Wealth Disparity

[Ex-Cyber]

The real kicker is that all the talk of "the 1%", while nicely pithy, is in some sense understating how top-heavy the distribution is. If you zoom in on the top 1%, the picture doesn't change much (in some sense it's akin to a scaled/bounded version of the natural exponential function, sometimes characterized in terms of the Pareto principle). IIRC, the top 0.000001% (1% of 1% of 1%, i.e. about 7000 people worldwide if wealth distribution were to match population distribution worldwide, which it obviously doesn't) has around 25% of the total wealth. Or maybe it was 10%; I'm not sure I'm keeping income vs. wealth straight (the numbers aren't the same due to the threshold effect of debt vs. saving/investment).

[TrevHead (TVR)]

TL DR

What pisses me off is all those PCB elitists! Viva la revolution! PCBs for the masses!

[neorichieb1971]

I just watched "in time" last night. A movie about wealth disparity. Slightly different concept but still.

If you like concept movies I think most people in this thread might enjoy it.

[blackoak]

Some level of wealth disparity is natural as societies like to incentivize socially positive behavior, which often is very difficult and benefits from material incentivizing up to a point. That is to say nothing of the many other negative externalities unleashed by the unquestioned premises of Capitalism, of course (imperialistic ventures, warring rival nation states, environmental destruction via tragedy of the commons, etc). But the current level of wealth disparity can't be ethically or practically justified. Class warfare and class consciousness are going to openly spread throughout the world in our lifetimes because the assumptions of Capitalism, no matter what particular form it takes (keynesian, austrian, whatever), do not allow for these problems to be solved. That might sound crazy or "impossible" but human history is full of structural social upheavals, and we're definitely (over)due for one.

[PC Engine Fan X!]

What pisses me off is all those PCB elitists! Viva la revolution! PCBs for the masses!

Aw man, that would deflate the value of said expensive PCBs...next thing y'know, they'll be selling for mere pennies on the dollar.

TrevHead, it ain't that hard to get your feet wet with a supergun & a few classic Cave shmup PCBs...then you'd finally belong in that exclusive elite PCB club.

Here are some simple key pointers to remember in with dealing with PCBs:

1.) Gotta be at the right place & at the right time to score such a Cave PCB.

2.) Unless you're loaded, it's actually going to be slow going + require lots of time, disposable income & patience acquiring your favorite PCBs.

3.) Play & win the lottery, then you can buy all the PCBs to your heart's content. (Easier said than done, of course.)

4.) Sell one of your kidneys on the black market & use the profits to score some PCBs.

5.) Use your income tax refund from federal & state to buy some PCBs.

6.) Try to buy from a seller who really doesn't know the true value of said Cave PCB to get a really cheap-ass deal. (Such an ESP.ra.de PCB was sold for a mere $75.00 USD some time back on another forum as the seller didn't know the true value of it & simply wanted to get rid of it anyways.)

7.) Some PCB deals end up being cheaper than you anticipate them to be if an auction ends with just one or two bidders on it. (Happened to me with scoring an SP1 cart of Viper Phase 1 U.S.A. for a mere $20.00 USD many moons ago -- best eighty quarters spent right there. The next cheapest barebones SP1 cart of VP1-U.S.A. sold in the Shmups Trading section for a mere $50.00 USD.)

PC Engine Fan X! ^_~

[TrevHead (TVR)]

Now I know who will be the first target with my homemade orbital deathray (cunningly disguised as NEXT EXY). GP will be 2nd and Super Pang will be 3rd. MUHAHAHA

And this chap can go die in a fire!

[BulletMagnet]

This article just inspired a new sig.

[SGGG2]

This article just inspired a new sig.

That article's freakin hilarious.

I deal with wealthy people sometimes at work. Half of them get worked up about small amounts of money that wouldn't even phase me for a micro-second, I make virtually nothing in comparison.

[TLB]

I wonder what would have happened if it had been rich people trying to file complaints.

[DEL]

BulletMagnet's article (link) is not written in a very coherent way, but you are right that there are some sigworthy quotes in there: http://finance.yahoo.com/news/bonus-wit ... 00338.html

"I can't imagine what I'm going to do," Schiff said. "I'm crammed into 1,200 square feet."


btw. (That's 9X the square feet my family is living in).

