Income inequality is good - Kevin O'Leary

[Magis]

O'Leary has expanded on this in numerous interviews before this segment even took place. He's not saying that's great news that some people are poor. He's saying that it's great news that some people are rich. He's also stated in numerous interviews that he thinks it doesn't matter how unequal wealth is, so long as everyone's wealth is increasing - the fact that the wealth of many people is not increasing is something that concerns him.

The problem is that arguably the wealth of many people is not increasing because the wealth of a few people increases so fast. The economy can only grow so fast- and if the economy is growing at 3% a year while gazillionaires' wealth grows at 10-20% a year, sooner or later the gazillionaires will be getting literally all the new wealth from the expanding economy.

I disagree with this completely and I don't see how you can substantiate it. Economic growth is not limited by some arbitrary maximum where some people can take their portion first and leave the scraps for the rest of us.

Counter example: this week Mark Zuckerberg's wealth increased by about $3 billion in a single day. It did so because someone that wasn't him sold a share of Facebook to someone else (that also wasn't him) at a higher price than on the previous day. According to the way wealth is calculated, the 16% increase in Facebook share price increased the value of Zuckerberg's holdings by $3 billion. That increase in his wealth didn't take a single penny out of the pocket of any poor person, and it didn't "use up" some finite amount of economic growth. In fact it had no direct negative consequences of any kind, and the person who sold that share will be paying capital gains taxes on his profit.

So at some point, yes wealth inequality becomes a problem in its own right, because it means that a handful of people control all the means by which anyone could conceivably get wealthier.

Again, this is unsubstantiated. The value of the stock holdings of the 85 wealthiest people is completely disconnected from: your skill set; the market value of your skill set; the demand for your skill set; your ability to create a product or to innovate or to sell a service. It certainly doesn't make you poorer.

And the sort of person who can get control of that much will predictably use it to enrich... themselves

The sort of person that has control of that much has their wealth tied up in a) ownership of their company or b) some other investment. Most people don't become rich by holding other people down (those that do should rightfully be opposed), and believe me, the best thing that could possibly happen to the stock market tomorrow is if everyone in the world magically became a millionaire.

Anyone else getting richer is going to be purely a random side-effect, and one accompanied by other people getting poorer, also as a random side-effect.

Nobody in the world wakes up in the morning and says, "How can I make Magis or Simon rich today?". If I want to become richer, I need to earn it somehow. At the same time, nobody wakes up wanting me to be poorer, either. These 85 wealthiest people certainly aren't holding me down, and in fact they are actually enabling my productivity by doing things like selling smartphones, providing energy, providing credit and other financial instruments, etc.

[K. A. Pital]

Economic growth is not limited by some arbitrary maximum where some people can take their portion first and leave the scraps for the rest of us.

It is limited, however, that only a given amount of economic growth can occur in a given time with a given technological level and market saturation level. An economy with saturated markets, such as most First World countries, can expand between 1-3% a year if no radical technical breakthrough occurs. That is true because it is corroborated by observation of industrial economies over time.

...believe me, the best thing that could possibly happen to the stock market tomorrow is if everyone in the world magically became a millionaire.

You cannot become one unless you are a capitalist. So this is feasible in case the entire population becomes capitalists (say, shareholders of a giant trust or several companies in a tight oligopoly). I'll leave it to you to judge just how feasible this is. Share ownership in America is at a very high level, considering it is a country that is more advanced than many in capitalist development (markets, ease of buy and sell) and yet it is nowhere near 100%. Worse yet, shares aren't really distributed equally among the working population. So that 50% figure which people often throw around usually does not mean 50% of America's citizens are millionaires, or that they hold 50% of all wealth in US under their command. Actually, were it so, America would've been one of the fairest societies on Earth.

[Welf]

Again, this is unsubstantiated. The value of the stock holdings of the 85 wealthiest people is completely disconnected from: your skill set; the market value of your skill set; the demand for your skill set; your ability to create a product or to innovate or to sell a service. It certainly doesn't make you poorer.

