top 1% were people with incomes over $328,000, the “rich” really aren’t just the Bill Gates and Donald Trumps of this world. They are also the small businessmen and women who routinely go bankrupt. Saying that “the rich” never lose their fortunes shows little knowledge of economics, business, or history.
Yes, very interesting article, thank you. However, I feel the need to clarify your quote. The point of the article is that the intergenerational effect is, perhaps, 50% more inelastic than was previously thought. That is, previous studies had found the coefficient (rho) to be 0.4, suggesting some amount of (financial) mobility (where 0.0 signifies no relation between father/son income and 1.0 that a son will earn exactly the same amount as his father).
This study, however, found the value of rho to be 0.6, indicating much less intergenerational financial mobility than was previously thought. (In the U.S., at least; on page 3, the author cites a study from 1999 that found rho to be 0.2 in Canada.) The discrepancy was attributed to the time span used in calculating the fathers’ incomes.
To carry through the author’s warnings: he repeatedly states that this is poorly understood and needs more study.
I took the OP to mean that the top 1/4 of 1% received almost one half of the economic gains. Perhaps I misunderstood something there, but that’s people making a hell of a lot more than $328,000/year. Those aren’t small businessmen and women.
What about this is really risk-taking? I’m with you that it is a tragedy and often a crime, but how does this apply to risk-taking? It used to be that you could work at the same job for 47 years and retire with a pension; this stategy seems like the epitome of not taking risks.
I think we’re talking about two different meanings of “risk” here. A billionaire who invests fifty million dollars in the development of some new technology is taking a risk, even though he’s not betting more than a small fraction of his wealth. The risk is defined by the chance of success vs failure, not the percentage of his fortune involved. It’s this type of investment risk that economic growth relies upon. And it’s this type of risk that most billionaires are going to avoid - they’ve succeeded under current economic conditions (and may have helped create those conditions) and their main motive now is going to be economic stability. Bill Gates may have revolutionized the computer world but do you think he wants to have another computer revolution now?