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Why the Rich Are So Much Richer
31–40 of 62 posts
Re: Why the Rich Are So Much Richer
#32As proposed by Thomas Piketty in Capital in the 21st Century, when "r > g" (where r = return on capital and g = rate of economic growth) the rich (those with capital) get richer.
Apart from between 1930 and 1975 (which Piketty suggests were unique circumstances due to WW2) r has generally been greater than g.
Re: Why the Rich Are So Much Richer
#33Some good points in the article, but I am not sure I agree with all of its conclusions. CEO pay is going through the roof because of a ratcheting-up effect that has been going for years. The board brings a consultant to evaluate the CEOs pay. Said consultant is in tight with board, and is looking for their next consulting gig. Not a chance they are going to recommend a significant cut, or a performance plan that is a…
I would basically like to see stock options eliminated. If you want shares of company, you need to buy it just like everybody else. With your taxed income. This makes decisions to buy stocks much harder, and it will really show you're putting money where your mouth.
The idea behind stock option grants was to tie CEO's pay to the company's performance.Good idea, but It is not quite working out because CEOs are primarily interested in pumping up the stock price short-term, rather than in long-term health of the company.
The vesting period should be spread over 5 years or so. I would also grade company's performance relative to its peers/competitors/industry, not on just the stock price growth, which may be caused by other factors (like the Fed inflating markets through ZIRP).
Re: Why the Rich Are So Much Richer
#34"... the policies that shaped the US in the postwar era: high marginal tax rates on the rich and meaningful investment in public infrastructure, education, and technology." This is interesting in the context of the current GOP race in the States, where the candidates continually speak about how America has become weak compared to what it was in the past. It seems these kinds of policies contributed to making it stron…
When the GOP candidates are talking about "making America strong again" they are primarily talking about foreign policy, not domestic. American foreign policy under Obama has been haphazard at best, frequently angering allies and ignoring threats. They're focusing on that.
Re: Why the Rich Are So Much Richer
#35Two words: compound interest. To those that have much, much accrues. In the absence of redistributive taxes, societies become unequal because math.
Re: Why the Rich Are So Much Richer
#36"So an unequal economy is less robust, productive, and stable than it otherwise would be."
Given this is true and Stiglitz is correct, the inverse may also be true: An economy that is less robust, less productive and less stable becomes more unequal. This would create a positive feedback loop, which may seem dismal. However if thats the case then strategies and actions that break the loop by improving robustness, productivity, and stability of the economies of individuals, groups and organizations may prove effective. Examples include skills training to become more robust, infrastructure investments to improve productivity, and orienting choices to improve stability could be implemented from the individual up to global scale. Simple redistribution may prove less effective.
Re: Why the Rich Are So Much Richer
#37Earlier quoted context omitted.
I find it hard to believe that there are 2 orders of magnitude more goods and services being bought and sold in the economy that 25 years ago. Rather, the complexity of financial instruments is the one that has gone up and up, but there's not that much more real wealth to back it up. If that is the case, the short answer would be "because of inflation".
Asset prices have gone up 2 orders of magnitude; real inflation for "real" things (not financial instruments) hasn't gone up as much (80% or so). In part this is because profits have been up, therefore equities are up. Profits are up because companies aren't investing in the real economy as much since the 2008 crash. As to whether this is sustainable... PE ratios are trending higher but no where near the dot-com era…
You also have to factor in QE. Low interest rates make bonds considerably less attractive, so a lot of the money that used to be in bonds has moved into the stock market chasing returns high enough to cover inflation.
Re: Why the Rich Are So Much Richer
#38Some good points in the article, but I am not sure I agree with all of its conclusions. CEO pay is going through the roof because of a ratcheting-up effect that has been going for years. The board brings a consultant to evaluate the CEOs pay. Said consultant is in tight with board, and is looking for their next consulting gig. Not a chance they are going to recommend a significant cut, or a performance plan that is a…
>I'd like to see CEOs treated like true investors. Want to make 50 million if the company does well? Cool. Company loses money? You owe $60 million.
I'd like to see people not worry about what other people get paid. Unless you're a shareholder, what difference does it make? It's not your money.
Re: Why the Rich Are So Much Richer
#39Some good points in the article, but I am not sure I agree with all of its conclusions. CEO pay is going through the roof because of a ratcheting-up effect that has been going for years. The board brings a consultant to evaluate the CEOs pay. Said consultant is in tight with board, and is looking for their next consulting gig. Not a chance they are going to recommend a significant cut, or a performance plan that is a…
>I'd like to see CEOs treated like true investors. Want to make 50 million if the company does well? Cool. Company loses money? You owe $60 million. I'd like to see people not worry about what other people get paid. Unless you're a shareholder, what difference does it make? It's not your money.
It makes a difference when someone is paid several orders of magnitude more than others in the company because it massively increases inequality, which affects everyone.
Re: Why the Rich Are So Much Richer
#40Earlier quoted context omitted.
>I'd like to see CEOs treated like true investors. Want to make 50 million if the company does well? Cool. Company loses money? You owe $60 million. I'd like to see people not worry about what other people get paid. Unless you're a shareholder, what difference does it make? It's not your money.
It makes a difference when someone is paid several orders of magnitude more than others in the company because it massively increases inequality, which affects everyone.
How?