The value of the 85% wealthiest people is directly connected from our skill set. Their wealth comes from the companies they own (or some options on companies), and the value of the companies is defined by the profit they make and will make. And they make more profit if they pay less to their employees.
That's the core of the problem. In a world with strong unions, worker protection laws, social security and universal health insurance worker will get a bigger share of the pie and there are less billionaires.

[Irbis]

I disagree with this completely and I don't see how you can substantiate it. Economic growth is not limited by some arbitrary maximum where some people can take their portion first and leave the scraps for the rest of us.

Yeah, because money, resources, time and such unimportant items are infinite

Even if just one of the above was finite, much less all of them, you'd have quite non-arbitrary maximum to any possible growth.

Counter example: this week Mark Zuckerberg's wealth increased by about $3 billion in a single day. It did so because someone that wasn't him sold a share of Facebook to someone else (that also wasn't him) at a higher price than on the previous day. According to the way wealth is calculated, the 16% increase in Facebook share price increased the value of Zuckerberg's holdings by $3 billion.

And tell me, what exactly he did to deserve it? Worked harder? Did things more efficiently? Or just could lie with hookers in bed whole day and still get this?

That increase in his wealth didn't take a single penny out of the pocket of any poor person, and it didn't "use up" some finite amount of economic growth.

Yeah, because had poor people get this money instead, they wouldn't spend it on silly things like manufactured goods and services actually fuelling economic growth. No, they would let the money languish doing nothing! Oh, wait, or maybe you're full of shit and maybe it's current situation that is harmful to economy?

Again, this is unsubstantiated. The value of the stock holdings of the 85 wealthiest people is completely disconnected from: your skill set; the market value of your skill set; the demand for your skill set; your ability to create a product or to innovate or to sell a service. It certainly doesn't make you poorer.

Yeah, because they make money appear out of thin air with their Übermensch powers and not in fact leech that capital out of industries, workers and capitals they control.

The sort of person that has control of that much has their wealth tied up in a) ownership of their company or b) some other investment. Most people don't become rich by holding other people down (those that do should rightfully be opposed), and believe me, the best thing that could possibly happen to the stock market tomorrow is if everyone in the world magically became a millionaire.

A) This demonstrates how little you understand of economics, B) stock, you say? Reality called, you might want to read this article. Or this. See this hoarded money doing anything productive? Because I don't.

These 85 wealthiest people certainly aren't holding me down, and in fact they are actually enabling my productivity by doing things like selling smartphones, providing energy, providing credit and other financial instruments, etc.

Yes, because if someone slices half of the cake and hides it in his pocket instead of consuming he definitely isn't holding other 99 people down when it comes to fight over remaining half of cake, right? Except, no matter how you slice it, it's still half of the cake, not a whole. By the way, quite a lot of these people engage in speculation and destruction of assets on a profit - I wonder, will you also say they are not "holding me down" if one of them bought your company only to tear it apart for assets after he artificially downwalued it? Or manipulated currency of the nation you're trading with so that your export is no longer profitable just for pocketing profits on long time currency options? Because all of this happens, you know, and is exactly why too much capital in concentration is harmful.

[Starglider]

Yeah, because money, resources, time and such unimportant items are infinite

Money is infinite, in that we can issue as much as we want. In modern electronic-fiat economies, creating money is almost trivially easy.

That increase in his wealth didn't take a single penny out of the pocket of any poor person, and it didn't "use up" some finite amount of economic growth.

Yeah, because had poor people get this money instead, they wouldn't spend it on silly things like manufactured goods and services actually fuelling economic growth. No, they would let the money languish doing nothing! Oh, wait, or maybe you're full of shit and maybe it's current situation that is harmful to economy?