I might have relayed this true story before, but anyway a chauffeur for London Investment Bankers (husband and wife) was told a couple of years ago that they were cutting his pay from £27,000 per annum to £23,000 because of the Crash. Soon after, he was in their house and stumbled upon the wife's Bonu$ cheque for that year, sitting on her desk. He took a peak and it was £3,000,000.
sick
cheap
bastards

I don't mind a bit of Capitalism, but the disparity we're talking about here can annoy me

[undamned]

It has to do with the way money has been designed.

Its only purpose is to exploit those who have none.

It's the money's fault! I blame money!
-ud

[neorichieb1971]

You can believe what you want. But most people who suddenly come into money will quickly choose to become like those who have it a while.

[undamned]

You can believe what you want. But most people who suddenly come into money will quickly choose to become like those who have it a while.

It has everything to do with the individual and nothing to do with money being inherently evil or some such nonsense. Giving an irresponsible person a bunch of money only gives them a bigger gauge with which to display their irresponsibility.
-ud

[Jonathan Ingram]

It has everything to do with the individual and nothing to do with money being inherently evil or some such nonsense. Giving an irresponsible person a bunch of money only gives them a bigger gauge with which to display their irresponsibility.
-ud

Social being determines one`s consciousness. Change the base and the superstructure will follow. Everything being down to the individual is anti-materialist nonsense.

[undamned]

Social being determines one`s consciousness. Change the base and the superstructure will follow. Everything being down to the individual is anti-materialist nonsense.

I love blaming others for my shortcomings. Man-up much?
-ud

[Drum]

It has to do with the way money has been designed.

It's the money's fault! I blame money!
-ud

I know I didn't give you a lot to work with, but you still managed to misrepresent me. Please don't reply to this post, I am not interested in discussing this subject. With you.

[xbl0x180]

It has to do with the way money has been designed.

Its only purpose is to exploit those who have none.

It's the money's fault! I blame money!
-ud

Guns don't kill people...

[CIT]

The reason wealth disparities get larger over time is because of compound interest.

Averaged out over time, an economy grows in a linear way, however compound interest grows exponentially. At first, the nature of compound interest works extremely well to make an economy flourish, but once interest growth starts exceeding the ability of an economy to create wealth in real terms (which is now the case in USA, EU and Japan), more and more money will gravitate towards the few people who already have an extremely large capital base. This continues until things get so bad that the entire system is reset by some unpleasant means (such as monetary reform, default, government expropriation, revolution or war).

Compound interest is inherently unsustainable and flawed, and this is also the reason Christianity and Islam forbid the collection of interest.

One way to counter this problem would be to design a different type of money that diminishes in value, if it is not put to use (essentially negative interest). This would be a way to limit capital accumulation and keep liquidity in the market.

[Ed Oscuro]

The reason wealth disparities get larger over time is because of compound interest.

That's only a small part of a range of methods the wealthy use to get wealthier.

What you're saying is analogous to asserting that the only reason car crashes happen is because of worn tires.

One way of looking at the problem is to consider wealth transfers.

The wealthy and their backers (both politicians and some of those who aspire to wealth) complain endlessly when taxes, regulations, or any other democratic intervention by government creates a "wealth transfer" from the wealthy to the poor, and they often argue that regardless of whether it is actually a net benefit (I, for one, would consider it a bad outcome to have hung onto my dollars at the sake of provoking a bloody revolution).

The reverse situation is harder to understand because I think it is inherent in some individuals that they know more ways to accumulate wealth (compound interest does not explain the sudden appearance of some billionaires compared to the rest of the world's population, when they all started out with similar middle-class backgrounds, so it is of limited use as an explanation; in a similar way the endless arguments over the estate tax seem more or less distracting from real centers of inequality).

Here is a good introduction to the problem, from Monthly Review (a socialist publication!):

SL: You argue that neoliberalism functions by redistributing wealth, as you've just said, rather than generating it in the first place, what you call "capital accumulation by dispossession" rather than accumulation by the expansion of wage labor. Can you explain for us some of the many forms that accumulation by dispossession can take?

