(feel free to move this more appropriate…it’s kinda politics adjacent)
Three people attending the inauguration were worth $1T. Mr. Roman salute is on pace to be the first (or second) Trillionaire.
He’s not going to be spending it on PEZ. He’s got 11 kids that may get something after he croaks. And the old saw was that theres no money for the third generation to will to the forth…probably doesn’t play here?
But the mathematics are that all this money isn’t going to be spent. There’s only so many houses and islands and boats 200 million can buy, and they’ve got 5 times that…there just isn’t any effective way this money is making it back into the economy.
Like bitcoin, where a percentage will never come out of the blockchain…what happens to that money? What happens to the rest of the money that isn’t in there. Will we be paying $13M USD for a dozen eggs?
(My 1990 Macro Econ 201 class left me woefully unprepared for this outcome.)
Personally, I’m still (darkly) amused by the fact that the person with the lowest net worth in history just gave a job to the person with the highest net worth in history.
Since the election, shares of Tesla have soared almost 70%, lifting the value of his stake to about $165 billion, according to Bloomberg. His stake in xAI, his artificial intelligence company, is worth about $25 billion, while his SpaceX holdings were worth about $82 billion before the private sale, Bloomberg reported. His other holdings include X, the social media app and the Boring Company.
To remove it from the economy, you’d need to convert it to cash, and then stick that cash in a vault somewhere. Not in a bank, because they’d loan it out to earn interest and facilitate other economic activity. I mean lock it up in a vault that doesn’t get opened.
Well that’s another question: it can be demonstrated that money, in high enough concentration, makes more money than anyone can conceivably do anything with.
Way down here at the bottom, you run out of money, you manage your expenses and/or hopefully do things to make enough money to live/be comfortable
But you concentrate enough…compute? Get it in the way of enough people? You win at economics…but then there’s too much accelerating too fast to do anything with…then what happens to the economy at large? The type of person that can get there…earning money is no longer the goal…probably never was. That doesn’t motivate those people.
But the money is still there, still accelerating. Does it inflate prices beyond the rest of everybody to afford? Is it not a zero sum game and we just keep growing chickens for eggs? Does an outside effect destabilize the system (insurance policy cancellations in places where out overheated ecosystem does what it does and burns the world)
If your wealth exists as shares of ownership in publicly traded companies (as is generally the case for billionaires), then continued growth of your wealth is linked to continued growth of those companies. Those companies don’t grow in a vacuum: you’d expect average companies to grow at the same rate as the rest of the economy - meaning you, as a shareholder in average companies, should expect your net worth to remain a relatively constant percentage of the whole economy over time.
The fact that some billionaires’ wealth is growing faster than the economy is because the price of the shares they own is growing faster than the economy. In some cases, that’s not because the companies themselves are actually growing faster. Example, Tesla and SpaceX share prices are overpriced right now, so at some point in the future when those companies fail to deliver the massive profits one would expect from those valuations (and the market comes to understand/accept this), share prices will drop, and you will see Musk’s net worth plummet back to something more in line with what it was before the election.
Wealth generally does not last more than a few generations as it is past along and diluted among more and more descendants.
It is easy to assume that a wealthy family has always been wealthy and will always be wealthy. But the truth is, around 70 percent of wealthy families lose their wealth by the second generation. More so, around 90 percent of families lose their wealth by the third generation. - SOURCE
Of course, there are exceptions and with numbers as big as Bezos and Musk and Zuckerberg the dynamics might be different. Still, in time, that money should find its way back to the broader economy.
Unless I’m misunderstanding something here, Musk’s net worth is not 5 times that, but more like 2000 times that. Which is an absolutely obscene amount of wealth to be in the hands of any one individual.
This is very true. That’s why the vast majority of the wealth of the uber-rich sits in capital markets instead of being spent on goods and services. Which, not coincidentally, is also why the rich get richer just by sitting around and watching the days and months and years go by, while the rest of us have to spend money to live.
I didn’t say guaranteed, or every year. The S&P 500 returns an average of 10.5% / year, with dividends reinvested.
Add to that an army of professional money managers? If someone with that money can’t generate an average 10% / year then they must not be trying. Hell, I’m 51, started saving in 1996, and I’ve done better than 10%/year CAGR.
Isn’t Musk planning on buying primary challengers for politicians with whom he disagrees? (I guess I mean he’ll underwrite the campaigns of challengers.)
He could spend significant moolah on this. I’m guessing that nearly all of the money spent for this would go back into the economy. (Or am I missing something?)
We’ve discussed this before and I introduced the concept (my own pet) of potential money vs. actual money.