Other than cash savings, wealth is not money. Stock valuations are not money, not just because blocks of stock that large are not liquid, but because every stock market 'inflow' is balanced by an 'outflow'. Money is not goods, money does not have direct utility, distribution of money is only relevant to the extent that it determines distribution of actually useful goods & servies. While clearly the correlation is strong (thus the acquired utility of money) it is not total and there are many complete disconnects.

Yeah, because they make money appear out of thin air with their Übermensch powers

In the finance industry we prefer to call this 'issuing credit' or sometimes after a few drinks 'ha suckers we own the Federal Reserve, the regulators and most of the pundits and politicians'.

[Purple]

Yeah, because money, resources, time and such unimportant items are infinite

Money is infinite, in that we can issue as much as we want. In modern electronic-fiat economies, creating money is almost trivially easy.

That's actually a major source of the modern economic inequality. Used to be that if you wanted to get rich you had to have someone creating that value for you. And that meant that someone would get a chance to earn something from it as well. Now a days, when you can produce money out of thin air there is no incentive to do anything other than multiply your own abstract wealth. Thus you can have people getting richer and richer even whilst their number of employees and their total output drops.

[Starglider]

Now a days, when you can produce money out of thin air there is no incentive to do anything other than multiply your own abstract wealth. Thus you can have people getting richer and richer even whilst their number of employees and their total output drops.

Careful, you almost sound like one of those horrible goldbug or worse bitcoin libertarians.

[Purple]

Now a days, when you can produce money out of thin air there is no incentive to do anything other than multiply your own abstract wealth. Thus you can have people getting richer and richer even whilst their number of employees and their total output drops.

Careful, you almost sound like one of those horrible goldbug or worse bitcoin libertarians.

Actually I am a communist and believe that the stock market is the natural enemy of workers everywhere.

[Starglider]

Actually I am a communist and believe that the stock market is the natural enemy of workers everywhere.

Actually the stock market used to gather capital and use it to build factories, stock valuations used to go up on capacity expansion. However in the late 80s all the quants programmed our algorithms to bid up the stock price on detection of the keywords 'layoff' and 'redundancies' in the Reuters feed. So clearly it is all our fault.

[Welf]

Other than cash savings, wealth is not money. Stock valuations are not money, not just because blocks of stock that large are not liquid, but because every stock market 'inflow' is balanced by an 'outflow'. Money is not goods, money does not have direct utility, distribution of money is only relevant to the extent that it determines distribution of actually useful goods & servies. While clearly the correlation is strong (thus the acquired utility of money) it is not total and there are many complete disconnects.

Yes, but the different forms of non-monetary wealth, e.g. real estate, treasuries, stocks, derive their value from future cash flows or the possibility to create cash flow. For the argument of Irbis it doesn't really matter if the transfer of money takes place now or later.
In other words: The stock market keeps score how much the rich will screw the poor in future generations.

[Enigma]

Is the CBC financed through taxes like the BBC? Because if it is...

Yup, funded by the federal government. But not through TV fees which I believe BBC get's their funding?

[Simon_Jester]

O'Leary has expanded on this in numerous interviews before this segment even took place. He's not saying that's great news that some people are poor. He's saying that it's great news that some people are rich. He's also stated in numerous interviews that he thinks it doesn't matter how unequal wealth is, so long as everyone's wealth is increasing - the fact that the wealth of many people is not increasing is something that concerns him.

The problem is that arguably the wealth of many people is not increasing because the wealth of a few people increases so fast. The economy can only grow so fast- and if the economy is growing at 3% a year while gazillionaires' wealth grows at 10-20% a year, sooner or later the gazillionaires will be getting literally all the new wealth from the expanding economy.

I disagree with this completely and I don't see how you can substantiate it. Economic growth is not limited by some arbitrary maximum where some people can take their portion first and leave the scraps for the rest of us.

It's simple arithmetic at some point.

If billionaires consistently over long periods* become richer at a rate which outpaces overall economic growth, that represents them getting a larger percentage share of the pie. The entire point of your argument is that enlarging the pie benefits everyone equally, even if one or two people gain larger absolute rewards- each thin slice gets 10% bigger at the same time that the one big fat slice gets 10% bigger.

