Perhaps this is philosophical, but how much actual “wealth” was created by humans in the past two years? Yes, assets values went up, but how much if any of the that growth was “real” vs inflationary? Did businesses get that much more efficient, did we invent new technologies to improve our standard of life? If the wealth captured isn’t real, meaning it can’t be realized in any normal sense (outside of big numbers on a screen) does it matter?
Real GDP per capita is a better indicator of "economic wealth" than valuation.
Asset values swing most wildly on the basis of the risk free rate, which is where most of the new "wealth" created since 2020 has come from (ZIRP, QE etc). It is somewhat illusory in that low rates must be sustainable to support elevated valuations. Obviously we're seeing the other side of that with rates having risen due to inflationary pressures.
e.g. look at how much "wealth" Japan had in the 1980's before their economy imploded. The imperial palace was perceived to be worth more than all of California, something like that.
I think I see what your saying. Wealth creation is dilutive on a relative basis, meaning in 2019 the lower/middle class had X% of the total wealth. By “creating” a bunch of new wealth the denominator grows and on a relative basis the middle/lower class becomes less wealthy.
I’m not sure how much that matters when we’re talking about wealth distribution, since the dollars are fungible regardless of how “real” they are. It’s not like the middle class people’s new wealth is somehow any more real than the wealth of the richest 1%.
Yes, because those "numbers on a screen" are called dollars.. and we price everything using those numbers. So if the numbers get bigger, people will want more of them when you buy things, including things you need to live like food and shelter.
> Musk, for example, has pulled $40b out through Tesla stock sales in the past couple of years. Those are real assets.
Then your future salaries are also real assets, and should be counted for your net worth. The same argument applies, you can take out loans against your future earnings and spend it, so it is a part of your current net worth, right?
You say that maybe you get into an accident so you can't work? Same logic applies to stocks, something might happen and nobody wants to pay for them anymore rendering them useless.
So to make the comparison fair you have to be consistent. Either future earnings are assets, or they aren't, otherwise the comparison isn't meaningful.
You’d have to decrement by projected future expenses and discount for uncertainty (just as we value stocks on future free cash flows [not revenues], and discount for uncertainty).
Basically the number you are looking for is global real GDP growth. This also misses the mark in many ways but it's the closest easy proxy for what you want. So just take global real gdp growth and figure out the ratio that went to the 1% .
Note, life could become worse for almost everyone, while real wealth is created. I would argue that's pretty much what is happening. It doesn't mean real resources weren't created or extracted and someone owns those things.
The idea of altering these figures to account for happiness or quality of life is a fallacy in my opinion. GDP should be measured the way it is. Decmocracies need to figure out their own definitions of "happiness" or whatever you want to call it and optimize for those parameters. But there is no combined measure that covers both.
Regardless of how "real" the wealth is, my property value went up, and with it, my tax bill. In the same time period, household total income went down. Property values rise because the richest among us can make money flipping houses. I'm getting poorer because the roof over my head is a financial plaything. Technically, I could sell my house and profit, but I need a house and in terms of what I can afford, the entire market has moved too so my quality of life would diminish.
Congrats for getting out of that trap. Now for the next one. Pay off the mortgage. In my opinion you are not "free" until some bank or landlord cant take your housing away from you.
Indeed. Those "near-zero" interest rates you mentioned? They don't last. We could only lock in a 5-year rate -- the rates that come after that loom large in our awareness.
You should encourage some property tax reforms in your area. The way it should work is that a budget is set, and then property owners are taxed to meet that budget. When done that way, the tax rate on your property will actually drop as its value increases, because the budget isn’t any bigger.
Where I live, the only time my property tax rises is when the budget is increased. (Unfortunately, the budget keeps on increasing, because city council keeps having bigger and bigger dreams. Oh, yay, I’m so glad we’re dropping $50M on another sports centre I’ll never use. Better upgrade the pool while we’re at it, it’s been an entire decade since we last spent a fortune on it!)
Inflation and wage stagnation is not loss of wealth.
Wealth is an amount. Income is a flow. These have different units.
Most people have debt - inflation transfers value from lenders to borrowers, so tons of people with car loans and college loans and mortgages are better off as inflation lowers the effective amount they owe.
Wages have increased significantly as inflation rose.