Musk does not have a money bin like Uncle Scrooge. He has large shares of stock in several companies. That is potential money. He can convert it into actual money in several ways. The most straightforward is to sell the stock to create actual money to buy a yacht or a president. The most common way is to use the stock as collateral for a loan to buy something and hope that the profits generate enough to cover the loan. That’s what he did with Twitter - which has lost huge amounts of money so his collateral will come due some day. None of this has much to do with the actual money purchases of the less rich. Musk’s Tesla stock does not increase the price of a Tesla - the market determines that, and prices have been dropping.
Note that if potential money raises consumer prices when it goes up, potential money should lower consumer prices when it goes down. The Nasdaq lost 70% of its value in the dot-com bust of 2000. Do you remember prices plummeting?
Corporations are immortal if they are successful. Their market cap will get passed down from stockholders to stockholders and never become actual money. If they are not successful, the stock will lose all value and you won’t have to worry where all the money is going: it’s gone.
He’d have to sell shares of stock to do this. The money he receives from those sales would come from the buyers of those shares of stock. Where do you suppose those buyers get the money with which to buy that stock? If you trace it back far enough, it’s money that was “in” the economy. So Musk takes money “out” of the economy and spends it on campaign ads, where, yes, it goes back “into” the economy, via the purses of the people who make the ads, and the owners of the media that broadcast/print those ads.
Again, this comes up in thread after thread. If you’re wealthy enough you borrow against your assets and don’t EVER actually spend them. Or pay back your loans because you’re borrowing more money to cover future expenses as well as what you’ve already borrowed. That is, you pay the loan back with a new loan
And this works when your wealth is generating 40 billion a year, and you only need one billion to live on.
At a certain level, I understand that, but the worry is that the ownership gets to the point where it breaks economics. Granted, it’s trivial with his much ‘ownership’ to buy, literally, anything…heck, the presidency was less than half a billion dollars and he’s got plenty of billions of dollars.
I’ve see what happens to places like Venezuela when their money situation gets massively upside down (at one point 14.6M Bolivars were worth $2.22 USD and bought a chicken…but we’re talking USD as the fiat currence currently being f’d with.)
I’m just wondering if the vast imbalance is going to result in something similar?
Well, Musk is currently worth $427 billion. American net worth is $164,000 billion. Global net worth (as of 2022) is $454,000 billion.
As rich as he might be compared to the ordinary American, he doesn’t move the needle on a cosmic scale. Our economy is not like others. It can be hurt, but extraordinary catastrophes have to occur to break it. That may happen, but not because Musk has a lot of stock.
Still sounds kinda odd…did relatively few exceedingly wealthy people (who obviously found a way through election finance laws) buy the election?
(my gut instinct is no, he marketed himself better than his opposition. The more pessimistic thoughts in my head could be categorized as sour grapes and I’ll just let that lie.)
A terrible example of misinformation telephone. Heritage Investments cites Yahoo News who syndicated an article from GoBankingRates which pulls the number from thin air. Other people confidently cite this 70% number but all lead to similar dead ends. One place that does try to source it is Professional Wealth Management.com who claims it’s a study done by The Williams Group but The Williams Group claims it’s done by The Family Business Institute who have 404ed their paper so the trail runs cold.
More crucially, PWM claims
A 20-year research project on 3,200 families by US-based wealth consultancy Williams Group shows 70 per cent of wealthy families lose their wealth by the second generation, and 90 per cent by the third.
This alleged study only looks at family businesses which is a small minority of all wealthy people and only judges whether they “successfully transitioned”, ignoring that it’s perfectly possible to remain wealthy even if you don’t hand off the business to your heirs.
Anything in the personal finance/wealth management space is just crammed full of recycled glurge churned out by cynical content mills with little regard for any journalistic standard and endlessly recycled. Other examples include how 60% of Americans live paycheck to paycheck (something made up by Lending Club) and how the average American wedding costs $20,000 (made up by TheKnot).
[I]n 2014 Forbes began assigning each billionaire a self-made score. The score ranges from 1 to 10, with 1 to 5 meaning an individual inherited most of his or her wealth and 6 to 10 meaning he or she built their company or established their fortune. In 1984, less than half the people on The Forbes 400 were self-made; in 2023, 70% have created their own riches.
The last few decades have seen an enormous pool of invention, most notably in tech, but also in the consolidation of other industries to create oligopolies. The government assisted by virtually shutting down enforcement for the past few decades. The combination produced new billionaires by the score.
We don’t know if that will last. Will there be another round of new billionaires or will they be crushed by the existing ones? The current tech bros are aging out of the founder/CEO roles. They will also spawn a lot of inherited fortunes.
All these billionaires strive to keep the economy as healthy as possible. Pretty unlikely they will work to crash the wealth of the world.