DH: Accumulation by dispossession is to me a very important concept. And it doesn't simply apply in the periphery of the global capitalist economy. For example, in Mexico, the reform of the land system there, privatizing land, has forced many peasants off the land. The result is the land has gone into few people's hands. So you get concentration of wealth and power in agriculture in Mexico going on very fast and the creation of a landless proletariat as a result. Now, in this country we have analogous things going on in terms of what's happening to family farming. That lot of family farmers can no longer make it and they're being taken over by agribusiness. One of the mechanisms there, of course, is through indebtedness, that people borrow, they get into debt, they can't pay off their debts, and in the end they have to sell out sometimes at rock bottom prices. Accumulation by dispossession takes many local forms

These concepts are very familiar to anybody who has studied the academic literature from the 1970s-1990s about the functioning of development and developing nations. A lot of the literature would seem, to give a broad overview, to support the argument that government intervention in development is bad. What is really going on, according to almost all the writers, is that the government intervention has often played right into the hands of strengthening the finances of elites, instead of serving its intended purpose.

Back to the wealthy schemes of creating wealth transfers, however: Some of those ways the wealthy get money may be "good" (i.e., working hard on restructuring a failing business), some may be controversial, and some may be outright fraudulent; in all cases, there is still the situation that some people will accumulate a claim over so much resources as to skew the priorities of a society. This is the flip side of a favorite libertarian or conservative economic argument, that government spending "crowds out" private sector spending (this was even being said during the depths of the recession and ongoing recovery, when it was clear that there were so many unemployed resources - both workers and factories - and probably because business interests are jealous about their control over the economy and do not want the government involved, even at the sake of peoples' lives, because they fear it would be a challenge to their legitimacy in dictating policy for the rest of us).

On the flip side, there is also a good argument to be made that the wealthy can, and do, make a good contribution to society in terms of managerial competence and vision - certainly this is an argument that Ayn Randites are fond of. Management is a skill that not everybody can manage, like any other, and it seems necessary for society.

What I think is absurd, however, is to categorically state (as most all conservatives do) that only the condition of having personal wealth makes you an expert on the matter. Even more, they argue only those who are promoting private capital accumulation and demoting democratic wealth transfers are justified to talk about society's wealth management, because they presuppose that private capital accumulation is either the most valuable foundation, or one of the most important ones, of a society (not a democratic one, surely), rather than some other good like not having profit sharing so that peoples' inputs into production are commensurate with their personal rewards. Many people do very hard work but are effectively locked out of profit sharing; they are locked out of the capital accumulation fast-track by an inability or unwillingness to engage in the shenanigans that let the wealthy make "money from nothing." A strange theme in Ayn Rand's works illustrates the lack of clear thinking on this point; she has one of her heroes (Rourke, I think) working in a quarry for a while while hoping to get some architectural work, so she wants to draw a parallel or even a connection between personal toil and managerial competence, but in fact there are many people doing irreplaceable work (some of it physical, some intellectual) that is not going to result in them getting an offer from an angel investor (nor will they be rewarded for raping her later, as in Rand's work, at the risk of introducing an ad hominem attack here), or being promoted to the top of the firm because they have "good work ethic."

Although having grunt work is a necessary condition for having a successful product or business, and having managerial competence is a necessary condition for having a successful product or business, the first group is not often rewarded at a level commensurate with their personal risk into the success of the product, and management is often rewarded seemingly out of proportion. A problem for any person wishing to tackle this problem, however, is the "scarcity of good inputs" argument. You often hear banks claim that they need to be able to offer outrageous pay packages, as if there aren't governments being headed right now by technocrats who could head any bank in the world and yet are giving back their meager salaries, and also as if the world-class researcher who develops a new type of foo that sets the company apart from all the rest is worth only as much to the company as any number of middle-level suits could take the place of those who are currently running the company. I will not say that there is a provable general trend here - this is just a counter-example to the "only managment counts" assumption that seems to prevail quite often. An even better example is the employee who "accidentally" creates a world-class foo, and because of his or her current low standing is not going to see a sizable bonus for their work, because to this the conservatives will not get away with saying that the company will always reward the world-class researcher in line with his or her potential. When you are small fry in this hierarchical system, the level of your input is not tied to your renumeration, and that's a simple fact.

