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Joseph Stiglitz Says American Inequality Didn’t Just Happen

evonomics.com

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Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#181

Post by Jill_the_Pill »

sokoloff wrote: post #117
eecc wrote: post #116

Earlier quoted context omitted.

Well 120k for doing nothing is a pretty rent I would say... unless you have a nasty disease and no health insurance. (Unlikely)

Most commonly, it's $120K/yr in income based on a lifetime of two earners carefully saving (deferring current consumption-this is the "doing") and investing for their self-managed retirement. Couple A with $3MM in liquid assets and self-funding their retirement is not particularly better off than couple B[0] who has zero liquid assets and $120K/yr in state-funded pensions, yet couple A is the target of multi-milliona…

It's not scorn for Couple A, but rather for their cheerleaders. There is a real problem with setting an expectation for everyone to have had the financial skills and good luck of Couple A. I think that's more what people mean when they say "that's why there are unions and pensions . . . " -- to give security to large numbers of retirees regardless of their personal situations along the way.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#182

Post by spikels »

rizwank wrote: post #168
JamesBarney wrote: post #154

Earlier quoted context omitted.

The wealthy tend to have more wealth invested in the stock market. Most middle class wealth is invested in real estate, specifically the house they are living in.

Citation? While this is true for many, the extent of 401(k) might signal differently. Also, most of the wealthy I know have far less in the stock market than you might imagine. Real Estate, development and private placements. Stock Market is too tax inefficient.

http://www.visualcapitalist.com/chart-assets-make-wealth/

Keep in mind that when referring to real estate the value is often the equity (asset - debt) not the asset value itself. Pretty sure that is the case with SCF data from the Census.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#183

Post by gleenn »

WalterBright wrote: post #157
ScottBurson wrote: post #124

Earlier quoted context omitted.

Most corporate stock is owned by the wealthy: https://www.investopedia.com/news/stock-ownership-slips-ineq... Furthermore, it is mostly hedge funds that benefit from short-term price gains, as they're frequently leveraged, often with options. Long-term holders like individuals and mutual funds are usually unleveraged.

Any stockholder can leverage if they want to. Just buy on margin.

That seems incredibly misleading. As per Investopedia, buying on margin requires a margin account which requires a minimum of $2000. That is pennies, but given most Americans have far less than $2000 in their bank accounts, and most are already strapped with significant debt, suggesting the should or even could is wrong.

https://www.investopedia.com/university/margin/margin1.asp

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#184

Post by tim333 »

ScottBurson wrote: post #108

Something came up yesterday, in the discussion about business schools, that I think is also relevant here. A lot of people — as in, practically everyone — has been persuaded over the last half-century or so that the board of directors of a public corporation have a legal responsibility to maximize shareholder value. The general acceptance of that fiction is resulting in a tremendous amount of wealth transfer from the…

The shareholders have the power to vote people on to or off of the board of directors, who can then fire the management so they have some control to choose people they like, who are often those who maximise the shareholders share values. This hasn't changed for the last century and I don't know if you can blame it for recent changes.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#185

Post by tim333 »

I think the root of the problem is that US political decisions can be bought to a larger extent than in most countries by giving money to campaigns, lobbyists, PACs and the like. Then for some billionaires it's a simple calculation - why not give $100m to get taxes lowered on themselves if they'll get $500m back in tax breaks. The recent 2017 tax bill is a typical example which slashes corporate tax while adding $1.5tn to the deficit which will be paid by normal working people down the line.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#186

Post by WalterBright »

gleenn wrote: post #183
WalterBright wrote: post #157

Earlier quoted context omitted.

Any stockholder can leverage if they want to. Just buy on margin.

That seems incredibly misleading. As per Investopedia, buying on margin requires a margin account which requires a minimum of $2000. That is pennies, but given most Americans have far less than $2000 in their bank accounts, and most are already strapped with significant debt, suggesting the should or even could is wrong. https://www.investopedia.com/university/margin/margin1.asp

52% of Americans invest in stocks.

https://www.financialsamurai.com/what-percent-of-americans-o...

That doesn't necessarily mean 48% cannot invest in stocks - they just may be unwilling to. I know many middle class people who invest in other things besides stocks, like bonds and real estate, as well as the proverbial mattress.

> strapped with significant debt

Buying a house with a mortgage is leveraging an investment debt. In fact, leveraging an investment IS taking on debt.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#187

Post by WalterBright »

dredmorbius wrote: post #180
WalterBright wrote: post #175

Earlier quoted context omitted.

> Long term return on invested capitalhas been declining since the 1960s. Need to take into account the ever-greater share of the GNP consumed by the government. MSFT has been around for >30 years. Still waiting for their sacrifice of the long term to produce a precipitous fall.

http://2.bp.blogspot.com/-pSBLtgulQvo/To6RGPsHfAI/AAAAAAAAY1... Microsoft eventually climbed above its Dec 9, 1999 close. In late 2016.

Only if you want to argue that the 2000 stock market crash was due to Microsoft's short term thinking.

(and Microsoft's profits continued to rise during the 2000's, their P/E dropped, not their profits)

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#188

Post by WalterBright »

ScottBurson wrote: post #176
WalterBright wrote: post #167

Earlier quoted context omitted.

If the theory was correct, you'd see companies join the stock market with high valuations, and then trend downwards to oblivion as those long term chickens come to roost. But this is just not happening. Look how richly rewarded AMZN is for long term choices.

> Look how richly rewarded AMZN is for long term choices. Yes, Bezos made it clear that he was going to reinvest all profits for a long time. Although obviously some people thought this was a great strategy, it was considered quite unusual. Google is another example of a company that has done very well while making it clear they were not going to dance to Wall Street's tune. But the existence of notable exceptions do…

The overall trend is companies that invest for the long term are richly rewarded, and the S&P 500 shows an upward trend.

I do know a couple companies that "danced to Wall Street's tune", or what they imagined it was, and screwed the long term position for quarterly profits. WS investors were not fooled, and their stocks tanked.

Do you really think that sophisticated investors who study the companies they invest in are so stupid as to reward companies for doing this?

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#189

Post by laurencerowe »

mjfl wrote: post #149
laurencerowe wrote: post #144

Earlier quoted context omitted.

Maximizing shareholder value concentrates returns in the hands of shareholders over employees. This has a significant distributional impact as for most income from employment dwarfs income from investments.

again, why do you treat employees as a distinct group from shareholders? At many companies, employees are the shareholders.

Because employees and shareholders have distinct and sometimes opposing interests. Increasing pay for employees reduces the profits available for distribution to shareholders.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#190

Post by specialist »

WalterBright wrote: post #165
specialist wrote: post #87

Also true: Creating the middle class was a deliberate, hard fought policy choice. The USA has done it (massive redistribution of wealth) three times. We're overdue for the fourth cycle. Wealth and Democracy: A Political History of the American Rich [2003] http://a.co/6rMyoc1 "The Second Gilded Age has been staggering enough in its concentration of wealth to dwarf the original Gilded Age a hundred years earlier. Howev…

> Creating the middle class was a deliberate, hard fought policy choice. The middle class appeared in the US right along with industrialization. You can see it in paintings of towns and such before the Civil War. All sorts of businesses and middle class homes. A few years ago a pre-war Mississippi steamboat wreck was dug up and it was stuffed full of trade goods for middle class people.

Phillips gives the https://en.wikipedia.org/wiki/Homestead_Acts as one of three times the US government choose to create a middle class.

The alternative proposal was selling the land to raise money directly for the government.

Imagine if that had happened. We probably would have had South American style share croppers in toiling in usury and enduring inequity.

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