Author Topic: Larry Summers says Elizabeth's economics advisers are con artists  (Read 3354 times)

Castanza

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #10 on: October 28, 2019, 05:44:53 AM »
Not directly related to EW tax policy but a good read from Scott regarding Household debt, spending, and savings. Very much in start contrast to the political sentiment that's out there.

http://scottgrannis.blogspot.com/?_sm_au_=iVVrk13qNP2qNkDF


Cigarbutt

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #11 on: October 29, 2019, 09:02:42 PM »
Not directly related to EW tax policy but a good read from Scott regarding Household debt, spending, and savings. Very much in start contrast to the political sentiment that's out there.

http://scottgrannis.blogspot.com/?_sm_au_=iVVrk13qNP2qNkDF
When you dig into the data, fascinating patterns emerge.
For the longest time, household net worth and household assets had grown proportionally to GDP growth which seems like a reasonable outcome. However, since the mid 90's, the growth in net worth and assets has decoupled from GDP growth, sometimes to significant degrees (dot-com period, real estate bubble period, the now period). For reasons that are beyond my comprehension, experts such as Mr. Grannis, in order to assess the long-term trend line, assume that levels now correspond to average levels.
When you decompose the assets as a % of GDP over time, real estate assets have remained pretty constant apart from what looks like a small bump (from 2002-7) in the long-term scheme of things but which, it seems, triggered the GFC. In the last 30 years and since the GFC, the most remarkable component comes from financial assets which, for instance, constituted about 60% of assets in the late 80's and about 75% now.
The most significant part of the growth in household net worth has come from financial assets (see chart #1 from Mr. Grannis' blog).
What may be relevant for analysis in relation to this thread is that ownership of equities has tended to be concentrated at the top and this concentration has increased significantly over the last 30 years, suggesting that the con artists may be onto something even if some of the policies they propose have the potential to be very detrimental.
It remains to be seen what will happen to the wealth effect, whatever that is.
"Gatsby believed in the green light, the magic promise of the future. He didn't realize that as we reach forward towards the dream, it moves even further away from us. We press on, like boats against the current, and all the time we are carried back into the past."
The Great Gatsby,   F. Scott Fitzgerald

Cardboard

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #12 on: October 30, 2019, 03:45:16 AM »
Therefore it becomes pretty obvious that the problem is lack of equity ownership and a very large portion of that can be fixed through higher allocation by government's pension plan such as social security.

Something else that is missed in today's world is that pretty much anyone with a $30,000+ salary is a millionaire. How so?

How much money do you make with a million in a 2-3% environment without taking much risk? So if you do a NPV of a $30,000+ salary you got your million AND security that it will continue giving you such after you stop working.

The one who has a million $ thinks about return on capital and capital preservation while the one who doesn't salivates with envy about all the goods and perks that would be bought. That is the famous story of lottery winners ending up with nothing.

My view remains that income inequality in rich countries is a huge whine and a creation by politicians using these arguments to rise to power.


LC

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #13 on: October 30, 2019, 06:39:46 AM »
Quote
Something else that is missed in today's world is that pretty much anyone with a $30,000+ salary is a millionaire. How so?
Incredible the lengths people will go to rationalize away inconvenient facts.

Next time you meet someone on the federal poverty line, go tell them, "no wait, you're ACTUALLY worth about 600,000, so cheer up buddy!"
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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Cigarbutt

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #14 on: October 30, 2019, 07:08:38 AM »
2-
Therefore it becomes pretty obvious that the problem is lack of equity ownership and a very large portion of that can be fixed through higher allocation by government's pension plan such as social security.

Something else that is missed in today's world is that pretty much anyone with a $30,000+ salary is a millionaire. How so?

How much money do you make with a million in a 2-3% environment without taking much risk? So if you do a NPV of a $30,000+ salary you got your million AND security that it will continue giving you such after you stop working.

The one who has a million $ thinks about return on capital and capital preservation while the one who doesn't salivates with envy about all the goods and perks that would be bought. That is the famous story of lottery winners ending up with nothing.

