Money and wealth • Hacker News Board

Re: Money and wealth

#71

Post by gaius » Fri, Jan 10, 2014, 4:43 PM UTC

CJefferson wrote: post #37

jerf wrote: post #31

This is also why wealth redistribution works far less well than people who imagine it as money redistribution think it will. Part of the wealth is tied up in the owner, and that can't be redistributed without loss, sometimes great loss. Let's take a concrete example. Suppose that class warfare rhetoric utterly wins, and as its first scalp The People decide that the filthy rich Bill Gates needs to have 100% of his wea…

Bill Gates is a special case -- I would imagine the vast majority of stock (surely over 95%, maybe 99%) does not have value because of who owns it. Also, if the rich are sitting on wealth which loses values as soon as it is spent, perhaps quite a lot of the "wealth" was never really there in the first place? (although there we are perhaps getting into philosophy)

If there is a revolution, then all financial assets are worthless overnight, stocks, bonds, whatever. Even physical assets lose a lot of their value - a factory that can't get raw materials and can't get their product to retailers is worth a great deal less than an identical factory with identical workers that is a going concern.

Re: Money and wealth

#72

Post by oafitupa » Fri, Jan 10, 2014, 4:43 PM UTC

CJefferson wrote: post #37

jerf wrote: post #31

This is also why wealth redistribution works far less well than people who imagine it as money redistribution think it will. Part of the wealth is tied up in the owner, and that can't be redistributed without loss, sometimes great loss. Let's take a concrete example. Suppose that class warfare rhetoric utterly wins, and as its first scalp The People decide that the filthy rich Bill Gates needs to have 100% of his wea…

Bill Gates is a special case -- I would imagine the vast majority of stock (surely over 95%, maybe 99%) does not have value because of who owns it. Also, if the rich are sitting on wealth which loses values as soon as it is spent, perhaps quite a lot of the "wealth" was never really there in the first place? (although there we are perhaps getting into philosophy)

It was really there because it generated a lot of wealth, eg: Windows 8 (if you think it has any value heheh). In the hands of the poor, the company got destroyed and it won't produce any more windows.

Re: Money and wealth

#73

Post by apostate » Fri, Jan 10, 2014, 4:43 PM UTC

tomstokes wrote: post #10

The takeaway from this article is that hoarding cash is not a good store of wealth, and that the key to long-term wealth is to acquire net income generating assets. Great points for sure, but I strongly disagree with his assertions that saving up for retirement is ill-advised and that traditional investments (stocks, etc.) are too volatile and risky to be useful. He never explicitly gives any advice for acquiring net…

I'm glad to see someone advocating sensible retirement planning here. Though the post had a few good points about how to perceive wealth vs. money, I cringed at the notion that most stocks are "buy and pray" investments. Stocks have a better risk/return profile than just about any other asset class with a given 10+ year time window over the last century, assuming proper diversification. I should also point out that stocks, by definition, are ownership.

That being said, it is important to further diversify within a stock portfolio by having a good mix US, European, Emerging Market, small/mid/large cap, etc. As one nears retirement, risk can be reduced along with return by shifting into bonds. Again diversification is useful here. Have a good mix of both corporate and government, high quality, high yield, floating rate, inflation protected, etc.

Of course, developing a skill is a way to increase your wealth, as defined by the article, but diversified equity and fixed income holdings are a way to protect that wealth for a time when those skills are no longer relevant, whether it is by the slow erosion of time or a sudden unfortunate event.

Re: Money and wealth

#74

Post by a8da6b0c91d » Fri, Jan 10, 2014, 4:46 PM UTC

Cash is a hedge against deflation. Many vast fortunes have been made by people who held cash, rode deflation down, and then bought assets at the bottom. You want a substantial fraction of your portfolio as cash to hedge deflation, just as you want a fraction in hard assets to hedge stagflation. You of course want a fraction in income generating ventures and equities that do very well in an environment of growth, as advocated here, but failure to hedge the other two conditions has often proved ruinous.

We haven't had a serious bout with deflation in 80 years so people have grown overly biased against cash. We haven't had a serious bout with stagflation in 40 years. Historically, deflationary and stagflationary downturns have been common. All the points in the article are highly valid, but it seems to overlook these critical reasons to hold quite a bit of cash and hard assets.

Re: Money and wealth

#75

Post by ajcarpy2005 » Fri, Jan 10, 2014, 4:47 PM UTC

hooande wrote: post #63

jerf wrote: post #31

This is also why wealth redistribution works far less well than people who imagine it as money redistribution think it will. Part of the wealth is tied up in the owner, and that can't be redistributed without loss, sometimes great loss. Let's take a concrete example. Suppose that class warfare rhetoric utterly wins, and as its first scalp The People decide that the filthy rich Bill Gates needs to have 100% of his wea…

Following the logic of this post, you can't redistribute wealth , only money. ” The People” don't want to own companies, they want enough money to feed their families. The problem isn't that Bill Gates has a lot of money, it's that wealth is a system of exponential growth. It is somewhat unfair that his money allows him to make more money at such an outsized rate. Taxes are a way to put wealth on an logarithmic scale…