Household income is not wages per person. Getting married doubles average household income for those people. Getting a job and hiring a nanny, maid, and gardener creates fictional household income, because homemaking is assigned $0 value by the Fed.
Society is a complex mix of different genetic pools that mix like water and oil. Small pools end up with all the money because they operate on an abstraction layer higher than the rest. Life for them is like walking around picking up 100 dollar bills. The rest of us scrounge for nickels.
It absolutely has. People like mark zuckerberg and the google founders became wildly wealthy from raw intellect and business cunning. Over long time spans, these types of people will collect in the upper crust of society. Everyone just wants to believe the game is rigged, on a long enough time frame genetic winners are at the top
> No fortune is honest or ethical. The concepts are incompatible.
How so?
Scenario: Assume that someone was born intelligent, and chose to sacrifice their time and money to become a surgeon, and then earned a lot of money. They chose to invest that money to generate more money.
It isn't unethical because they didn't break a law. It isn't dishonest because they worked for it.
"Political nihilism is the position holding no political goals whatsoever, except for the complete destruction of all existing political institutions—along with the principles, values, and social institutions that uphold them.[105] Though often related to anarchism, it may differ in that it presents no method of social organisation after a negation of the current political structure has taken place. An analysis of political nihilism is further presented by Leo Strauss."
> Everyone just wants to believe the game is rigged, on a long enough time frame genetic winners are at the top
Is that a good game?
Why not just appoint the natural-born redheads as kings?
Seriously, if I'm born into a "game" where I'm predestined to lose by my birth status, then I'd rather not play that game at all, thank you very much.
However, you have to wonder about the mentality of not seeking wealth as your primary goal in life. The smartest are not necessarily the wealthiest. Was Einstein the richest person in the world? No. He chose to pursue science, not business.
I feel that society should actually deter people who are obsessed with wealth-seeking over all other values. That's unhealthy personally and socially. Money is not the true measure of a man.
The game will always be imbalanced. People will seek to find a way to give their offspring an advantage.
I argue that this is good for society overall. It’s far better for my wife and I to do our best to raise successful children (for whatever definitions of success we choose) than to leave them to fend for themselves.
Inherent in parents trying to do their best with/for their kids is that some parents will do that more effectively than others. Other parents will simply be not good parents. Being born to not good parents will suck for sure.
> It’s far better for my wife and I to do our best to raise successful children (for whatever definitions of success we choose) than to leave them to fend for themselves.
That's a bit questionable, because overbearing or helicopter parents can do a lot of damage to a kid. ;-) Anyway, it seems like a bit of a false dichotomy too, because Plato argued in the Republic that children should be raised communally rather than by individual parents.
Parents who subscribe to Plato’s view can choose that. There are many roads to Rome/Athens. I’m not here to dictate choices that are other parents’ to make.
> Parents who subscribe to Plato’s view can choose that.
Well, no, by definition you need buy-in from the whole community.
In Plato's Republic, parents didn't know which children were theirs, and vice versa. This eliminated exactly the thing you were talking about: favoritism toward your own children.
> mark zuckerberg and the google founders became wildly wealthy from raw intellect and business cunning
Mark Zuckerberg went to Exeter before going to Harvard. Raw intellect alone doesn't open doors to schools like Exeter. It would also be fair to say that attending Exeter also increased Zuckerberg's probability to attend Harvard, which increased his probability to come across groundbreaking ideas that he could then steal.
Sorry no. There are people smarter and more cunning than those three that had worse outcomes. Most generational wealth that is not protected by a standing army rarely lasts a few generations.
A lot of lasting generation wealth is from cronyism as well. For example many of the large land owners (even to this day) in England descended from folks that were involved in the Norman invasion of England. Some of those didn't directly use their 'superior genes' to conquer the land, they just happened to be buddies with William I.
There was a lot of propping up of google/fb in their early days by other wealthy investors and in the case of Google, the US government.
Feel free to continue to worship your tech gods for their superior genetics though. Circumstance, luck and timing has a lot to do with the current set of billionaires we have in tech. They rode a wave of technological innovation that they themselves didn't even invent. Well other than maybe Pagerank. That was pretty awesome. Most of the ideas were lifted from the "greatest hits" of computer science though.
