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Money and wealth

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Re: Money and wealth

#161

Post by darkarmani »

smackfu wrote: post #142
darkarmani wrote: post #116

Earlier quoted context omitted.

> 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.

You might be right as I have an owner-occupied 2-Family house, but i was told that i was only dinged 0.5% on the rate for the rental unit.

> Also, I wasn't really thinking that people used their cash to buy a second property...More like an inherited house or such.

But in that case you have to think of your return as based on the opportunity cost of not selling the house and investing the cash in something else. If you aren't making money beyond what a loan would be, then it probably isn't a worthwhile investment to hold onto. (I'm over simplifying because there are tax benefits and you might gamble on appreciation).

Re: Money and wealth

#162

Post by drharris »

jerf wrote: post #65
mullingitover wrote: post #53

Earlier quoted context omitted.

> 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. That's a testable hypothesis, and as it turns out it's already been refuted: research has shown that dollar-for-dollar, tax cuts are a net drag on the econom…

And I actually think that furthers the idea that "money == wealth" isn't a helpful way to look at the world. Why are food stamps so effective? Because when you're hungry, food stamps are astonishing wealth to the recipient, far more than the societal costs of providing it. Unfortunately for people who read this as a strong endorsement for general redistribution, it is indeed the "biggest bang" and once you have fille…

Yes, wholeheartedly agree here. I was not thinking of having the basic Maslow levels met, as I think that kind of social net should be somewhat guaranteed, and the economic benefit is obvious. Once those needs are met, does a redistribution of $100 have a net positive or negative on the overall economy? Not sure, but gut tells me negative. The wealthy will invest, which has a tiny net positive on the economy that compounds over time. The non-wealthy will consume, which has a positive immediate benefit on the economy, but poor long-term benefit along with terrible environmental consequences. Really, we probably need both for any economy to survive, but consumption is what the middle class is for anyway.

Re: Money and wealth

#163

Post by hcarvalhoalves »

dragonwriter wrote: post #153
hcarvalhoalves wrote: post #151

Earlier quoted context omitted.

> Spending does not equal inflation. It does when it's a nanny state telling people to spend. First, taxation is not redistribution of wealth. In practice, it's always a lot heavier on the middle class than on the elite, the later have better means to avoid taxation. Second, this money is never just handed over to the poor. Here in Brazil, for instance, it's used to back credit programs by state-owned banks, and inte…

> It does when it's a nanny state telling people to spend. This seems to be an article of faith (and one using buzzwords with no objective meaning) for which neither evidence nor argument is offered. > Second, this money is never just handed over to the poor. Concrete proposals to do just that (e.g., Unconditional Basic Income) have been made. > Here in Brazil, for instance, it's used to back credit programs by state…

> This seems to be an article of faith (and one using buzzwords with no objective meaning) for which neither evidence nor argument is offered.

What do you mean? The argument is my entire comment explaining what's happening here.

Brazil also has what would be equivalent to a basic income, it's called "Bolsa Família" and guarantees a certain income for families based on the number of members. In practice it has been used to manipulate votes, every election there are rumors the program could end so poor people keep electing the same (already proven corrupt) party that championed the program.

In theory those ideas are beautiful, but I'm not seeing it work in practice, and I'm cynical it can ever be.

Re: Money and wealth

#164

Post by 01Michael10 »

thedufer wrote: post #158
01Michael10 wrote: post #149

Earlier quoted context omitted.

Depositing your money in a bank...

Where is the bank getting money to pay you interest? By making investments. The fact that you're one level removed from the decision-making doesn't make it less of an investment.

Ummmmm Really? The Bank is taking the risk not you. Never heard of insured accounts? Granted, there are no guarantees in life but money in the bank is pretty solid. You may stuff a couple mill under your mattress if it makes you feel better...

Re: Money and wealth

#165

Post by aliston »

a8da6b0c91d wrote: post #91
mullingitover wrote: post #80

Earlier quoted context omitted.

> 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.

Debt based currencies deflate when a lot of debts go bad. When somebody declares bankruptcy and debt goes bad, that's money going "poof" and disappearing from the banking system, with knock-on effects. That's what happened in the 30s and nearly happened in 08. Whether or not the gold convertibility window is open doesn't much figure into it. If the US government were to partially default on its debts, or a lot of ban…

If a private debtor defaults and declares bankruptcy, then the money supply contracts and you get deflationary pressure. I'm curious, though, why you believe the US would see deflation if it were to default?

The Eurozone countries tended to deflate, but there are plenty of examples of countries that went the other way -- Germany, Argentina, Mexico...

I don't think the US will default any time soon, but if we were to get near that point, we would inflate our way out.

Re: Money and wealth

#166

Post by drharris »

siphor wrote: post #60
drharris wrote: post #41

Earlier quoted context omitted.

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 found these posts interesting, and I don't know what to think of them. In terms of large corporations, I do think it would be more beneficial to split the money more evenly amongst the people who helped create the wealth, and, with bill gates in particular, is having money in stock actually generating wealth? Sure, if he sold it all at once it would crash, but if he slowly started getting rid of it and turning it i…

I think I get what you're saying... mainly that when wealth is so centered in that 0.1% upper crust of power brokers, that it keeps potentially wealthy people off the boat. Combine that with the fact these people are well connected and intertwined, and it becomes

> Wealth, more evenly distributed, would give more people a greater chance at, in turn, creating more wealth.