But if the big fat slice grows at 20% at the same time that the overall size of the pie only increases 5-10%, then inevitably that means that the owner of the big slice ends up with more pie relative to everyone else. And depending on the overall size of the pie, it's possible that no one else is actually getting any more pie at all. A 5% increase in the pie might translate to a 20% increase in the share of one person who was getting 25% of the pie to begin with... and no one else gets any, let alone an increase proportionate to the first guy's.

*(i.e. not Mark Zuckerberg's paper wealth soaring overnight and collapsing next week)

So at some point, yes wealth inequality becomes a problem in its own right, because it means that a handful of people control all the means by which anyone could conceivably get wealthier.

Again, this is unsubstantiated. The value of the stock holdings of the 85 wealthiest people is completely disconnected from: your skill set; the market value of your skill set; the demand for your skill set; your ability to create a product or to innovate or to sell a service. It certainly doesn't make you poorer.

If the 85 (or for that matter 850, 8500, or 85000) wealthiest people are able to game the economy such that wages stagnate, then hell yes the value of their stock holdings (and controlling interest in corporations and lobbyists) is connected with my employability.

This kind of thing could conceivably create an economy where I as an individual might be able to thrive, but where the average citizen sees no net improvement over time, because for every person going from rags to upper-middle-class riches, there is at least one more person going from riches to rags.

The market is not an ideal frictionless vacuum; a large enough group of people who control a large enough share of the total value present in the market can systematically alter its dynamics just by existing.

And the sort of person who can get control of that much will predictably use it to enrich... themselves

The sort of person that has control of that much has their wealth tied up in a) ownership of their company or b) some other investment. Most people don't become rich by holding other people down (those that do should rightfully be opposed), and believe me, the best thing that could possibly happen to the stock market tomorrow is if everyone in the world magically became a millionaire.

The real problem arises when people who control great wealth seek to manipulate the rules of the system to make it easier on themselves. Because they are individually more powerful, they are better at rule-bending than the middle and lower classes.

If they want labor laws that favor the interests of corporations over the stability and prosperity of the average worker, they have a good chance of getting those laws. If they want tax cuts for themselves, they have a good chance of getting them, and getting relatively bigger, friendlier cuts than random people who can't afford to keep accountants or lawyers on retainer.

Keep this up for twenty years and you get an economic climate where it is easy to increase your wealth as a billionaire, but relatively hard to do so when living paycheck to paycheck. The predictably result is that a growing share of newly created wealth is 'born' under the control of billionaires, and less of it is born under the control of the lower class.

Anyone else getting richer is going to be purely a random side-effect, and one accompanied by other people getting poorer, also as a random side-effect.

Nobody in the world wakes up in the morning and says, "How can I make Magis or Simon rich today?". If I want to become richer, I need to earn it somehow. At the same time, nobody wakes up wanting me to be poorer, either. These 85 wealthiest people certainly aren't holding me down, and in fact they are actually enabling my productivity by doing things like selling smartphones, providing energy, providing credit and other financial instruments, etc.

You're neglecting the effect of the system- if you are VERY rich, you may get up in the morning and think "how can I alter the legal regime to get richer?" Or "how can I prevent any new competitors from arising and making my company less rich?"

Given free rein to do these things, the result is a system where (yes) no one cares if you get richer or poorer. But the system is nevertheless biased so that falling is at least as easy as rising- because opportunities to rise are being crowded out.

[Guardsman Bass]

Actually I am a communist and believe that the stock market is the natural enemy of workers everywhere.

Actually the stock market used to gather capital and use it to build factories, stock valuations used to go up on capacity expansion. However in the late 80s all the quants programmed our algorithms to bid up the stock price on detection of the keywords 'layoff' and 'redundancies' in the Reuters feed. So clearly it is all our fault.

Wouldn't surprise me, although they'd have to take a break from trying to confuse other algorithms with fake order spam to do it.

