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%

#121

Post by _delirium » Thu, Aug 04, 2011, 9:37 AM UTC

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

I've only looked at the top 50 on that list so far, but it looks like only 20 are self-made entrepreneurs outside finance (13 in tech, 7 in other areas). 30 made their money either through inheritance or finance, or some combination (like inheritance+investment).

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

#122

Post by lucasjung » Thu, Aug 04, 2011, 9:49 AM UTC

danenania wrote: post #49

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…

Yep, fiat money systems are at the core of modern wealth inequality. Regulations and other measures will have little impact until we address this. Bailouts, taxes, budgets, deficits, regulations: none of it has much relative quantitative significance when the Fed is doling out many trillions behind the scenes. This money directly benefits the very wealthiest and regressively dilutes the rest on a scale that vastly ex…

It's funny that you say this, because prior to the adoption of fiat money systems, class-warfare leaders agitated for decades (centuries, even?) in favor of a system of fiat money, because they saw fiat money as a way to reduce wealth inequality. The logic goes like this:

1: In general, poor people borrow money from rich people. Interest payments on these loans is a transfer of wealth from the poor to the rich: an increase in debt inequality.

2: Fiat money is much more subject to inflation than commodity money.

3: When inflation occurs, the real value of debts is reduced.

4: By adopting fiat money and the accompanying continuous inflation, a situation would be created whereby poor people could borrow money from the rich, use it to create wealth for themselves, and then effectively pay back less than they had borrowed.

I'm not saying they were right, I'm just describing their ideas. I find the whole situation ironic.

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

#123

Post by djm » Thu, Aug 04, 2011, 9:58 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…

Agreed. Inflation amounts to stealing from people with savings.

I haven't read the book you linked to yet but I just wanted to chime in and reference another great little book "How and economy grows and why it crashes" by Peter & Andrew Schiff. It's an extremely readable cartoon book that explains recent American economic history in a comic fashion and shows the differences between keynesian and austrian thinking on the subject.

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

#124

Post by djm » Thu, Aug 04, 2011, 10:05 AM UTC

trunnell wrote: post #104

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…

This misses the point of the article, which is that many in the top 0.1% got there from some form of self-dealing. His argument is that they are profiting from their position in the economy rather than from the value they add. And by position, he doesn't mean nearness to the money press. I think he means nearness to the center of wealth and power, which at the moment happens to be the financial industry. > This is wh…

I understand the reasoning that the fed & equivalents in other countries are supposed to manage the money supply as a smoothing function in booms and busts. I have never managed to accept though that the decision making of a committee can outperform the decision making of the market itself.

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

#125

Post by chopsueyar » Thu, Aug 04, 2011, 10:12 AM UTC

trunnell wrote: post #104

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…

This misses the point of the article, which is that many in the top 0.1% got there from some form of self-dealing. His argument is that they are profiting from their position in the economy rather than from the value they add. And by position, he doesn't mean nearness to the money press. I think he means nearness to the center of wealth and power, which at the moment happens to be the financial industry. > This is wh…

You say "in direct contradiction to the last 80 years of economic thought", but we have not been off of gold and on fiat for that long, more like 40 years IIRC.

Even the swiss franc was pegged to gold until 2000. The Fed is getting pretty limited to what it can do by lowering rates.

With only 6% more unemployment, we would be at 1870s levels (completely unmanageable)?

Calling it counterfeiting is a bit extreme, though.

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

#126

Post by shalinmangar » Thu, Aug 04, 2011, 10:15 AM UTC

marcamillion wrote: post #106

Astrohacker wrote: post #98

Earlier quoted context omitted.

> However, that being said, you make it sound as if those banks are lending/giving that money to rich Saudi princes who squander it. They are not. They are lending it to entrepreneurs that have built a business to X point that want to expand. Banks create 80% of the money and declare themselves owner of it, which they then loan out. There is nothing wrong with loaning money. But there is something very wrong with cre…

At this point now, based on your replies, I can only assume you are trolling so I will ignore the first 2 responses and reply the to third and fourth. >Nope. It very much is because bankers wanted to get rich. The Federal Reserve was designed by bankers. Other central banks are designed by bankers. Governments go along with it because they get to benefit from the inflation just like the bankers. Are you a techie? Do…

>If that's the case, why has inflation been so low in the US in the last two years, when the Fed undertook the largest expansion of it's balance sheet in modern history? i.e. it has printed more money recently, than at any other time in it's mandate - but inflation AND inflation expectations are still low.

That is because all that inflation has been exported to other countries. There are economies who have bet their growth on exports and depend on a strong dollar.

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

#127

Post by chopsueyar » Thu, Aug 04, 2011, 10:20 AM UTC

marcamillion wrote: post #108

daemin wrote: post #97

Earlier quoted context omitted.