Yes and no. Look at lottery winners (or other windfall recipients) as an example that the average person cannot create wealth. Some people are able to create wealth and most are not. Let's say Bill Gates does indeed give every person that shares his picture on Facebook $5000 dollars. Most people will waste it, some will use it to pay down debt, and a small percentage will create wealth from it. I think there are two groups that could potentially benefit the most from this. Upper lower class folks can easily put this money toward education and skills that would have a net positive. Upper middle class folks might potentially start new businesses and markets which have a definite impact.

If people have a problem with current wealth distribution, there is a very easy (not easy in the sense of doing it, rather in understanding it) way to reallocate it - get out of debt. Debt is one of the main ways rich people get richer, by reallocating money from the poor to the rich. Getting rid of their main source of income would force them to invest in real, tangible businesses that solve real problems (because presumably without debt, nobody is buying a new TV yearly anymore). I believe debt is the primary source of economic stratification right now, not income.

> In terms of large corporations, I do think it would be more beneficial to split the money more evenly amongst the people who helped create the wealth.

Amen to this. This culture where CEOs earn 20x the average employee salary is screwed up. Also, it would be beneficial if they didn't own every politician ever created, but that's another story.

Re: Money and wealth

#167

Post by gvnq »

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…

The process you imagined will only produce the opposite outcome: when the price of MS stock plunges to zero, Gates himself will likely buy back all his (confiscated) stock and since MS the company operates independently from the stock market, the real value of the company is not destroyed, and will likely bounce back when Gates buys back all his stock. Soon he will regain all his lost wealth and be filthy rich again. This actually happened in 90s Russia: when the former Soviet Union was no more, then Russian government issued every citizen shares of the SU state owned entities - factories, OIL FIELDS, etc. As you rightly pointed out, ordinary Russian citizen didn't know what to do with these "shares", they dumped them cheap. Some enterprising individuals then acquired them cheap and that's how the Russian Oil Oligarchs got their wealth.

Re: Money and wealth

#168

Post by dragonwriter »

hcarvalhoalves wrote: post #163
dragonwriter wrote: post #153

Earlier quoted context omitted.

> It does when it's a nanny state telling people to spend. This seems to be an article of faith (and one using buzzwords with no objective meaning) for which neither evidence nor argument is offered. > Second, this money is never just handed over to the poor. Concrete proposals to do just that (e.g., Unconditional Basic Income) have been made. > Here in Brazil, for instance, it's used to back credit programs by state…

> This seems to be an article of faith (and one using buzzwords with no objective meaning) for which neither evidence nor argument is offered. What do you mean? The argument is my entire comment explaining what's happening here. Brazil also has what would be equivalent to a basic income, it's called "Bolsa Família" and guarantees a certain income for families based on the number of members. In practice it has been us…

> Brazil also has what would be equivalent to a basic income

No, it doesn't.

> it's called "Bolsa Família" and guarantees a certain income for families based on the number of members

Bolsa Família is a combination of a variety of traditional social welfare programs of the type that Basic Income is laid out as an alternative to, not an equivalent of Basic Income; it features a variety of means-tested and other qualification-based components. The part you seem to be referring to is a benefit with a fixed cash value per vaccinated child attending school to families whose total family income is below a certain threshold. It involves both means-testing (the family income threshold to qualify) and behavioral testing (based on vaccination status and school attendance) of exactly the type that Basic Income is laid out in opposition to.

Re: Money and wealth

#169

Post by scotty79 »

benjaminwootton wrote: post #8
probablyfiction wrote: post #4

Robert Kiyosaki's claims are pretty hard to verify. Rich Dad, Poor Dad is not a good source for financial information. Edit: Forbes link ( http://www.forbes.com/sites/helaineolen/2012/10/10/rich-dad-... )

Even if it's true, property millionaires are outliers who simply used lots of leverage to accumulate property during a massive credit fueled orgy of speculation. They got lucky. Those conditions are not likely to return and the path is likely to be much more difficult for anyone trying to do the same today. I don't admire property speculators such as Kiyosaki. Recklessness rather than brains led many people down this…

> In addition, hoarding property is actually a massive net negative to society.

I think that progressive task on real estate could help with that. If you own one, two or even three houses, no tax, but if more, tax should grow very fast. Fast enough that it's more economical to sell property than keep it.

Re: Money and wealth

#170

Post by scotty79 »

msrpotus wrote: post #3

This makes sense but then what are some useful ways to use cash to build wealth if not buying stocks and other investments? I'm a young guy with plenty of money in the bank (in the tens of thousands; obviously not enough to retire but I could quit my job and do nothing for a while) and basically no debt. I find and I'm sure I'm not alone here with this feeling that, while I could spend a lot more money, I'm perfectly…

Two ideas: Buy bitcoin mining equipment. Have a kid and use money to spend maximum time with him/her doing cool stuff so he/she grows to be awesome and thankful to you.
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