[Magis]

I disagree with this completely and I don't see how you can substantiate it. Economic growth is not limited by some arbitrary maximum where some people can take their portion first and leave the scraps for the rest of us.

Yeah, because money, resources, time and such unimportant items are infinite

Even if just one of the above was finite, much less all of them, you'd have quite non-arbitrary maximum to any possible growth.

I didn't say that potential growth was infinite. I said that it was not limited to an arbitrary maximum. I don't know if the rolling of your eyes was directed at my comment or at your own lack of reading comprehension. The growth rate is a result of the change in an economy - it does not impose a change in an economy. Your concept of the cause-and-effect here is backwards.

Counter example: this week Mark Zuckerberg's wealth increased by about $3 billion in a single day. It did so because someone that wasn't him sold a share of Facebook to someone else (that also wasn't him) at a higher price than on the previous day. According to the way wealth is calculated, the 16% increase in Facebook share price increased the value of Zuckerberg's holdings by $3 billion.

And tell me, what exactly he did to deserve it? Worked harder? Did things more efficiently? Or just could lie with hookers in bed whole day and still get this?

There are many way to address the point you raised. For starters, as an aside, I think he did "deserve" it because he (and Sheryl Sandberg) are primarily responsible for the success of the company. But even if they weren't, and even if he didn't do anything at all, I would still wouldn't have a problem with him or his wealth. Again, there are several ways to address this, which I shall do below.

On one hand, I could say he deserves it because he possesses something that someone else is willing to pay for. He invested in a company, that company grew, and now others want to buy shares of that company from him. So whether you think he deserves it or not, the person who wants to buy his shares think the shares are worth that price, and since the buyer and seller are the only people involved, the price they agree upon isn't any of your business.

On the other hand, I could say he deserves it because in our society, every adult deserves the right to enter into contracts with other adults without undue interference by the State attempting to implement some social engineering policy.

But what I will actually say is that the question of whether he deserves it or not is a silly, arbitrary and irrelevant one. By what standard do we say someone deserves something? If you own a house and that house appreciates in value, do you deserve that? If you put all your money into an investment and that investment fails, do you deserve to lose your money? Does a lottery winner deserve his winnings? Does someone that flips burgers and has no skills whatsoever except being able to move his limbs deserve $15/hour? Who should we put in charge of deciding these things? I think it's fair enough to say that we leave that decision to the people who are actually involved in the transactions. I don't think that Paris Hilton has done anything of any significance, but I think she deserves her money because someone was willing to give it to her, and it's not my place to interfere in their business dealings.

That increase in his wealth didn't take a single penny out of the pocket of any poor person, and it didn't "use up" some finite amount of economic growth.

Yeah, because had poor people get this money instead, they wouldn't spend it on silly things like manufactured goods and services actually fuelling economic growth. No, they would let the money languish doing nothing! Oh, wait, or maybe you're full of shit and maybe it's current situation that is harmful to economy?

I made no claim at all regarding what other people would spend the money on. I made no claim at all that the economy would be worse off if poor people had more money instead. My claim was simply that when the stock market appreciates, and someone gains wealth as a result of higher share prices, that in particular does not extract any money from the pockets of poor people. And vice versa, if the stock market depreciates and a billionaire loses wealth, poor people don't gain money. I'm seeing a trend here of you rolling your eyes whenever you fail to comprehend something - maybe this should be a future indicator to you. Whenever you're about to roll your eyes, re-read whatever your responding to.

Again, this is unsubstantiated. The value of the stock holdings of the 85 wealthiest people is completely disconnected from: your skill set; the market value of your skill set; the demand for your skill set; your ability to create a product or to innovate or to sell a service. It certainly doesn't make you poorer.

Yeah, because they make money appear out of thin air with their Übermensch powers and not in fact leech that capital out of industries, workers and capitals they control.

