Who Rules America: An Investment Manager's View on the Top 1% • Hacker News Board

Re: Who Rules America: An Investment Manager's View on the Top 1%

#61

Post by philiphodgen » Thu, Aug 04, 2011, 4:57 AM UTC

lionhearted wrote: post #35

arjunnarayan wrote: post #4

There's a pretty simple solution: Abolish the capital gains tax, and tax all capital gains at the income tax rate. There is no more "capital gain". Only income. Whether your income was earned through labor or rents on capital that you own seems rather irrelevant to me.

Let's think about secondary effects. What percent of very wealthy Americans do you think would renounce their citizenship based on this? How much less investment capital would there be in the USA based on that? Note: Not asking for a value judgment ("good riddance if they do!" - not productive). Just your estimate as to what percent of wealthy Americans would give up their citizenship and how much less investment cap…

For those of you responding skeptically to Lionhearted's question, I'm in the business of helping these people exit the United States. At any given point I have four or five of these cases going.

They go everywhere.

Their money goes with them.

Re: Who Rules America: An Investment Manager's View on the Top 1%

#62

Post by forensic » Thu, Aug 04, 2011, 5:01 AM UTC

eternal_skeptic wrote: post #55

Astrohacker wrote: post #43

It makes perfect sense that most people in the top 0.1% are associated with the financial and banking industries if you know how banks work. Banks, and the Federal Reserve, create new money. They give this money to themselves, and then loan it out. This is as bad as, and effectively equivalent to, counterfeiting. Creating new money, i.e. counterfeiting, i.e. inflation, does not create new wealth. It merely changes th…

You say "Banks, and the Federal Reserve, create new money". That is factually untrue: only the Federal Reserve can legally create new money in the US. Since you mentioned it by name, you are definitely talking about the US, but the same state holds in virtually all developed countries as well: one designated "central bank" entity creates money, the others don't. Per your main point, yes, the central bank creates mone…

Banks do create money using the fractional reserve system. The majority of money in the economy was created by banks other than the Federal Reserve. This is a simple fact. They also create money through loans, mainly mortgages. They loan out money they don't actually have, which is the same as issuing money. Since this behaviour carries systemic risk, they are protected by the FDIC -- the taxpayers.

Re: Who Rules America: An Investment Manager's View on the Top 1%

#63

Post by shawndrost » Thu, Aug 04, 2011, 5:02 AM UTC

Astrohacker wrote: post #43

It makes perfect sense that most people in the top 0.1% are associated with the financial and banking industries if you know how banks work. Banks, and the Federal Reserve, create new money. They give this money to themselves, and then loan it out. This is as bad as, and effectively equivalent to, counterfeiting. Creating new money, i.e. counterfeiting, i.e. inflation, does not create new wealth. It merely changes th…

"counterfeiting... stealing... scams..."

"For some reason this subject is very polarized."

Baffling!

Re: Who Rules America: An Investment Manager's View on the Top 1%

#64

Post by zedpm » Thu, Aug 04, 2011, 5:02 AM UTC

eternal_skeptic wrote: post #55

Astrohacker wrote: post #43

It makes perfect sense that most people in the top 0.1% are associated with the financial and banking industries if you know how banks work. Banks, and the Federal Reserve, create new money. They give this money to themselves, and then loan it out. This is as bad as, and effectively equivalent to, counterfeiting. Creating new money, i.e. counterfeiting, i.e. inflation, does not create new wealth. It merely changes th…

You say "Banks, and the Federal Reserve, create new money". That is factually untrue: only the Federal Reserve can legally create new money in the US. Since you mentioned it by name, you are definitely talking about the US, but the same state holds in virtually all developed countries as well: one designated "central bank" entity creates money, the others don't. Per your main point, yes, the central bank creates mone…

You can argue about what constitutes "giving money" vs. loaning money, but in certain cases there has been very little difference. Take the "loans" made available to the top .1% via TALF. Matt Taibbi describes the non-recourse loans handed out the wealthy and well-connected in this piece: http://www.rollingstone.com/politics/news/the-real-housewive... .

Re: Who Rules America: An Investment Manager's View on the Top 1%

#65

Post by rmason » Thu, Aug 04, 2011, 5:03 AM UTC

tedkimble wrote: post #52

rmason wrote: post #21

Take a good look at the Forbes 400. The vast majority of them are entrepreneurs and though a sizeable number made their money from the financial industry it's no where near a majority - not even close. http://www.forbes.com/wealth/forbes-400/list

What's your point? The author is talking about the top 0.5%, or even just the top 0.1%. The Forbes 400 represents the top 0.0000132%. Sure, maybe entrepreneurs are the majority in that group, but don't trick yourself into thinking the other 1.5 million in the top 0.5% are too.

We don't have the Forbes 4 million to view. But for every Zuckerberg on that list there are more than a few members of that 0.1% from members companies on that list.

I am not doubting that the financial industry influence is quite concentrated compared to others, but I am not convinced he's totally proven his case. Maybe the firm he represents has an outsized proportion of financial people as their clients.

Re: Who Rules America: An Investment Manager's View on the Top 1%

#66

Post by swampthing » Thu, Aug 04, 2011, 5:05 AM UTC

Astrohacker wrote: post #60

eternal_skeptic wrote: post #55

Earlier quoted context omitted.