The wealthy have many dodges to exploit here. One is the total structure of the institution of modern business: the NDA, the forced assignment of patents, the no-competition clause, and the otherwise legally coercive contracts which state in so many words that what the researcher "learned" at the company (no matter that he or she could have developed it anywhere) will have to die with the company (or at least in a fire sale of its assets). So this is an artificial way in which the wealthy accumulate the appearance of legitimacy through accumulation of other peoples' assets. That the company represents the immediate salary interests of a large group of workers is no guarantee that the system is just, because most of those workers may be similarly under the thumb of management for any number of reasons. Ayn Rand, as I said before, would prefer not to contemplate that the researcher (or engineer, or architect) and the management could be different functions embodied wholly in different people. It was a lot simpler, and a lot of the appearance of inequality avoided, if she merely assumed that the management would of course be dirtying its hands. No J.P. Morgans (rest his bones!) or elderly Carnegies as heroes in her books. Even separating her uncritical adulation of the male macho man from the better conservative arguments, however, we still see some of the same basic problems.

[Drum]

The reason wealth disparities get larger over time is because of compound interest.

Averaged out over time, an economy grows in a linear way, however compound interest grows exponentially. At first, the nature of compound interest works extremely well to make an economy flourish, but once interest growth starts exceeding the ability of an economy to create wealth in real terms (which is now the case in USA, EU and Japan), more and more money will gravitate towards the few people who already have an extremely large capital base. This continues until things get so bad that the entire system is reset by some unpleasant means (such as monetary reform, default, government expropriation, revolution or war).

Compound interest is inherently unsustainable and flawed, and this is also the reason Christianity and Islam forbid the collection of interest.

One way to counter this problem would be to design a different type of money that diminishes in value, if it is not put to use (essentially negative interest). This would be a way to limit capital accumulation and keep liquidity in the market.

This is kind of what I was getting at, but that's only part of the reason for adopting it. Money that diminishes in value is, in my opinion, a fantastic idea - but it's not one that people with a lot of money, or people who want to make a lot of money, would care for - they'd just invest in money that didn't diminish in value, or in things like property. So it needs something else to build confidence in it beyond its general supposed benefits.
http://en.wikipedia.org/wiki/Freigeld
It's an interesting idea, but it's also maddeningly hard for people who aren't predisposed towards the idea to get their heads around, despite it being fairly straightforward, which can result in some irritating misunderstandings. It's very much a sideways-on solution.

[Ed Oscuro]

Money that diminishes in value is, in my opinion, a fantastic idea

This is just old-fashioned inflation.

http://en.wikipedia.org/wiki/Freigeld
It's an interesting idea, but it's also maddeningly hard for people who aren't predisposed towards the idea to get their heads around, despite it being fairly straightforward, which can result in some irritating misunderstandings. It's very much a sideways-on solution.

I think that Gesell's proposal to make money stable would actually be more likely to be taken up by those who want to keep the purchasing power of their money stable, i.e., the wealthy. One hears a lot of conservative or libertarians complain about monetary expansions and inflation "stealing" the purchasing power of their money. Gesell's system seems to have a significant downside in that it assumes that the purchasing power of money is assumed to be the policy goal, rather than avoiding crises with fiscal targeting (which is what Gesell really wanted).

I realize that is not at all what Gesell intended, but I am having trouble seeing how that proposal alone out of his system would have the intended consequences (or how his total system would avoid it, for that matter, though as you point out I don't understand it totally).

[Drum]

Money that diminishes in value is, in my opinion, a fantastic idea

This is just old-fashioned inflation.

Not necessarily. It (obviously, I'd have hoped) depends on implementation. Freigeld, running with the example, is inflation-stable.

rather than avoiding crises with fiscal targeting

One has not much to do with the other. There's nothing about Freigeld that doesn't permit this - further, the idea is that crises would be less common and severe (speculative).
This is all pretty fringe stuff tho.