They make money because they legally possess something that someone else is willing to pay for. And if Mark Zuckerberg's stock becomes worth more on Monday, that doesn't make me poorer (unless I had a short position in that equity, or something). His stock portfolio does not affect the marketability of my skills, and therefore does not affect my ability to be economically productive. The actions of his company might do that (for example by succeeding over his competitors, etc.) but that is a different issue.

The sort of person that has control of that much has their wealth tied up in a) ownership of their company or b) some other investment. Most people don't become rich by holding other people down (those that do should rightfully be opposed), and believe me, the best thing that could possibly happen to the stock market tomorrow is if everyone in the world magically became a millionaire.

A) This demonstrates how little you understand of economics, B) stock, you say? Reality called, you might want to read this article. Or this. See this hoarded money doing anything productive? Because I don't.

Oh boy. Your comment is especially ironic because you call into question my understanding of economics while simultaneously linking to articles that don't refute my claim whatsoever. My claims were addressing the net worth of individuals, not the cash held by a corporation (granted, they are related). Now, are the "cash hoards" by Apple, etc., doing anything productive? You don't think so, but you do realize that their "cash" isn't a big pile of dollar bills, right? In the case of Apple, their "cash" is actually a mix of corporate securities, government securities, municipal bonds, and other loans. In 2013, less than $6 billion of Apple's $150 billion was actually in cash. You might continue to hold the position that, for example, owning government treasurys or municipal bonds isn't productive, but I don't share that view.

These 85 wealthiest people certainly aren't holding me down, and in fact they are actually enabling my productivity by doing things like selling smartphones, providing energy, providing credit and other financial instruments, etc.

Yes, because if someone slices half of the cake and hides it in his pocket instead of consuming he definitely isn't holding other 99 people down when it comes to fight over remaining half of cake, right? Except, no matter how you slice it, it's still half of the cake, not a whole.

Uh oh! Eye-roll alert! I don't think yours is a good analogy. I think a better (but still bad) analogy would be that each year everyone bakes a new cake, but some people can bake more cake than you can. But their ability to bake a big cake doesn't force you to bake only a small cake. No matter how much more money the richest people in the world make next year, it doesn't prevent me from a) starting a new business, b) getting more education, c) refining my skills, or for that matter anything else that would allow me to be more productive next year than I was in the prior year. If some rich person does act in such a way as to hold down society at large, I would not support that (as I stated explicitly in my post and which you can see below). But great wealth does not always lead to that behavior and that behavior is not restricted to the wealthy.

By the way, quite a lot of these people engage in speculation and destruction of assets on a profit - I wonder, will you also say they are not "holding me down" if one of them bought your company only to tear it apart for assets after he artificially downwalued it?

Why in the world would I sell my company unless I thought I was getting a good deal for it? I wouldn't sell it for a low price just because someone asked me to.

Or manipulated currency of the nation you're trading with so that your export is no longer profitable just for pocketing profits on long time currency options? Because all of this happens, you know, and is exactly why too much capital in concentration is harmful.

Maybe you missed the part where I said the following,

Most people don't become rich by holding other people down (those that do should rightfully be opposed), and believe me, the best thing that could possibly happen to the stock market tomorrow is if everyone in the world magically became a millionaire.

[Welf]

The problem is that arguably the wealth of many people is not increasing because the wealth of a few people increases so fast. The economy can only grow so fast- and if the economy is growing at 3% a year while gazillionaires' wealth grows at 10-20% a year, sooner or later the gazillionaires will be getting literally all the new wealth from the expanding economy.

So at some point, yes wealth inequality becomes a problem in its own right, because it means that a handful of people control all the means by which anyone could conceivably get wealthier. And the sort of person who can get control of that much will predictably use it to enrich... themselves. Anyone else getting richer is going to be purely a random side-effect, and one accompanied by other people getting poorer, also as a random side-effect.