I have been wondering about this and you may be the person to answer it. My thought is that inflation only occurs when the increase in money supply is greater than the increase in wealth generated in the economy. So if an economies' wealth increases at 5% a year and so does the money supply then there's no inflation. Have I got this right or even close to the mark?

This is an interesting way to put it, but I must admit I am not sure. The issue I have with this definition is that wealth can be generated even without new money being created - we are seeing it in Silicon Valley at the moment, where vast amounts of wealth are created largely on the back of old money being recycled. Strictly speaking, inflation occurs when more money chases the same assets - so the prices of those a…

I have a friend who scraps metal (steel, copper, aluminum). He has the best gauge on inflation of anyone I know.

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

#128

Post by econgeeker » Thu, Aug 04, 2011, 10:49 AM UTC

chopsueyar wrote: post #125

trunnell wrote: post #104

Earlier quoted context omitted.

This misses the point of the article, which is that many in the top 0.1% got there from some form of self-dealing. His argument is that they are profiting from their position in the economy rather than from the value they add. And by position, he doesn't mean nearness to the money press. I think he means nearness to the center of wealth and power, which at the moment happens to be the financial industry. > This is wh…

You say "in direct contradiction to the last 80 years of economic thought", but we have not been off of gold and on fiat for that long, more like 40 years IIRC. Even the swiss franc was pegged to gold until 2000. The Fed is getting pretty limited to what it can do by lowering rates. With only 6% more unemployment, we would be at 1870s levels (completely unmanageable)? Calling it counterfeiting is a bit extreme, thoug…

Gold was criminalized for use in transactions in 1933 by executive order. I think that's a fair point to mark the end of the "gold standard" and the beginning of the fiat era. It is true the US government would redeem dollars for gold for foreign countries up to 1970 or so, under Nixon... but indie the USA, it was a crime to use gold as money. (Though jewelry was allowed) up until the 1970s.

He's using the term "counterfeiting" in the economic sense.

One of the things that makes something money in economics is that it is difficult to duplicate, so you can't just make more of it for yourself. Fiat currency doesn't have that restraint. So, we can say it is not money, or we can say that it is being counterfeited. This is not a word chosen for its alarm value, though it should make you alarmed.

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

#129

Post by CaptainDecisive » Thu, Aug 04, 2011, 10:50 AM UTC

keeptrying wrote: post #86

potatolicious wrote: post #42

Earlier quoted context omitted.

Echoing what rayiner said - where are the rich going to go? Europe is less friendly to the rich - extremely so in the most pleasant of places. China? India? Neither are very pleasant places, and even with truckloads of cash has a hard time competing with the quality of life enjoyed in the US even under onerous taxation. I think you're not giving enough credit to the American quality of life - it's why my family immig…

I dont think your right. I've been in Bangalore for 2 months and its hard to decide where I have a better quality of life. Here I can rent a brand new 3 bedroom with gym and swimming pool for $400. Driver for $200 a month. Hospitals are cheaper and about as well equipped. You get all channels including HBO for $5 a month. Savings rate in a CD is 10%. With the rampant unemployment in the US - I cant see why you would…

Remember we're talking about the top 1% or 0.1% of the population here. The unemployment rate simply doesn't enter their quality of life equation. But quality of life is a big deal for rich people.

There are a number of surveys (Mercer, Economist, International Living etc) that rank countries according to quality of life factors and it's always the same places at the top of the list: Western Europe, Australia and New Zealand, North America, maybe Singapore and Japan. These are all, unsuprisingly, expensive places to live.

Wealthy people immigrating is a global phenomenon too; a few months ago there was a spate of news articles regarding rich Chinese looking to get out of China due to the low quality of life (eg http://www.time.com/time/world/article/0,8599,2077139,00.htm...).

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

#130

Post by econgeeker » Thu, Aug 04, 2011, 11:02 AM UTC

_delirium wrote: post #115

philiphodgen wrote: post #61

Earlier quoted context omitted.

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.

The total number for 2009 was 743, though, which is pretty small peanuts by the scale of the U.S. economy. It's not even large as a proportion of very-rich people.

That's the number of people who renounced. And that number is going up dramatically, and I've heard that the published figures for renouncement are way under-reported. (as in here are lawyers who have more clients who have renounced than the government claims renounced in total.) But on both sides these are just claims.

The number of people who simply moved their butts and their assets overseas is much higher. You can tell this is the case because the administration has been saber rattling for the last four years, and starting to work their way into currency controls.

Did you know, in order to renounce, you have to get the permission of the government? They charge an exit tax too for your funds. This is a currency control and it is one of the things that marked the soviet union as a bad regime. If you can't move your money in and out of a country, then you're not likely to invest in that country.

I'm not very rich, and I will renounce as soon as my second citizenship gets in. It will be easier for me because, not being very rich yet, I will be more likely to get permission of the government to give up my citizenship.