In the end there has to be a 'winner.' It could have easily been a different group of people if public preference was ever so slightly different. I could be easily typing this message on a AOL browser right now if the outcome was slightly different.
This purely "genetic winner" viewpoint is super narrow viewpoint that if one is not careful can quickly get disgusting. Genes that are advantageous in one situation can be poor in another. Barring outliers, there is sometimes no "best" when talking about genetics/expression of genes. Pugs do much better around humans than wolves. Who has the better genetics?
It's much more boring than that: generational wealth.
If you're lucky enough to have parents and ancestors that put their money to work compounding over a long time period, it would be growing more each year than the rest of us can hope to earn in our lifetimes. No evil plan needed. Just time.
A large percentage of millionaires are first generation. Also, even if they manage to get rich, often the wealth is gone again by 1-2 generations. But yes, families where wealth has been exant and growing for hundreds of years do exist.
genetics has nothing to do with it, as in some benefit of the actual genes you have. You could be lucky to be born to some billionaire. You are actually fortunate to be born to a rich person, or even "just" an educated person in a western country, who can give you all the opportunities.
As a software engineer, I'm doing alright. I'm not jealous of the idiots of the world who are idiotic and think they are some kind of genius, like a Trump or a Kushner.
I'd say that goes back to improved educational opportunities for wealthy and educated parents who know how to help you succeed. A relative has a child with learning disabilities, guess what they can afford to get them specialized instruction and aid to counter that extra challenge, and that will make that person vastly more likely to succeed.
As a software engineer you are anything but rich, regardless of wether you think being born in a western country is an advantage. Likely people born to educated parents outside the west are richer than you. Simply because their income is disproportionality higher than their peers, whereas you are just average.
Is this to say that the rich are several orders of magnitude smarter? It would seem your statement is a bit abstract for my poor ability to comprehend.
1. This is top 1% of the world. In other words, everyone with a net worth more than $850k, or in terms of income, around $80k
2. This is conveniently timed from a low stock market point. If they had timed it from Jan 2022 when the market most recently peaked, I bet the top x% have lost more than the bottom x%.
The takeaway is that people worth $850k were more likely to own stocks between 2020 and 2022 than Sudanese cattle herders.
the headline might have an inadvertent effect of making readers think of someone like Bezos, rather than themselves. The $80,000 threshold puts many Americans in the global 1%, despite not considering themselves wealthy.
I think their comment was to encourage readers to engage with the article rather than dismissing it based on the title and feeling resentful towards the “rich”.
Unfortunately, I suspect engaging with the article is likely to engender the same feelings (emphasis mine):
> A total of $42 trillion in new wealth has been created since 2020, with $26 trillion, or 63%, of that being amassed by the top 1% of the ultra-rich, according to the report.
Regardless, it is refreshing to see OP's explanation in these comments.
Going by individual income, 75% of Americans make less than that. Only one-quarter are in the global top 1%. Going by household income, 55% are below $80k. By net worth, 86% of households are below $850k.
Not to mention the fact that in some places in America, $80k is barely above the cost of living for a family of four. Plenty of Americans in the "global 1%" in terms of income have seen almost nothing of the new wealth created since 2020, and certainly have far less than $850k net worth (as you point out, there's a 31pp gap).
I would say however if you are managing to stay with a range of lifestyle you are probably gaining from new wealth even though it is not extra wealth which you are accumulating in a bank. You are generating new money and that is new wealth. Every year that 80K is new wealth, I am pretty sure that is how the definition is in this case.
A person in Sudan is averaging around $460 US a year, while in the US it is like $74K, and thus Americans are accumulating wealth at a higher percentage.
Also the comparative lifestyle in regards to goods and services are much different. While it might be more expensive to live in the US the lifestyle is dramatically different. Wealth doesn't always mean accumulation.
You know, "tax the rich" only puts more money in the hands of the government and the government bureaucrats. Those people are as corrupt as they (people) come. They are certainly no better than these 1% of the rich they want to villify.
I'm not saying that this "information" makes me happy -- I'm nowhere near any 1% -- but I'm saying that taking the money from the 1% and giving it to the government won't solve anything.
I mean, yeah, what do expect to happen when you drive mom and pop out of business with lockdowns while allowing your cronies to keep their big box and online stores open?
