Tag Archive for wealth

Billionaires Smell Like Fear

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Bloomberg News, often the mouthpiece of the elite, is revealing the soreness of .01% at the nascent excoriation movement dishonoring their special place in society as “job creators”. How dare we not be grateful for their large(ne)ss?

Read this. It’s stunning how bizarrely out of touch these folks are even when making deliberate statements to the press.

One example:

[John] Paulson, the New York hedge-fund manager who became a billionaire by betting against the U.S. housing market, has also said the rich benefit society.

This is actually pretty good reporting, but not as explicit as it should be. Paulson made money off of mass suffering and loss. It’s not a judgment, it’s a statement of fact.

Then there’s this:

Attacking the banking system is a mistake because it contributes to “a healthier economy,” [Blackstone Group CEO Stephen Schwarzman] said in the interview.

I honestly don’t know if these guys believe this stuff. A banking system could contribute toward a healthier economy, but the banking system we have? Not so much.

“If I hear a politician use the term ‘paying your fair share’ one more time, I’m going to vomit,” said billionaire founder of Paychex, Tom Golisano.

Fairness makes them sick.

Then a thinly veiled threat:

“It’s simply a fact that pretty much all the private- sector jobs in America are created by the decisions of ‘the 1 percent’ to hire and invest,” [Delphi Financial Group founder Robert] Rosenkranz, 69, said in an e-mail. “Since their confidence in the future more than any other factor will drive those decisions, it makes little sense to undermine their confidence by vilifying them.”

Read: “If you attack us, you’ll get hurt worst and first.” You seriously couldn’t make this stuff up if you were making comic-book villains out of these elitists.

Really, the whole article is chock-full of this stuff. I’m not even picking favorites here.

Okay, just one more:

[Home Depot co-founder Bernard Marcus, who also co-founded the 1 Percenter public relations group Job Creators Alliance] said he isn’t worried that speaking out might make him a target of protesters. “Who gives a crap about some imbecile?” Marcus said. “Are you kidding me?”

Right. He doesn’t give a crap; he just started a PR firm to respond to it. Other than that one move, he shows no sign of being bothered by the nationwide protests.

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The Generational Wealth Gap

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There’s been a social storm of intergenerational conflict on the horizon for a long time. Some say it’s merely hype meant to undermine Social Security and Medicare; others believe it’s the likely battlefield of future class conflict. I think it’s somewhere in the middle, but new research suggests the real-world rupture may be more severe than most of us have feared. That doesn’t mean we’re headed for a war between the ages; it just means we should pay attention and try to avert one.

study released last week by Pew suggests there’s been a drastic shift in the intergenerational wealth gap. Under an economic system like capitalism, which permits the accumulation of wealth, it’s only “natural” that older generations would accumulate greater net worth. But these figures point to a serious shift in that ages-old paradigm.

Pew doesn’t put it so bluntly, but basically what we’re looking at is a significant transfer of wealth from young to old in a way atypical of human history.

chart of generational net worth by age group, comparing 1984 to 2009.

Make sure you take a good, long look at those figures. Occupy Wall Street folks clamoring about how the so-called 1% are the only ones to have gained as a class in recent decades might want to take note: Baby Boomers and older folks did better as a class, too. And they seemingly did it on the backs of younger generations. They’re not alchemists, so their wealth came from somewhere, and it’s no coincidence that younger generations have less relative to what their elders had when they were young. Make no mistake, the super-rich capitalist class did way better than the “elderly” class has done over these same years. But these findings are still alarming.

Pew produced few hard figures detailing what’s behind the shift. I suspect much if not most change in the gap can be accounted for by debt; mainly student loans and relatively new mortgages. The benefit of this widened predation disproportionately went to the ultra-rich, of course, but pretty much anyone with 401k or pension fund investments was likely gaining off the trend of more young people getting into more debt. (I do not have data on hand to back this up, so I’d love to hear if I’m wrong.)

During the period in question, elites among Baby Boomers and their parents, the so-called Greatest Generation, managed to undermine blue collar labor across North America, which forced more and more young people to seek college educations. These elites were meanwhile hurting their own age peers, but overall the impact was far greater on those who had little or no established wealth to speak of. They emerged with crippling debt that their degrees aren’t paying back so quickly, and now the white collar jobs and wages they were seeking are basically going the same way or aren’t as secure as promised. They bought homes to provide financial security, but a housing bubble stripped them of equity.

It has long been accepted that each generation is supposed to leave the following generation better off in every possible way; it’s supposed to be “the American way”. That trend has ended. Wealth has been shifted in the wrong direction, as has the burden.

In case the above isn’t staggering enough, look at this switcheroo.

poverty shifts from old to young over the decades

Now, the progressive line on this is that these figures are inaccurate/relatively meaningless and being spun as a case against Social Security and Medicare. (Actually, I haven’t seen much addressing the poverty factor illustrated above, but I’m talking about the more widely publicized Pew findings about net worth and income.)

Well, I’m certainly not trying to start an “intergenerational war” (talk about overhyping; folks, nobody said leftists don’t know how to use alarming language), and I’m certainly not against Social Security or Medicare, and I don’t fall for the bullshit conservative arguments against them. But that doesn’t mean these findings are not significant and illustrative of a real social problem.

My point in reporting and analyzing these figures is not to engender intergenerational animosity. I certainly don’t think this was a plot by the older generations. If anything, it represents the results of a values split that probably started during the early postwar era, when commercialism and an erosion of interpersonal class solidarity redefined what Americans care about. I’m not saying my generation has been or will be any different in this regard, which is to show a severe disregard for those coming up behind us.

