Why the Rich Are So Much Richer
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Why the Rich Are So Much Richer
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Re: Why the Rich Are So Much Richer
#2I thought this part was interesting:
So what’s really going on? Something much simpler: asset managers are just managing much more money than they used to, because there’s much more capital in the markets than there once was. As recently as 1990, hedge funds managed a total of $38.9 billion. Today, it’s closer to $3 trillion. Mutual funds in the US had $1.6 trillion in assets in 1992. Today, it’s more than $16 trillion. And that means that an asset manager today can get paid far better than an asset manager was twenty years ago, even without doing a better job.
Re: Why the Rich Are So Much Richer
#3I thought this part was interesting: So what’s really going on? Something much simpler: asset managers are just managing much more money than they used to, because there’s much more capital in the markets than there once was. As recently as 1990, hedge funds managed a total of $38.9 billion. Today, it’s closer to $3 trillion. Mutual funds in the US had $1.6 trillion in assets in 1992. Today, it’s more than $16 trilli…
I find it hard to believe that there are 2 orders of magnitude more goods and services being bought and sold in the economy that 25 years ago. Rather, the complexity of financial instruments is the one that has gone up and up, but there's not that much more real wealth to back it up.
If that is the case, the short answer would be "because of inflation".
Re: Why the Rich Are So Much Richer
#4I thought this part was interesting: So what’s really going on? Something much simpler: asset managers are just managing much more money than they used to, because there’s much more capital in the markets than there once was. As recently as 1990, hedge funds managed a total of $38.9 billion. Today, it’s closer to $3 trillion. Mutual funds in the US had $1.6 trillion in assets in 1992. Today, it’s more than $16 trilli…
I find it hard to believe that there are 2 orders of magnitude more goods and services being bought and sold in the economy that 25 years ago. Rather, the complexity of financial instruments is the one that has gone up and up, but there's not that much more real wealth to back it up. If that is the case, the short answer would be "because of inflation".
Exactly. Much of it is just leverage and financial engineering.
Create derivatives of derivatives until you're essentially divorced from any underlying real asset. Still, it's all counted.
Re: Why the Rich Are So Much Richer
#5I thought this part was interesting: So what’s really going on? Something much simpler: asset managers are just managing much more money than they used to, because there’s much more capital in the markets than there once was. As recently as 1990, hedge funds managed a total of $38.9 billion. Today, it’s closer to $3 trillion. Mutual funds in the US had $1.6 trillion in assets in 1992. Today, it’s more than $16 trilli…
I find it hard to believe that there are 2 orders of magnitude more goods and services being bought and sold in the economy that 25 years ago. Rather, the complexity of financial instruments is the one that has gone up and up, but there's not that much more real wealth to back it up. If that is the case, the short answer would be "because of inflation".
Yep. In other words, it's all a house of cards.
Re: Why the Rich Are So Much Richer
#6Earlier quoted context omitted.
I find it hard to believe that there are 2 orders of magnitude more goods and services being bought and sold in the economy that 25 years ago. Rather, the complexity of financial instruments is the one that has gone up and up, but there's not that much more real wealth to back it up. If that is the case, the short answer would be "because of inflation".
Exactly. Much of it is just leverage and financial engineering. Create derivatives of derivatives until you're essentially divorced from any underlying real asset. Still, it's all counted.
Pardon my ignorance of economics, but does US/FED policy and trillion dollar deficits have anything to do with this? Along with other countries printing more money?
I remember reading Zimbabwe had the best performing stock market, but it was fueled through the "printing press". And they had no choice but to stop printing more.
Re: Why the Rich Are So Much Richer
#7Earlier quoted context omitted.
Exactly. Much of it is just leverage and financial engineering. Create derivatives of derivatives until you're essentially divorced from any underlying real asset. Still, it's all counted.
Pardon my ignorance of economics, but does US/FED policy and trillion dollar deficits have anything to do with this? Along with other countries printing more money? I remember reading Zimbabwe had the best performing stock market, but it was fueled through the "printing press". And they had no choice but to stop printing more.
It is all interconnected, but I'm not sure anyone knows 100% how.
I've started studying economics; the more I learn, the more I know that I don't know.
Re: Why the Rich Are So Much Richer
#8I thought this part was interesting: So what’s really going on? Something much simpler: asset managers are just managing much more money than they used to, because there’s much more capital in the markets than there once was. As recently as 1990, hedge funds managed a total of $38.9 billion. Today, it’s closer to $3 trillion. Mutual funds in the US had $1.6 trillion in assets in 1992. Today, it’s more than $16 trilli…
I find it hard to believe that there are 2 orders of magnitude more goods and services being bought and sold in the economy that 25 years ago. Rather, the complexity of financial instruments is the one that has gone up and up, but there's not that much more real wealth to back it up. If that is the case, the short answer would be "because of inflation".
I don't. In fact, I find it very easy to believe. Now that the Internet has made it possible for anyone with an net connection to do business, goods and services can be completely made up out of whole cloth. Someone goes out and makes a brand new media franchise, call it "Bleachuto." It's a tv series about dead ninjas. This new media property can easily launch an entire cottage industry of blogs, physical goods, some of which might be affiliated with the creators, some not.
All that has to happen for it to be a good or service is for money to change hands. I'd say between the internationalization of capital markets, the deepening of transportation services, and just the fact that many many more emerging economies are buying stuff now, two orders of magnitude difference might well be an understatement, it could well be three or even four.
Re: Why the Rich Are So Much Richer
#9Earlier quoted context omitted.
I find it hard to believe that there are 2 orders of magnitude more goods and services being bought and sold in the economy that 25 years ago. Rather, the complexity of financial instruments is the one that has gone up and up, but there's not that much more real wealth to back it up. If that is the case, the short answer would be "because of inflation".
Exactly. Much of it is just leverage and financial engineering. Create derivatives of derivatives until you're essentially divorced from any underlying real asset. Still, it's all counted.
I don't think you understand derivatives. They assist in resource allocation by applying pressure to the future value of goods, so that we have more control to hedge our risks.
Re: Why the Rich Are So Much Richer
#10Earlier quoted context omitted.
I find it hard to believe that there are 2 orders of magnitude more goods and services being bought and sold in the economy that 25 years ago. Rather, the complexity of financial instruments is the one that has gone up and up, but there's not that much more real wealth to back it up. If that is the case, the short answer would be "because of inflation".
I don't. In fact, I find it very easy to believe. Now that the Internet has made it possible for anyone with an net connection to do business, goods and services can be completely made up out of whole cloth. Someone goes out and makes a brand new media franchise, call it "Bleachuto." It's a tv series about dead ninjas. This new media property can easily launch an entire cottage industry of blogs, physical goods, some…
>Someone goes out and makes a brand new media franchise, call it "Bleachuto." It's a tv series about dead ninjas. This new media property can easily launch an entire cottage industry of blogs, physical goods, some of which might be affiliated with the creators, some not.
And yet the anime industry is continually going out of business?