One of the stupidest defenses of shareholder maximization theory is the bullshit argument that since everybody owns stocks these days through our 401Ks and mutual funds, then high corporate profits and a booming stock market benefits everybody! Except, not really:
The richest 1% of Americans own half of all mutual funds and stocks. The bottom 90% hold 9%. http://t.co/OVSg0o7Wxr pic.twitter.com/knAt10cCnf
— Sudeep Reddy (@Reddy) December 29, 2014
The vast majority of working and middle class Americans simply don’t own much stock, because you can’t invest money you don’t have.
Forty years ago, annual US corporate profits averaged about 6 percent of GDP. Today profits consume about 13 percent of GDP. That’s an extra $1 trillion a year in corporate profits propping up equity prices. Meanwhile, labor’s share of GDP has declined by a corresponding 7 percent over the same period. Coincidence?
Righties hate numbers like this, fearing that they might be used to justify some sort of massive redistribution of wealth. But that redistribution is already going on. It’s just going in the wrong direction.
Righties hate numbers like this, fearing that they might be used to justify some sort of massive redistribution of wealth. But that redistribution is already going on. It’s just going in the wrong direction.
I suppose that depends on how one measures it.
Wealth, essentially, is net worth.
From Wolff’s paper, p.40-41 (42-43 in the PDF):
Net worth inequality, on the other hand, remained
relatively unchanged between 2010 and 2013, though the share of the top one percent was up by 1.6 percentage points.
Why, no substantial change in net worth inequality? Why might that be?
Taxation and government transfers, probably. Wealth redistribution.
I think Goldy is wrong in his final conclusion. The magnitude of the redistribution may not be as great he would like to see, certainly. The direction of that redistribution
If the income distribution was unchanged between 2011 and 2013, the average federal tax rate for all households would have been 1.7 percentage points higher under 2013 tax rules than it was in 2011, CBO estimates. Although average federal tax rates would have increased by about 1 percentage point across much of the income distribution, the average tax rate for households in the top 1 percent of the income distribution would have increased by an estimated 4.3 percentage points.
https://www.cbo.gov/publication/49440
seems correct.
Lefties hate numbers like this.
The real dark side of all this is that much of the “value” of the holdings of mutual funds is based, directly or indirectly, on “amplified” consumer debt. So, as the great horde of Baby Boomers retire and try to cash in their “investments” to pay off their loans…well, it ain’t gonna be pretty.
Wolff’s NBER paper, Table 10:
Net worth, average annual real rate of return, 2010-2013
Top 1% 6.16%
Next 19% 5.94%
Middle three quintiles 6.94%
And yet, there it is, plain as day in the abstract:
“The inequality of net worth, after almost two decades of little movement, was also up sharply… there was virtually no change in median wealth [a good proxy for the lower quintiles] from 2010 – 2013 despite the rebound in asset prices.”
So what is the surprising part here? More money being slurped up by the top 1% would obviously be surfaced as a higher perceived tax rate unless they’re THAT good at hiding it all… even after this “redistribution”, wouldn’t you know it, they’re still up in the game.
And way to minimize the gap in net worth behind the delta of a few tenths of a percent. Who would have guessed it’s easier to double 2 vs. 200 thousand?
@ 4
Also in the abstract is the mention of the over-leveraged middle class prior to the Great Recession.
If you buy too much shit, then actually have to pay it off in a rough economy, then you don’t have enough of an asset base to take advantage of investment opportunities when the market starts to advance again.
But, hey, that second Volvo sure looked great in the driveway.
Starting at 20, and ending at 40, looks better than starting at 2 and ending at 4.
Goldy’s right that you can’t invest money you don’t have, options trading aside.
Unfortunately, you can SPEND money you don’t have, which was done to excess prior to the 2007-2010 period of time. There’s your over-leveraging.
The only way to win this game if you are in the lower 90% is to stiff your creditors when hard times hit.
That’s what the big guys do — and so do I.
Apologists for uber-wealth like Doctor Bob love to use “average” numbers to make their points, because whenever Warren Buffett eats out the average net worth of every person in the restaurant is over a billion dollars.
@5 Actually, I somewhat agree with you about this, Bob. The working and middle classes aren’t innocent. Ignorant, maybe, but innocent, no. They’re complicit to a degree. They willingly go along with the propaganda of lenders and marketers leading them like sheep to slaughter. Somehow, simply relabeling “debt” as “credit” turned bad into good and the reality of poverty into an illusion of wealth. If people swallow this, at some point, it’s their own damn fault.
Of course, Roger Rabbit isn’t this so. Roger Rabbit drives a 12-year-old car, has a Tracfone instead of a smart phone, and doesn’t own a TV much less a big-screen TV. Roger Rabbit has two simple financial rules: (1) Own, don’t owe; and (2) capital must never be spent. Roger Rabbit never pays interest — he has no mortgage, no car loans, and 1 credit card he pays in full every months. Instead, he collects dividends — over $1,000 a month of dividends, on which he legally pays zero taxes. Roger Rabbit’s net worth is just under $1 million, most of which consists of just two asset classes: home equity and stock.
Above all, Roger Rabbit doesn’t work for salary or wages. Under our fucked-up capitalist system and tax code, working is the worst way of getting money there is. It’s the biggest hassle, the most heavily taxed, and the least rewarding financially. Capitalists are much better off than workers.
Roger Rabbit isn’t in love with the capitalist system, but it’s the system we’re stuck with, and that being the case, he believes everyone should be a capitalist and no one should work. That’s merely the only logical conclusion one can reach under a system that disrespects and mistreats workers, and gives all the rewards to capitalists — even though workers create every cent of capitalists’ wealth and capital would be useless and worthless without the labor of workers.
Who said life is fair? It isn’t. So which side of an unfair deal would you rather be on, the winning side, or the losing side? That’s why Roger Rabbit is a capitalist and doesn’t work. Roger Rabbit is a lot of things, not all of them flattering, but you can’t call him a sap, sucker, or patsy. He doesn’t give blood, he takes it. He’s greedy bloodsucking leech like the rest of the capitalists. Speaking of which I made $556 in the stock market today without doing a damn thing to earn it.
Racism.
[Deleted]
@10 Bet my gig is better than yours.
@9 & @10…
‘Bob’ the smug and sloppy solipsist needs everyone to think he does REALLY IMPORTANT STUFF.
‘Bob’ the smug and sloppy solipsist thinks he’s REALLY IMPORTANT.
Everything ‘Bob’ the smug and sloppy solipsist says is REALLY IMPORTANT.
Don’t all you little people GET THAT?????
Is Bob sock puppeting again?
http://wallstreetonparade.com/.....s-of-2008/
Look out, Rog…hope you are ‘insulated’.
@13…
Again??? Hahahaha…