Mate, you life in the 90s:

–All told, average inflation-adjusted income per family climbed 6% between 2009 and 2012, the first years of the economic recovery. During that period, the top 1% saw their incomes climb 31.4% — or, 95% of the total gain — while the bottom 99% saw growth of 0.4%

Altough the source is a blog on the webpage of The Wall Street Journal, and we all know they are hard-core left-wingers.

There are many way to address the point you raised. For starters, as an aside, I think he did "deserve" it because he (and Sheryl Sandberg) are primarily responsible for the success of the company. But even if they weren't, and even if he didn't do anything at all, I would still wouldn't have a problem with him or his wealth. Again, there are several ways to address this, which I shall do below.

On one hand, I could say he deserves it because he possesses something that someone else is willing to pay for. He invested in a company, that company grew, and now others want to buy shares of that company from him. So whether you think he deserves it or not, the person who wants to buy his shares think the shares are worth that price, and since the buyer and seller are the only people involved, the price they agree upon isn't any of your business.

On the other hand, I could say he deserves it because in our society, every adult deserves the right to enter into contracts with other adults without undue interference by the State attempting to implement some social engineering policy.

But what I will actually say is that the question of whether he deserves it or not is a silly, arbitrary and irrelevant one. By what standard do we say someone deserves something? If you own a house and that house appreciates in value, do you deserve that? If you put all your money into an investment and that investment fails, do you deserve to lose your money? Does a lottery winner deserve his winnings? Does someone that flips burgers and has no skills whatsoever except being able to move his limbs deserve $15/hour? Who should we put in charge of deciding these things? I think it's fair enough to say that we leave that decision to the people who are actually involved in the transactions. I don't think that Paris Hilton has done anything of any significance, but I think she deserves her money because someone was willing to give it to her, and it's not my place to interfere in their business dealings.

The whole problem is actually pretty easy to understand:
Value of stock = future profits / interest deflator
profit = revenue - cost
cost includes wages
This means: value of stock is bigger if wage is lower

And if you have a few billions you can spare a few millions to rig the game. Or course you call it "right to work" or explain that tax cuts for the rich will be beneficial due to trickle-down effects.
Or you plain set up a cartel.

Oh boy. Your comment is especially ironic because you call into question my understanding of economics while simultaneously linking to articles that don't refute my claim whatsoever. My claims were addressing the net worth of individuals, not the cash held by a corporation (granted, they are related). Now, are the "cash hoards" by Apple, etc., doing anything productive? You don't think so, but you do realize that their "cash" isn't a big pile of dollar bills, right? In the case of Apple, their "cash" is actually a mix of corporate securities, government securities, municipal bonds, and other loans. In 2013, less than $6 billion of Apple's $150 billion was actually in cash. You might continue to hold the position that, for example, owning government treasurys or municipal bonds isn't productive, but I don't share that view.

If one company holds excessive cash then it might be working in other companies. If all companies do that then there are wasted resources. And if it's better sued by the government it should be taxed away.
And maybe you shouldn't harp on terms when the pros use it differently.

[aerius]

Yeah, because they make money appear out of thin air with their Übermensch powers

In the finance industry we prefer to call this 'issuing credit' or sometimes after a few drinks 'ha suckers we own the Federal Reserve, the regulators and most of the pundits and politicians'.

Which leads to the fun part (which you know already).

In the real world, credit and debt are 2 sides of the same coin, and for the most part they spend just like cash. Buying a computer with a credit card is the same as buying it with cash, and you can buy a home with a mortgage just as easily as you can by plunking down a briefcase full of $100 bills. Cash & credit both spend the same way, in nearly all cases, credit = cash.

This is total outstanding credit


This is income for the top 1%


If we had non-inflation adjusted income the graphs would match even better.

If you want to get down to it, the problem is the US runs a policy which encourages taking on debt and credit issuance. The top percentile(s) are positioned to take advantage of it since they're the ones who have investment portfolios, everyone else gets fucked. Trying to tax it away won't work, you need to get to the root of the problem instead of just treating the symptoms.