[Blackbird]

I think a lot of people would have trouble wrapping their heads around the idea of money with depreciating value.

"What do you mean my money loses half it's value as soon as I walk out of the bank!?"

BONUS GET:

Selling RARE, NEW-SEALED Monies, mint condition! L@@k!

I'm exaggerating for comedic effect here, but it does sound pretty crazy until you think about it.

[Ed Oscuro]

Money that diminishes in value is, in my opinion, a fantastic idea

This is just old-fashioned inflation.

Not necessarily. It (obviously, I'd have hoped) depends on implementation. Freigeld, running with the example, is inflation-stable.

I'm not following you - are you saying inflation is good or bad?

Most economists today recognize that inflation is a good thing, when controlled. So if you're going to say "zero inflation!" I'll just laugh. Inflation carries an incentive to keep spending money. Too much inflation is bad, but zero or negative rates of inflation (deflation) can be worse for production and a recovery. (Theoretically, I don't think low or negative inflation is a requirement for getting stuck in a liquidity trap, but it won't help.)

When I say "this is just old-fashioned inflation," I also mean that it can be thought of as that simple. Slapping on policy constraints willy-nilly without really saying what purpose it serves just makes a system more cumbersome and less flexible.

That said, the Fed's interest rate or inflation seems to essentially follow the Freigeld principle, except instead of targeting zero inflation, they promote various policies (interest rates, inflation - of course the federal funds rate via t-bills is their main method).

rather than avoiding crises with fiscal targeting

One has not much to do with the other. There's nothing about Freigeld that doesn't permit this - further, the idea is that crises would be less common and severe (speculative).
This is all pretty fringe stuff tho.

See above: In some non-hypothetical situations (i.e. the current recovery) it is pretty much a given that zero inflation is going to run counter to good recovery policy.

Anyway, if we want to talk about fringe economics, I'd rather talk about MMT than this. I think Silvio Gesell deserves a lot of credit for starting the debate and I wasn't aware of his contributions until this discussion. However, I think the debate has moved on from zero inflation targeting.

[xbl0x180]

People who buy into the notion of the "gold standard"... do they believe in zero inflation? I never understood the use of gold to begin with since I can't think of its practical usage other than gold fillings/teeth

[Ed Oscuro]

They believe that gold inherently has value (rather than value being a social construct) and they tend to believe that gold is always present in a fixed quantity (so no gold mining asteroids or whatever). Gold does have a fixed value suggested by its industrial uses, but that's a tiny fraction of its current market value.

The funny thing about gold is that, even if you're not using it as a coin (very bad idea because it rubs away), the Goldfinger type of scenario still applies. Tying wealth to something that physical strikes me as risky.

Something that I've never been able to understand are all these "gold is at an all-time high! sell ur golds now!" ads I see. Maybe they lowball the hell outta people selling their gold?

[xbl0x180]

Yeah, that's what I was getting at: people tying value to plain rarity rather than wide usage. I'd rather put my money on technology that can desalinate/purify water at half the energy usage than on gold because there's a need for it - people die from lack of water, people don't die from a lack of gold (except girls looking to get married)

[BryanM]

People who buy into the notion of the "gold standard"... do they believe in zero inflation? I never understood the use of gold to begin with since I can't think of its practical usage other than gold fillings/teeth

I have a lot of arguments with crazies about this on the bb.com forums. There's always some guy who makes a post in support of it. Every day. Always. Do you know how many times I've read the "a blah of gold bought a fine robe in rome, a blah of gold buys you a fine suit today, therefore gold always has one specific intrinsic value, forever!" meme. So many times.

I just mock them by telling them canned food n' guns will be more useful when the apocalypse comes, and if you're going to invest in anything silly, go for silver and kosher salts. Which, in theory, might help you fight off the star wraiths when they descend.

A gold brick? You chuck that at Dracula's head, and he just gets pissed off.

You can believe what you want. But most people who suddenly come into money will quickly choose to become like those who have it a while.

A lot of NBA players go ass-broke because they have so many family members and friends back home, who live in less than wonderful conditions. Damn empathy, that shit will kill you~