Money and wealth • Hacker News Board

Re: Money and wealth

#141

Post by forgottenpaswrd » Fri, Jan 10, 2014, 6:54 PM UTC

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…

In my experience, as part of my family is from ex communist societies, when you distribute money, there is concentration of power.

A government powerful enough to distribute all assets is super powerful, and those that control this government(the party) have all the power.

Having all the power, they have all the material resources for them, their families and friends, even when they don't have "money". They want a car, they ask for a car with any excuse and the day after they have the car, they want to travel and so on.

The rest of the society live in conditions of near slavery. They could ask for a car, as they are "equal", but it takes years to come, and when it comes, it is a horrible car you could not choose anything about.

Also corruption is levels of magnitude bigger than anything in something near capitalistic(even paying more than 40% to the state) societies. If your wife is beautiful and the people of the party wants to fuck with her, they will blackmail her with the working conditions of her family. The same party that controls the media and justice and the only company that hires people.

That was the reason my family emigrated, all at once.

Re: Money and wealth

#142

Post by smackfu » Fri, Jan 10, 2014, 7:00 PM UTC

darkarmani wrote: post #116

smackfu wrote: post #104

Earlier quoted context omitted.

How did your friends get the second residence? Do they have a mortgage on the rental property? That makes things much harder to break even. For a lot of people, the only rental property they can afford is in lower income neighborhoods, and the return on investment is often much better there too. But the headaches are also much greater.

> Do they have a mortgage on the rental property? That makes things much harder to break even. You have it backwards. Borrowing money at 4.5% is way cheaper than using your own money. There is opportunity cost to tying up your own money in the real estate. Real estate loans allow you to leverage your 15-20% down. It was really bad when they let you leverage using 3.5% down.

OTOH, those 4.5% mortgage rates are for property you live in, not for rental properties. You can play games by moving around constantly, but that starts to not be just a passive investment.

Also, I wasn't really thinking that people used their cash to buy a second property. (Unless you are buying very low cost houses in low-income areas.) More like an inherited house or such.

Re: Money and wealth

#143

Post by bzbarsky » Fri, Jan 10, 2014, 7:08 PM UTC

mullingitover wrote: post #80

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.

> only as difficult as turning on the printing press.

Which can be quite difficult depending on what else is going on, as the example of Japan over the last 20-some years shows.

Re: Money and wealth

#144

Post by yen223 » Fri, Jan 10, 2014, 7:08 PM UTC

01Michael10 wrote: post #103

I have to disagree with this part of the author's post... "But surely, having a lot of money, say a billion dollars, is the same as being wealthy? In theory, perhaps. In practice, it seems people who know how to maintain wealth would never keep a large sum in cash around, but quickly turn it into net income generating assets, and those who do not (e.g. lottery winners) often quickly find that the seemingly infinite p…

> "The LAST thing you really need to do is "invest" that money to generate income."

> "You live off the bank interest"

Where does the bank interest come from, if not investments?

Re: Money and wealth

#145

Post by yen223 » Fri, Jan 10, 2014, 7:14 PM UTC

rushiagr wrote: post #118

You said twice that children with great education are one of the biggest wealth. I'd have loved if you had given an example of how exactly. I'm curious to listen

From a cold, dispassionate economic point of view, you "invest" 18-25 years worth of blood, sweat, love, and tears raising your children. In return, they will start supporting you once they're capable of generating more than enough income to sustain themselves, hopefully before your retirement years.

Re: Money and wealth

#146

Post by bdcs » Fri, Jan 10, 2014, 7:18 PM UTC

yummyfajitas wrote: post #137

cconroy wrote: post #125

Earlier quoted context omitted.

Agree. It seems noteworthy to point out in the GP in how he expresses class warfare . When this is invoked (here and elsewhere) it's always the poor who are committing "class warfare" against the rich. When in reality, with evidence abound throughout history it is the rich who actually commit class warfare on a continuous basis against everyone else. Even HN is not immune to this propaganda.

Historically this has been true, but nowadays it's not (at least in the US). To quote Paul Krugman on the topic, from way back when he still did economics: "...growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story--the rich becoming richer by exploiting the poor. But that's just not a reasonable picture of America in the 1980s. For one thing, most…

Your thesis is fundamentally wrong.