[Simon_Jester]

The problem is that arguably the wealth of many people is not increasing because the wealth of a few people increases so fast. The economy can only grow so fast- and if the economy is growing at 3% a year while gazillionaires' wealth grows at 10-20% a year, sooner or later the gazillionaires will be getting literally all the new wealth from the expanding economy.

So at some point, yes wealth inequality becomes a problem in its own right, because it means that a handful of people control all the means by which anyone could conceivably get wealthier. And the sort of person who can get control of that much will predictably use it to enrich... themselves. Anyone else getting richer is going to be purely a random side-effect, and one accompanied by other people getting poorer, also as a random side-effect.

Mate, you life in the 90s:

–All told, average inflation-adjusted income per family climbed 6% between 2009 and 2012, the first years of the economic recovery. During that period, the top 1% saw their incomes climb 31.4% — or, 95% of the total gain — while the bottom 99% saw growth of 0.4%

Actually, that is exactly my point- the rich have been gaining income at ~10% per year for long enough that what I describe has already happened: total income (and by implication the rate of wealth-growth) is increasing by 2% per year, the pie is getting larger...

...And all that increased pie-size is going to the people who already get to eat the biggest share of said pie.

My point was simply that this HAS to happen as a matter of mathematical common sense, if you have billionaires getting very rich, at an increasing rate that outstrips the growth rate of the economy. Allow enough income inequality and economic growth will ALWAYS cease to benefit the average citizen.

[Welf]

Actually, that is exactly my point- the rich have been gaining income at ~10% per year for long enough that what I describe has already happened: total income (and by implication the rate of wealth-growth) is increasing by 2% per year, the pie is getting larger...

...And all that increased pie-size is going to the people who already get to eat the biggest share of said pie.

My point was simply that this HAS to happen as a matter of mathematical common sense, if you have billionaires getting very rich, at an increasing rate that outstrips the growth rate of the economy. Allow enough income inequality and economic growth will ALWAYS cease to benefit the average citizen.

I agree and did agree, I maybe have been writing it a bit too unclear. We sadly have already reached the point where all the gains go the top.
Something that is most likely related to the growing debt aerius mentioned. The lower classes want to increase their standard of living and can do that only by increasing their debt.

[K. A. Pital]

The growth rate is a result of the change in an economy - it does not impose a change in an economy.

Growth rate is a result of change in economy, but rate of change (unless we're talking about rapid collapse) in economies with saturated market is generally slow.

But even if they weren't, and even if he didn't do anything at all, I would still wouldn't have a problem with him or his wealth.

So you don't have a problem with a complete non-meritocracy when wealth is bestowed upon some persons randomly? I guess there's not much left to argue.

I think it's fair enough to say that we leave that decision to the people who are actually involved in the transactions. I don't think that Paris Hilton has done anything of any significance, but I think she deserves her money because someone was willing to give it to her, and it's not my place to interfere in their business dealings.

I don't think it is a good idea to think that some nebulous 'people' could decide everything. You say that people have no right to meddle in the affairs of others. However, inheriting wealth means the person receiving it not just didn't do shit to deserve it, he didn't even do anything socially useful (as a founder of a high-tech company may have done). He's just a worthless piece of meat that happened to be born from a particular vagina, and this vagina made him golden. I do not see why we "shouldn't meddle". In fact, I find the division of people into ordinary and golden reprehensible.

And vice versa, if the stock market depreciates and a billionaire loses wealth, poor people don't gain money.

They do. Every dollar they have is worth more relative to the rich person. If the wealth gap contracts, this means that the poor person can buy a bigger share of what a rich person can buy. They may not have become richer in the absolute sense, but certainly their purchasing power increased relatively, and thus in the relative sense they have become richer.

But their ability to bake a big cake doesn't force you to bake only a small cake.

False. The amount of investment is limited by the economy in a given time. If someone can make a big cake, he will get the investment. The other person would necessarily have to bake a small cake, since he wouldn't get the flour to bake a big one.