Who Rules America: An Investment Manager's View on the Top 1% • Hacker News Board

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

#161

Post by Jeema3000 » Thu, Aug 04, 2011, 2:15 PM UTC

lefstathiou wrote: post #48

potatolicious wrote: post #42

Earlier quoted context omitted.

Echoing what rayiner said - where are the rich going to go? Europe is less friendly to the rich - extremely so in the most pleasant of places. China? India? Neither are very pleasant places, and even with truckloads of cash has a hard time competing with the quality of life enjoyed in the US even under onerous taxation. I think you're not giving enough credit to the American quality of life - it's why my family immig…

That's not true. How about Hong Kong or Singapore where you certainly get a western style life with extra benefits: safer, cleaner, live-in maid service, better access to healthcare and a 15-20% all in tax rate. Have you been to Thailand or Indonesia? Sounds ridiculous but this is happening right now. I'm in banking and I hear my clients talk about it all the time. They're doing it as we speak (slowly migrating their…

"Nobody likes seeing their money go to waste, especially to causes they dont agree with (ie union pensions for government employees that retire after 20 years of service)."

So the ultra rich obstruct attempts at making the system more efficient (i.e. getting rid of the for-profit healthcare industry in America which costs the average American more and delivers worse outcomes than other industrialized countries) and then use that as an excuse to not pay more taxes? That's a pretty good racket they got going there. The world's smallest violin must be playing for all those poor downtrodden multi-millionaire bankers...

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

#162

Post by danvet » Thu, Aug 04, 2011, 2:15 PM UTC

nazgulnarsil wrote: post #87

eternal_skeptic wrote: post #55

Earlier quoted context omitted.

You say "Banks, and the Federal Reserve, create new money". That is factually untrue: only the Federal Reserve can legally create new money in the US. Since you mentioned it by name, you are definitely talking about the US, but the same state holds in virtually all developed countries as well: one designated "central bank" entity creates money, the others don't. Per your main point, yes, the central bank creates mone…

FRB is fine in a free banking system. Competition would create an ideal level of reserves by means of some banks dying and some thriving. We do not have that. Large banks are shielded from their fuckups. This creates perverse incentives for them to make high risk/high reward investments with other people's money.

Exactly. All this massive discussions about creating new money somehow ingnores the elephant in the room: If banks with too much leverage would actually be able to default people will suddenly notice the problem and check their bank's reserves before opening a deposit or something like that (in historical timeframes, i.e. years ...).

Now the problem is obviously that everyone who went along for the ride, hoping for the best will go bust, too. Among them the top 0.1% (or at least a large part, you need to substract the Warren Buffet type). Obviously the rich and powerful don't like becoming poor and deprived of power, so the bailout themselves via the gov't/fed.

And as a strawmen they set up the crumbling 401k savings of the 99.9% normals.

An aside: I seriously wonder what would have happend if the gov't would have continued to let banks default. I don't think it'd be much worse than the Marshall plan for Germany with it's complete reset of the (liquid) wealth after WW2. And that went really well. And for a bit of fairness, resetting the clock every 80 (because people tend to forget the last utter economic catastrophe) probably won't hurt.

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

#163

Post by shapoopy » Thu, Aug 04, 2011, 2:20 PM UTC

While I appreciate the effort to bring attention to the serious differences between the simply well-off and the astonishingly-rich-and-powerful, I'm having trouble wrapping my head around some of this:

"While income and lifestyle are all relative, an after-tax income between $6.6k and $8.3k per month today will hardly buy the fantasy lifestyles that Americans see on TV and would consider 'rich.' In many areas in California or the East Coast, this positions one squarely in the hard working upper-middle class, and strict budgeting will be essential. An income of $190k post tax or $15.8k per month will certainly buy a nice lifestyle but is far from rich."

What in the hell?

Where I come from, six figures is rich, period. I grew up in a household whose yearly income was a bit over $100,000 (pre-tax), and had no delusions about my place in the economy. Sure, weren't "free from financial worry," but we nonetheless could afford the occasional vacation and a new or semi-new car when we needed it.

My significant other comes from a place where $50,000 each year (pre-tax) is considered rich (and this in the apparently-mythical California, no less). She grew up with a pre-tax annual income of less than $10,000.