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[ 3.8 ms ] story [ 105 ms ] threadAsset values swing most wildly on the basis of the risk free rate, which is where most of the new "wealth" created since 2020 has come from (ZIRP, QE etc). It is somewhat illusory in that low rates must be sustainable to support elevated valuations. Obviously we're seeing the other side of that with rates having risen due to inflationary pressures.
e.g. look at how much "wealth" Japan had in the 1980's before their economy imploded. The imperial palace was perceived to be worth more than all of California, something like that.
https://en.wikipedia.org/wiki/Japanese_asset_price_bubble
I would argue yes. Not because there's more wealth, but because it means that a greater percentage of the existing wealth is going to the largest 1%.
Then your future salaries are also real assets, and should be counted for your net worth. The same argument applies, you can take out loans against your future earnings and spend it, so it is a part of your current net worth, right?
You say that maybe you get into an accident so you can't work? Same logic applies to stocks, something might happen and nobody wants to pay for them anymore rendering them useless.
So to make the comparison fair you have to be consistent. Either future earnings are assets, or they aren't, otherwise the comparison isn't meaningful.
Note, life could become worse for almost everyone, while real wealth is created. I would argue that's pretty much what is happening. It doesn't mean real resources weren't created or extracted and someone owns those things.
The idea of altering these figures to account for happiness or quality of life is a fallacy in my opinion. GDP should be measured the way it is. Decmocracies need to figure out their own definitions of "happiness" or whatever you want to call it and optimize for those parameters. But there is no combined measure that covers both.
Where I live, the only time my property tax rises is when the budget is increased. (Unfortunately, the budget keeps on increasing, because city council keeps having bigger and bigger dreams. Oh, yay, I’m so glad we’re dropping $50M on another sports centre I’ll never use. Better upgrade the pool while we’re at it, it’s been an entire decade since we last spent a fortune on it!)
Is that claim still valid when the current #2 richest person lost $200B?
Wealth is an amount. Income is a flow. These have different units.
Most people have debt - inflation transfers value from lenders to borrowers, so tons of people with car loans and college loans and mortgages are better off as inflation lowers the effective amount they owe.
Wages have increased significantly as inflation rose.
And no matter how you slice it real incomes have increased vastly over the past 40 years, e.g., https://fred.stlouisfed.org/series/MEHOINUSA672N
True. But it increased because personal income increased: https://fred.stlouisfed.org/series/MEPAINUSA672N
Furthermore, two income households have decreased as less people get married, so the personal income is even greater than that graph.
>Getting a job and hiring a nanny, maid, and gardener creates fictional household income, because homemaking is assigned $0 value by the Fed.
That's just nonsense. First, very few households have any of those, and certainly not the median house.
And, as the graph above shows, median personal income has vastly increased over the same time.
If you want to make stuff up, try looking up the data before making false claims.
What, would you prefer that of a national socialist?
It's false if one person on the planet made a fortune honestly and ethically
Yeah, that is the whole point of the statement. No fortune is honest or ethical. The concepts are incompatible.
A weak argument and unhelpful perspective
It is only unhelpful if you want to perpetuate the crime of wealth hoarding.
How so?
Scenario: Assume that someone was born intelligent, and chose to sacrifice their time and money to become a surgeon, and then earned a lot of money. They chose to invest that money to generate more money.
It isn't unethical because they didn't break a law. It isn't dishonest because they worked for it.
What do you see that I don't see?
Bahahahahahaha
"Political nihilism is the position holding no political goals whatsoever, except for the complete destruction of all existing political institutions—along with the principles, values, and social institutions that uphold them.[105] Though often related to anarchism, it may differ in that it presents no method of social organisation after a negation of the current political structure has taken place. An analysis of political nihilism is further presented by Leo Strauss."
Is that a good game?
Why not just appoint the natural-born redheads as kings?
Seriously, if I'm born into a "game" where I'm predestined to lose by my birth status, then I'd rather not play that game at all, thank you very much.
However, you have to wonder about the mentality of not seeking wealth as your primary goal in life. The smartest are not necessarily the wealthiest. Was Einstein the richest person in the world? No. He chose to pursue science, not business.
I feel that society should actually deter people who are obsessed with wealth-seeking over all other values. That's unhealthy personally and socially. Money is not the true measure of a man.