>citing the growth in inequality since the 1990s only makes [Krugman's (1990)] point about dollar gains/losses more stark.

Actually, nothing is different nowadays as from long ago in history: the class-warfare is still the rich (capital) waging class-warfare on the poor (labor). Krugman, whom you quote, realizes this as well and rescinded his comments from that time:

"I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications. But I think we’d better start paying attention to those implications."[1]

"The pie isn’t growing the way it should — but capital is doing fine by grabbing an ever-larger slice, at labor’s expense."[2]

[1] http://krugman.blogs.nytimes.com/2012/12/08/rise-of-the-robo...

[2] http://www.nytimes.com/2012/12/10/opinion/krugman-robots-and...

Re: Money and wealth

#147

Post by ricardobeat » Fri, Jan 10, 2014, 7:24 PM UTC

Dewie wrote: post #139

ricardobeat wrote: post #127

Earlier quoted context omitted.

I don't think that story means what you think it does. It's a tale of wealth and power . Money is just one part of the equation. It also perpetuates the right-wing myth/prejudice that poor people are lazy and can't handle larger amounts of money than they "need", which has been proven wrong repeatedly.

> I don't think that story means what you think it does. It's a tale of wealth and power. Money is just one part of the equation. You automatically take me for a fool when all I did was present the story, not my interpretation of it. Fiction can be interpreted in many different ways, independent of the author. I think the story is saying that there is more to wealth than just money; that you can't just throw money at…

I'm sorry, I got the impression you were corroborating the parent comment's idea that money is better kept within the rich.

The whole economy could go bust and society revert to bartering, yet Scrooge would still come out ahead because he owns the means of production (the farm/businesses) - assuming he has the power to uphold his ownership either by force or politics.

Re. motivation, I wasn't implying it's intentional, cultural/social context is carried into everything we do. An alternative ending would have people starting their own businesses, producing value and growing the economy as a whole. If written by a norwegian, maybe Scrooge would have found oil within the city borders and distributed the proceeds to all residents :)

Re: Money and wealth

#148

Post by wmf » Fri, Jan 10, 2014, 7:24 PM UTC

RyanZAG wrote: post #45

I read through this, but I'm a bit lost. You realize you can use money to purchase income generating assets? In fact you realize that most people accumulate money for the purpose of purchasing these income generating assets? If I have a lot of money I can easily change it into a lot of wealth and a lot of wealth can be liquidated into a lot of money. And no, nobody who is actually rich cares about their education or…

It seems like the author discounts the value of any investments you can purchase, which leads him to the conclusion that entrepreneurship is the way to go. As others have commented, this isn't borne out by history.

Re: Money and wealth

#149

Post by 01Michael10 » Fri, Jan 10, 2014, 7:43 PM UTC

yen223 wrote: post #144

01Michael10 wrote: post #103

I have to disagree with this part of the author's post... "But surely, having a lot of money, say a billion dollars, is the same as being wealthy? In theory, perhaps. In practice, it seems people who know how to maintain wealth would never keep a large sum in cash around, but quickly turn it into net income generating assets, and those who do not (e.g. lottery winners) often quickly find that the seemingly infinite p…

> "The LAST thing you really need to do is "invest" that money to generate income." > "You live off the bank interest" Where does the bank interest come from, if not investments?

Depositing your money in a bank...

Re: Money and wealth

#150

Post by 001sky » Fri, Jan 10, 2014, 7:54 PM UTC

cconroy wrote: post #125

lmm wrote: post #90

Earlier quoted context omitted.

Liquidity is an irrelevant side issue. Gates would have exactly the same problem if he tried to sell all that microsoft stock to buy turnips; he could destroy billions of dollars of wealth just as easily as the people you so despise. (In fact, if you turn it around, Gates doesn't really have 100 billion dollars. He has something that looks like it's worth that much, but only for as long as he doesn't try and use it.…

Agree. It seems noteworthy to point out in the GP in how he expresses class warfare . When this is invoked (here and elsewhere) it's always the poor who are committing "class warfare" against the rich. When in reality, with evidence abound throughout history it is the rich who actually commit class warfare on a continuous basis against everyone else. Even HN is not immune to this propaganda.

"Class warfare" is waged through assets, not cash. See: expensive real estate, and other socially exclusionary asset allocation mechanisms, such as college educations.