I don’t even think older folks are aware of this apparent shift. More research needs to be done on it. But if it is as real as it seems (and as frankly logic dictates it would be), then it’s something that needs to be addressed along with pressing the 1%. Those in the more politically influential generations need to reverse the shift by investing accumulated wealth in younger generations. There doesn’t need to be a war; once the misplaced burden is identified, redistributing it fairly would be a way to alleviate any bubbling resentment.

photo by: Images_of_Money
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Linkage: Peak Oil, Symbolic Wealth, Class War, Externalities

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I’ve been very busy lately and thus haven’t been able to post even links to all the terrific stuff I’ve been reading. I’m trying to use Twitter and Google+ a little more to share links to stories, but as usual the temptation to comment somewhat substantively is very hard to resist. I hope you find some of these interesting!

Getting Sober on Peak Oil

I think a lot of folks on both sides of the the debate over the concept of peak oil are drunk with ideologism. So I really appreciate, and essentially agree with, James Hamilton’s sober take.

‘Symbolic Wealth’

I’m not a fan of the style of Charles Hugh Smith’s blog; I think his peculiar presentation — in design and rhetoric — undermines his credibility. But I can’t help agreeing with him a significant portion of the time. Here he exposes the fallacy of wealth and equity as it corresponds to the real world. Nothing groundbreaking, but if you’re new to economic philosophy, this is something a lot of PhD economists can’t seem to grasp… yetI bet you’ll get it intuitively.

No War Like Class War

Richard D. Wolff drops knowledge on the history of class conflict and consciousness in America. It ain’t what’s being presented in recent debates.

Republicans claim, in Orwellian fashion, that Obama’s millionaire tax is ‘class war’. The reality is that the super-rich won the war.

Pollute for America?

Karl Smith over at Modeled Behavior makes a case that we need to suck it up and get polluting if we hope to escape our economic woes to the extent they’re driven by low cheap-energy supply. I read a lot of economists from across the spectrum, and I appreciate those who acknowledge climate change and resource limits as scientific truths, even if they conclude we shouldn’t worry so much in the short term.

Now in the long run something has to be done, if for no other reason than fossil fuels are not forever. In the short run there are many who are concerned about pollution, both C02 and the groundwater pollution from new fracking techniques.

I do not argue that these aren’t serious concerns. I do not dispute the science of global warming or the clear evidence of burning water, from natural gas contamination.

However, there are things worse the pollution and we have them. We should take steps to mitigate the harm but our first duty should be to relieve suffering now where we can and lay the foundation for recovery in the immediate future.

I disagree completely, but it’s interesting. Karl incidentally does not show his math (seems to avoid it, in fact) in terms of demonstrating why he thinks opening protected reserves can affect the market.

Food Inc. Strikes Back

Agribusiness giants are fighting back against the Michael Pollans and Food, Incs of the new food movement. Food advocate Anna Lappé expplains why we definitely do not want the new U.S. Farmers & Ranchers Alliance influencing food policy debate in America. (And why you can count on them doing just that.)

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‘Financial Terrorism’ in America

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Wow. This powerful, data-heavy paper comes off pretty bombastic, and I admit I’ve only given it a cursory read, but I’ve spot-checked the sourcing, and it holds up better than a lot of this kind of stuff that I come across. I’ve never seen the source before — Amped Status — but I’ll be taking a deeper look at that, too. It has a kind of Alex Jones (crazy) vibe, but I think it may actually be rooted in sanity.

I wish I had time to do a more thorough analysis, but I do not, so I wanted to make sure I shared this. You should just go read it. But in case you need some inducement, here are a few zingers from the report.

  • According to most recent Census Bureau data, from 2005 – 2009, average US household wealth declined by 28%. This represents a loss of $27,000 per household. Currently, at least 62 million Americans, 20% of US households, have zero or negative net worth.
  • In 2005, 25.7 million Americans needed food stamps, currently 45.8 million people rely on them.
  • While 68.3 million Americans struggle to get enough food to eat and wages are declining for 90% of the population, US millionaire household wealth has reached an unprecedented level.

Via Nomi Prins on Twitter.

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The Coming Second Dip

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I don’t plan to spend a lot of time on this blog writing about acute economic scenarios like our likely double-dip Great Recession, as I have my eyes a good bit further down the road. But I’ve been seeing a lot lately about us being on the verge of that second dip. I don’t do analysis on this level, but I do pay attention to it, so I thought I’d share some. The stock market is beginning to bet on that second dip, which of course doesn’t help us avert one (if that’s remotely possible).

For a light listen, NPR is on the ball with “Double Dip: Is the U.S. Headed for Another Recession”.

So how much does this matter? This report from the Economic Policy Institute suggests the mere slow recovery is having a measurably negative impact:

[T]he last six months have seen an average growth rate of less than 1%, a rate of growth that fully explains why the previously declining unemployment rate reversed course in the past six months.

So imagine what another downturn would do.

For a slightly headier review of the prospects, check out Harvard economist Kenneth Rogoff’s analysis. He notes:

But the real problem is that the global economy is badly overleveraged, and there is no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression, or inflation.

Which of those sounds most enticing? (I know my choice, if I can’t have none of the above.)

For true long-game insights, never miss Jack Rasmus. On the impending “dip” (plunge?), and how it relates to the recent debt-ceiling “debate”, Jack’s take is cynical but probably very realistic:

No wonder the stock market shuddered on Monday, notwithstanding all the “good news” about the debt deal. The performance of the real economy was far more important and “real” than all the huff and puff about debt ceilings and defaults by the US government. The alleged “good news” of the debt agreement was overwhelmed by the undisputable “real news” that the real economy was heading for a relapse.

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