While it's inaccurate an potentially damaging to misrepresent the degree to which it truly is the super-rich that benefit most dramatically from our economy, it also seems just as potentially damaging to write as though we really are all in the middle-class. This article seems to utterly silence the existence of poverty and the working class in order to make its point.

Maybe I just come from one of those strange parts of the country where we still have backwards things like "industry" and a "proletariat." I suspect, however, there's a lot more folks from places like where I'm from than places like the strange utopia this guy lives in.

Uh, ?

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

#164

Post by andylei » Thu, Aug 04, 2011, 2:23 PM UTC

Astrohacker wrote: post #60

eternal_skeptic wrote: post #55

Earlier quoted context omitted.

You say "Banks, and the Federal Reserve, create new money". That is factually untrue: only the Federal Reserve can legally create new money in the US. Since you mentioned it by name, you are definitely talking about the US, but the same state holds in virtually all developed countries as well: one designated "central bank" entity creates money, the others don't. Per your main point, yes, the central bank creates mone…

Here's how banks counterfeit money. You deposit $100. The bank loans out $80 of your money to someone else. They put that money back in the bank. The bank now has $100 - all your money. But your checking account says $100, and the loanee's checking account says $80, for a total of $180. The bank has now effectively created--that is, counterfeited--$80 in new money. They gave this new money to themselves, and then loa…

> The bank now has $100 - all your money. But your checking account says $100, and the loanee's checking account says $80, for a total of $180

you should learn about accounting. the loanee also has an $80 debt to the bank. no money is created. in fact, even if the bank didn't exist, in your fantasy land, basically everyone would be "money counterfeiters".

let's construct a scenario. when you loan your aunt $100, you give her $100, and then you sign a little contract with her indicating she owes you $100. you now have an asset worth $100 (the contract), and she now has a fresh $100 bill. oh my god, you just magically created $100! you're a counterfeiter!

when you deposit money in a bank, you loan them your money, which they then loan out. your checking account is essentially a low risk, pooled, variably timed bond that you buy from the bank.

i have a question for you though. do you believe in free markets? if so, then why do you oppose fractional reserve banking, which, at its fundamental core, is a contractual agreement between two parties?

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

#165

Post by yummyfajitas » Thu, Aug 04, 2011, 2:28 PM UTC

rayiner wrote: post #37

cjy wrote: post #31

I found this article poorly written and defended. I didn't find it HN worthy. It is basically an investment manager complaining that the wealthiest Americans are mostly in finance and don't pay enough taxes because most of their earnings are from capital gains. He makes a lot of presuppositions in his writing that he never defends. For example: "I asked if her colleagues talked about or understood how much damage was…

> How does finance destroy the broader economy in general? Liquid functional capital markets are critical for a stable economy. Finance is only bad for the economy when incentives are structures so that government limits the downside. False dichotomy. The article talks about the current financial system in the US hurting the economy. It's not suggesting dismantling the financial system in general. Step back for a mom…

Huh? Short term capital gains rates are 35%. (I assume that's what you mean by "moves money around".)

Long term cap gains rates are lower, but that compensates for the fact that the company you bought was also paying taxes in the meantime.

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

#166

Post by kds » Thu, Aug 04, 2011, 2:29 PM UTC

goblgobl wrote: post #149

mdonahoe wrote: post #137

Earlier quoted context omitted.

All of the people in the examples made money as salaried financial services employees or through stock. So for example, the programmer didn't make her money from selling her programming products; she sold her stock, a financial instrument.

She sold her stock, which represented ownership of a business. If Mark Zuckerberg sold all his "stock" in Facebook, that doesn't mean he made his money from the financial services industry. The majority of wealthy people are wealthy by equity (ownership of a business), not from annual income. If the author used traders as an example of people making money on stocks, that would be an argument more inline with his thes…

The retail bank in no way makes Joe Average far richer than he already is by his own efforts.

And I don't think those Russian billionaires invested in Facebook just because they were yawning at the thought of depositing the money in a bank and the boring routine of such a transaction.

They all expect huge capital gains and the pump-and-dump institutional machinery of Wall Street is the instrumental system for this.

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

#167

Post by gopi » Thu, Aug 04, 2011, 2:37 PM UTC

radicaldreamer wrote: post #40

lionhearted wrote: post #35

Earlier quoted context omitted.