Both wealth and money (as defined in the article) can be distributed. What good is money if a person doesn't have a "wealth of knowledge" in order to make good choices with that money? Wealth === value, truly useful, Money === Exchangeable notes or coins or electronic funds which individuals may use to meet an agreed upon metric of value in a trade

Re: Money and wealth

#76

Post by macco » Fri, Jan 10, 2014, 4:50 PM UTC

oleganza wrote: post #40

"Money is a medium of exchange for wealth, it is not a store of wealth." Disagree. To be a medium of exchange, money must have "holding" value (because money does not circulate, but simply switches holders: http://blog.oleganza.com/post/43378777734/on-circulation-of-... ). The liquidity of money is in how many people want to hold it in their cash balances. The more people want it - the bigger value of the total suppl…

Of course it is. The article is flawed.

Re: Money and wealth

#77

Post by vecinu » Fri, Jan 10, 2014, 4:51 PM UTC

_delirium wrote: post #44

jerf wrote: post #31

This is also why wealth redistribution works far less well than people who imagine it as money redistribution think it will. Part of the wealth is tied up in the owner, and that can't be redistributed without loss, sometimes great loss. Let's take a concrete example. Suppose that class warfare rhetoric utterly wins, and as its first scalp The People decide that the filthy rich Bill Gates needs to have 100% of his wea…

This just seems like a complaint about illiquidity of certain assets, which is a legitimate concern, but also a pretty commonly addressed one, because it already arises semi-frequently. If you were one of Sam Walton's heirs, for example, you can't just dump all your Wal-Mart stock on day 1. But if you want to turn that in-practice-fairly-illiquid holding into more liquid and diversified holdings, you are not SOL. It…

I believe the original poster was worried about 'The People' not wanting to hold on to the stock for a few years.

There seems to be no quick way to liquidate that much wealth without destroying some in the process.

Re: Money and wealth

#78

Post by macco » Fri, Jan 10, 2014, 4:54 PM UTC

The article is flawed. It distinguishes between having money and making money - this is very questionable.

From a scientific view wealth == money. Wealth is measured in money, something is worth x dollar. How this money is stored is another question, it can be stock, gold or whatever.

From a philosophical point of view wealth can be whatever you want it to be. I think the view of the author is quite sane and i agree with him on that; but please don't tell me , this is the right definition of wealth.

BTW I am reading Hackers & Painters right now and pg has a similar concept of wealth.

Re: Money and wealth

#79

Post by SideburnsOfDoom » Fri, Jan 10, 2014, 4:54 PM UTC

drharris wrote: post #41

jerf wrote: post #31

This is also why wealth redistribution works far less well than people who imagine it as money redistribution think it will. Part of the wealth is tied up in the owner, and that can't be redistributed without loss, sometimes great loss. Let's take a concrete example. Suppose that class warfare rhetoric utterly wins, and as its first scalp The People decide that the filthy rich Bill Gates needs to have 100% of his wea…

This is a really salient point. I would go a step further and ask whether or not that $100 is better in the hands of a wealthy person (in the context of this article - a person who would put that money to work in the local/national economy to make more of it), or in those of the poor person. Certainly the latter can put it to great use buying necessities of life, but in the hands of the former it might increase the l…

>I would go a step further and ask whether or not that $100 is better in the hands of a wealthy person or in those of the poor person. Certainly the latter can put it to great use buying necessities of life

There has been a lot of thought and data on this already. The answer is in - giving money to poor people is much "better" as the money travels much further. They buy the "necessities of life" quite quickly, and the money changes hands several times, benefiting other (mostly poor) people along the way. Wheras in the hands of a rich person the money is unlikely to do that. It mostly goes into an investment as there are no necessities of life urgently needed. (lower Marginal Propensity to Consume http://en.wikipedia.org/wiki/Marginal_propensity_to_consume#... )

http://www.vosizneias.com/36051/2009/08/02/washington-food-s...

>I'm not really a fan of trickle-down economics, but I think it's more realistic

It is not. trickle-down economics has been tried and it failed. It is not a valid model of reality.

http://en.wikipedia.org/wiki/Trickle-down_economics#Criticis...

https://www.google.com/search?q=trickle+down+economics+doesn...

Re: Money and wealth

#80

Post by mullingitover » Fri, Jan 10, 2014, 4:54 PM UTC

a8da6b0c91d wrote: post #74

Cash is a hedge against deflation. Many vast fortunes have been made by people who held cash, rode deflation down, and then bought assets at the bottom. You want a substantial fraction of your portfolio as cash to hedge deflation, just as you want a fraction in hard assets to hedge stagflation. You of course want a fraction in income generating ventures and equities that do very well in an environment of growth, as a…

> We haven't had a serious bout with deflation in 80 years so people have grown overly biased against cash.

Coincidentally we're not tying the money supply to stuff we dig out of the ground, growing the money supply is now only as difficult as turning on the printing press. Unless that changes, I don't see how deflation is a serious threat anymore.