You say "Banks, and the Federal Reserve, create new money". That is factually untrue: only the Federal Reserve can legally create new money in the US. Since you mentioned it by name, you are definitely talking about the US, but the same state holds in virtually all developed countries as well: one designated "central bank" entity creates money, the others don't. Per your main point, yes, the central bank creates mone…

Here's how banks counterfeit money. You deposit $100. The bank loans out $80 of your money to someone else. They put that money back in the bank. The bank now has $100 - all your money. But your checking account says $100, and the loanee's checking account says $80, for a total of $180. The bank has now effectively created--that is, counterfeited--$80 in new money. They gave this new money to themselves, and then loa…

... except unlike with counterfeiting, when all is said and done (all debts paid and all bank balances withdrawn), the total amount of US dollars in this closed system you describe will still be $100. You are ignoring the balance sheet of the second person (the one the bank lent $80 to) and only looking at that of the bank and the initial depositor.

Edit: Wow really, someone downvoted this?

Re: Who Rules America: An Investment Manager's View on the Top 1%

#67

Post by forensic » Thu, Aug 04, 2011, 5:05 AM UTC

recampbell wrote: post #57

Regarding those who will only bring home 15k per month post retirement: "And, for those folks who made enough to accumulate this much wealth during their working years, the reduction in income and lifestyle during retirement can be stressful." This is where I started laughing out loud! What a profound lack of perspective.

If you're unable to identify with those people, then you lack perspective as well.

Having perspective includes the perspectives of the top 1% as well as the perspectives as the bottom 99%.

Re: Who Rules America: An Investment Manager's View on the Top 1%

#68

Post by webXL » Thu, Aug 04, 2011, 5:07 AM UTC

Astrohacker wrote: post #43

It makes perfect sense that most people in the top 0.1% are associated with the financial and banking industries if you know how banks work. Banks, and the Federal Reserve, create new money. They give this money to themselves, and then loan it out. This is as bad as, and effectively equivalent to, counterfeiting. Creating new money, i.e. counterfeiting, i.e. inflation, does not create new wealth. It merely changes th…

As much as I favor low taxation and hate class warfare attacks on the wealthy, I think we ought to tax "freshly printed money" at a much higher rate, or figure out a more equitable way to create money... if we have to create money. Our financial system (the one created and regulated by the U.S. Federal Government) is so corrupt, as evident by TARP and the lack of lending and recovery. The only way its gonna change is if the dollar stops acting as the world's reserve currency, i.e. collapses. Only then do I think we have a chance of replacing it with something better. Don't hold your breath. The rest of the world is just as corrupt and financially unhealthy, so the dollar will remain superior.

Edit: Oh come on, why the downvote?

Re: Who Rules America: An Investment Manager's View on the Top 1%

#69

Post by eternal_skeptic » Thu, Aug 04, 2011, 5:10 AM UTC

Astrohacker wrote: post #60

eternal_skeptic wrote: post #55

Earlier quoted context omitted.

You say "Banks, and the Federal Reserve, create new money". That is factually untrue: only the Federal Reserve can legally create new money in the US. Since you mentioned it by name, you are definitely talking about the US, but the same state holds in virtually all developed countries as well: one designated "central bank" entity creates money, the others don't. Per your main point, yes, the central bank creates mone…

Here's how banks counterfeit money. You deposit $100. The bank loans out $80 of your money to someone else. They put that money back in the bank. The bank now has $100 - all your money. But your checking account says $100, and the loanee's checking account says $80, for a total of $180. The bank has now effectively created--that is, counterfeited--$80 in new money. They gave this new money to themselves, and then loa…

So you're calling fractional reserve banking "counterfeiting". I assume you oppose it.

Let's analyze your argument. Fractional lending doesn't particularly benefit the rich. A lot (IIRC, the vast majority) of the current millionaires in the US are 1st generation. They got their money in their lifetime. The vast majority therefore required a loan at some point, to fund their money-making venture. Even the evil financiers in virtually all cases get rich by leveraged (i.e. loan-fueled) investments.

So at least for those people who are able to help successful businesses - by creating, funding, or helping them in any way - fractional lending is a good thing. The vast majority, or at least a substantial number, of poor people who are now rich were able to do so because at some point, they received a loan of money that fractional reserve banking made more readily available.

You can still ban fractional lending, pulling the financial system back 500 or so. By doing that, you will get all the effects of the system that existed at that time: limited money supply, reduced lending, limited allocation of funds and investment to grow businesses, therefore stunted growth, less innovation, reduced social mobility, etc, etc.

Are you sure that's what you want? Because you haven't explained why fractional lending is bad yet, so it seems like we'll be sacrificing an awful lot for unclear benefit.

In all seriousness, a community focused on creating new businesses is the last place I'd expect to see fractional lending attacked so severely.

Edit: phrasing.

Re: Who Rules America: An Investment Manager's View on the Top 1%

#70

Post by danenania » Thu, Aug 04, 2011, 5:11 AM UTC

recampbell wrote: post #57

Regarding those who will only bring home 15k per month post retirement: "And, for those folks who made enough to accumulate this much wealth during their working years, the reduction in income and lifestyle during retirement can be stressful." This is where I started laughing out loud! What a profound lack of perspective.

Sounds like simply an observed fact to me. He didn't say he felt sorry for them, just that it causes them stress. The point was that these people aren't beyond financial worry.