Let's think about secondary effects. What percent of very wealthy Americans do you think would renounce their citizenship based on this? How much less investment capital would there be in the USA based on that? Note: Not asking for a value judgment ("good riddance if they do!" - not productive). Just your estimate as to what percent of wealthy Americans would give up their citizenship and how much less investment cap…

I'm not sure a significant portion of people will renounce their citizenship over the capital gains tax rate. We didn't have a brain drain or mass emigration when the top income tax rate was 91% either. To make tax policy based on a fear of wealthy Americans deciding to stop being American seems ludicrous. Similarly, I think investment capital will remain in the US because of the opportunities this country provides f…

When the top income tax was 91% (from 1951-1964), the capital gain tax was 25%. So while doctors and small businessmen pay >50% tax on earned income the uber rich paid 25%

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

#168

Post by oelewapperke » Thu, Aug 04, 2011, 2:43 PM UTC

bokonist wrote: post #158

michaelochurch wrote: post #143

Terrible writing. I'll sum it up: hard working people in the bottom half of the "top 1%" are not evil power-brokers but the most successful professionals. You have to look at the top 0.5 or top 0.1% (I'd argue that even 0.1% is generous) before engaging "the corridors of power", which consists of financial and real estate elites as well as contractors exploiting corrupt government officials. Is this news? A more inte…

American conservatism is a machine for driving a wedge between the people who are trying to save this society ("liberal intellectuals", although neither word should be pejorative) and the common people of the country they are trying to save. Who are you including under the term "liberal intellectual"? Are you including folks like Martin Feldstein (Harvard), Larry Summers (ex Harvard), Robert Rubin (Harvard BoD) and R…

And, as stated in the article : the top 0.1% gets their "real wealth" from government interference. What's the net worth of Obama (or Bush). Who influences policy ? Exactly what has happened to the net worth of Al Gore these last 10 years ?

So it seems that there are arguments going exactly the other way too. The easiest way to make the top 0.1% destroy themselves seems easy : destroy the government regulations keeping them wealthy, and excluding others.

That is of course diametrically opposite of both all forms of leftism and not a very popular option with those upper middle class "liberal" people, whose interests mainly seems to lie in protecting their benefactors. Or, if they get really roused up, they may upgrade their interests to becoming the new power elite, so they can start excluding others.

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

#169

Post by davedx » Thu, Aug 04, 2011, 2:45 PM UTC

bokonist wrote: post #158

michaelochurch wrote: post #143

Terrible writing. I'll sum it up: hard working people in the bottom half of the "top 1%" are not evil power-brokers but the most successful professionals. You have to look at the top 0.5 or top 0.1% (I'd argue that even 0.1% is generous) before engaging "the corridors of power", which consists of financial and real estate elites as well as contractors exploiting corrupt government officials. Is this news? A more inte…

American conservatism is a machine for driving a wedge between the people who are trying to save this society ("liberal intellectuals", although neither word should be pejorative) and the common people of the country they are trying to save. Who are you including under the term "liberal intellectual"? Are you including folks like Martin Feldstein (Harvard), Larry Summers (ex Harvard), Robert Rubin (Harvard BoD) and R…

Yup... Chomsky makes very much that point in 'On Language'; the liberal intellectuals are the elite's best propagandists. :(

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

#170

Post by onemoreact » Thu, Aug 04, 2011, 2:46 PM UTC

jonnathanson wrote: post #159

djm wrote: post #154

Earlier quoted context omitted.

I'd like to add that responsibility for banks providing loans backed by the taxpayer ultimately falls on voters. This is what fannie mae/sallie mae etc are all about. Disconnecting access to credit from the ability to repay it inevitably results in loans that will default. Politicians sold people stuff like fannie mae and people voted for it by electing them. And I guess voting in favour of such things is inevitable…

"...I guess voting in favour of such things is inevitable when not all voters are taxpayers." I get the premise of this logic, i.e., that poor people don't pay taxes and therefore don't care about spending taxpayer dollars. I've seen it presented hundreds of times. But I think, in all honesty, that such a theory is giving the poor too much credit. It assumes that the poor are making conscious decisions based on ratio…

To back this up, well over 20% of people eligible for food stamps don't apply.