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

The U.S. system provides the scalability for these people to make vast wealth. Shouldn't they pay it back to keep it up? The system is expensive to upkeep. There ain't no free lunch.

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 where the wealth of the top 0.1% comes from. Freshly printed money.

I'm sorry but this statement is very wrong. Newly printed money enters the economy through interbank loans. If I borrow $100 my net worth is exactly the same as before. I'm not any wealthier.

To set the record straight: the ability to expand or contract the money supply is an essential tool in managing the economy: the Fed can cool things down in a bubble (by raising rates and contracting the money supply) or heat things up in a downturn (by lowering rates and expanding the money supply). Otherwise, inflation or deflation can spiral out of control.

> Creating new money, i.e. counterfeiting, i.e. inflation, does not create new wealth.

Ok, but creating new money in an effort to grow the economy while managing inflation does create new wealth-- or more accurately, creates an environment in which wealth can more easily be created. Especially in comparison to the alternative: an unmanaged economy that is completely at the mercy of panics and bubbles. Think the last crash was bad? The unemployment rate rose to 14% during the six years following the panic of 1873, which was largely caused and substantially prolonged by the inflexibility of the money supply (which was still tied to silver and gold).

I'm getting a little tired of the anti-fiat currency crowd. You say you learned about economics; you might want to get your money back. I'm sure you're a very smart person, astrohacker, but your perspective here is unsupported and stands in direct contradiction to the last 80 years of economic thought. And no, the bitcoin crowd do not count as economists.

>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 you understand the web? Who would you want writing legislation to govern the web? Lawyers who are clueless about the web and think that the internet is a series of tubes, or people that are VERY web savvy - like Tim Berners-Lee, et. al? The same thing applies to finance, banking and everything else. Makes no sense to have people writing legislation or creating systems that don't understand what they are doing.

>The Fed does not produce wealth. Any profits they give to the government, thus saving taxpayers a little money, are more than offset by the loss in purchasing power the taxpayers suffer through inflation.

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.

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 assets rise to accomodate the new money. So in theory, by having the prices for those assets rising, wealth is created. i.e. if $100B in new money is injected into the economy, and half of that goes into residential real estate, then the average house prices will increase by no other reason than more money is chasing fixed supply.

So the $200,000 house is now worth $300,000 - therefore $100K has been 'created'.

But the way the economy is so complex and intertwined, that increase in wealth could beget another increase in wealth - i.e. the owner of that house could take out say $50K of that to start a business which increases his wealth even more (PG has a fabulous essay about creating wealth from nothing) out of his sweat (i.e. not related to inflation other than the fact that he used the rise in the price of his house to start the process but everything else was his own doing).

The truth is that I don't think modern economics truly understands inflation yet. For instance, America pumped a TON of new money into the economy (both fiscally and monetarily) and inflation has been subdued in America.

China pumped in a moderate amount of money, and inflation has been out of control recently. i.e. much more than the money they have pumped in, so they have been having to tighten the reins.

Suffice it to say, I don't know. I wish I could condense it to a nice nugget like that, but I can't.

If anyone else can, please chime in and do.

That would be interesting to me too.

No, by definition, the odds of being in the top .5% at any given moment are very slim. In a system with a high degree of economic mobility, it's conceivable that people would enter (and leave) the top N% at a reasonably high rate. Whether or not such high mobility is a good thing is certainly an open question, although the author certainly seems to think it should be higher than it is now.