I argue that this is good for society overall. It’s far better for my wife and I to do our best to raise successful children (for whatever definitions of success we choose) than to leave them to fend for themselves.
Inherent in parents trying to do their best with/for their kids is that some parents will do that more effectively than others. Other parents will simply be not good parents. Being born to not good parents will suck for sure.
That's a bit questionable, because overbearing or helicopter parents can do a lot of damage to a kid. ;-) Anyway, it seems like a bit of a false dichotomy too, because Plato argued in the Republic that children should be raised communally rather than by individual parents.
Well, no, by definition you need buy-in from the whole community.
In Plato's Republic, parents didn't know which children were theirs, and vice versa. This eliminated exactly the thing you were talking about: favoritism toward your own children.
Mark Zuckerberg went to Exeter before going to Harvard. Raw intellect alone doesn't open doors to schools like Exeter. It would also be fair to say that attending Exeter also increased Zuckerberg's probability to attend Harvard, which increased his probability to come across groundbreaking ideas that he could then steal.
A lot of lasting generation wealth is from cronyism as well. For example many of the large land owners (even to this day) in England descended from folks that were involved in the Norman invasion of England. Some of those didn't directly use their 'superior genes' to conquer the land, they just happened to be buddies with William I.
There was a lot of propping up of google/fb in their early days by other wealthy investors and in the case of Google, the US government.
Feel free to continue to worship your tech gods for their superior genetics though. Circumstance, luck and timing has a lot to do with the current set of billionaires we have in tech. They rode a wave of technological innovation that they themselves didn't even invent. Well other than maybe Pagerank. That was pretty awesome. Most of the ideas were lifted from the "greatest hits" of computer science though.
In the end there has to be a 'winner.' It could have easily been a different group of people if public preference was ever so slightly different. I could be easily typing this message on a AOL browser right now if the outcome was slightly different.
This purely "genetic winner" viewpoint is super narrow viewpoint that if one is not careful can quickly get disgusting. Genes that are advantageous in one situation can be poor in another. Barring outliers, there is sometimes no "best" when talking about genetics/expression of genes. Pugs do much better around humans than wolves. Who has the better genetics?
If you're lucky enough to have parents and ancestors that put their money to work compounding over a long time period, it would be growing more each year than the rest of us can hope to earn in our lifetimes. No evil plan needed. Just time.
https://finance.yahoo.com/news/5-huge-lies-generational-weal...
As a software engineer, I'm doing alright. I'm not jealous of the idiots of the world who are idiotic and think they are some kind of genius, like a Trump or a Kushner.
Have you ever seen how overrepresented children of professors are in cognitive fields and exceptional attainment? It's a lot higher than rich parents.
And then there are those who make so much money that it's not even worth their time or effort to bend over and pick up a hundred dollar bill.
2. This is conveniently timed from a low stock market point. If they had timed it from Jan 2022 when the market most recently peaked, I bet the top x% have lost more than the bottom x%.
The takeaway is that people worth $850k were more likely to own stocks between 2020 and 2022 than Sudanese cattle herders.
I think their comment was to encourage readers to engage with the article rather than dismissing it based on the title and feeling resentful towards the “rich”.
> A total of $42 trillion in new wealth has been created since 2020, with $26 trillion, or 63%, of that being amassed by the top 1% of the ultra-rich, according to the report.
Regardless, it is refreshing to see OP's explanation in these comments.
Think it could be good spin in the future for Americas ultra-rich.
"Don't worry 80k/yr, you're part of the global 1%!" - Daddy Warbucks
A person in Sudan is averaging around $460 US a year, while in the US it is like $74K, and thus Americans are accumulating wealth at a higher percentage.
Also the comparative lifestyle in regards to goods and services are much different. While it might be more expensive to live in the US the lifestyle is dramatically different. Wealth doesn't always mean accumulation.
Gain: Perspective. Escaping how one person framed the situation, elucidating another way to consider the issue.
Result: Greater objectivity.
Requirement: Critical thinking. Reasoning ability. An open mind.
I'm not saying that this "information" makes me happy -- I'm nowhere near any 1% -- but I'm saying that taking the money from the 1% and giving it to the government won't solve anything.
Try again
Not necessarily. You could tax the rich more and tax the non-rich less, leaving the same amount of money for the government.