1-
My view remains that income inequality in rich countries is a huge whine and a creation by politicians using these arguments to rise to power.
For 1-, in our imperfect but otherwise great advanced societies, there is a group composed of people who, through hard work, want to become like the top and there is another group who, through envy, want to replace the top. I would say the latter group would tend to grow at the expense of the former if the system becomes too unfair or even if the system is perceived to be too unfair. It's not the inequality that I'm worried about, it's the disconnect. Read this AM: The median net worth of a senator is approximately $3.2 million and the median net worth of the average U.S. household is $97,300. Confidence in political institutions is reaching all-time lows and some politicians are crafting a message and are taking advantage of the fact that they have a growing audience who has become unusually receptive to that message to an extent that the comfortable among us may not fully appreciate.

For 2-, the idea needs to be considered but there are huge risks. First, this introduces financial risk. I may be very wrong here but going all in at this point sounds like what Newton did when he re-entered his position in South Sea stock {which idea BTW was the main point of the above post). Also, the US public institutions have become quite poor at funding long-term obligations and, given the typical return assessment risk inherent to including stocks, such move would risk increasing further the inter-generational inequity through the kick down the road principle. Second, even if one could somehow establish some kind of safeguards with appropriate governance, there is a political risk whereby the government would become a large player in capital allocation decisions concerning the equity owners in the private market. Third, I would say central investing in equities would facilitate gliding the slippery slope suggesting that using leverage in our partially induced ultra-low interest rate environment to be the next 'logical' step. Tell me where I'm going to die so I don't go there.

The stock market domination has become a worrisome situation and the bottom 90% may have an unusual inclination to consider centrally-based value destroying ideas:
https://finance.yahoo.com/news/the-richest-1-own-50-of-stocks-held-by-american-households-150758595.html

RuleNumberOne

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #15 on: October 30, 2019, 09:20:28 AM »
The reason we need income inequality is to disincentivize people who sit naked all day in a circle, smoking a bong (like Dem Congresswoman Katie Hill).

And to incentivize people like farmers who work hard from dawn to dusk producing food for bong smokers.

If everybody in the country got paid the same, everyone would want to just smoke a bong and leech nonprofits like Katie Hill. What would you eat?

Quote
Something else that is missed in today's world is that pretty much anyone with a $30,000+ salary is a millionaire. How so?
Incredible the lengths people will go to rationalize away inconvenient facts.

Next time you meet someone on the federal poverty line, go tell them, "no wait, you're ACTUALLY worth about 600,000, so cheer up buddy!"

RuleNumberOne

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #16 on: October 30, 2019, 09:25:42 AM »
If everyone got paid the same, why work hard to discover new drugs. Work hard all your life to become a scientist, discover a new cure, and then AOC and Katie Hill show up and confiscate everything.

If that is what AOC wants, everybody would want to just smoke a bong and become a grant writer like Katie Hill.

LC

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #17 on: October 30, 2019, 09:28:42 AM »
Have I missed the legislative or political proposal to enforce 100% equal income for every citizen in the USA? I don't think so because it does not exist. Nobody is pushing for exact income equality.

What people are pushing for are policies to reduce the drastic increase in the rate of inequality we've seen over the past 30-, 40-, 50-  some-odd years. It's pretty much gone hyperbolic.
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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RuleNumberOne

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #18 on: October 30, 2019, 09:37:38 AM »
People in Silicon Valley pay most of their income in taxes as it is. Apart from the marginal tax rate of 50.3% on ordinary income, 54.1% on short-term capital gains, they also property taxes in the tens of thousands of dollars per year, e.g. 30k - 40k.

How are they supposed to pay their huge mortgages and also save for retirement?

There is nothing left. Lying Liz has not yet told us how she is going to fund Medicare for All. Her wealth tax by her own numbers raises only 1/16th of what she needs for all her "plans".

Have I missed the legislative or political proposal to enforce 100% equal income for every citizen in the USA? I don't think so because it does not exist. Nobody is pushing for exact income equality.

What people are pushing for are policies to reduce the drastic increase in the rate of inequality we've seen over the past 30-, 40-, 50-  some-odd years. It's pretty much gone hyperbolic.

Castanza

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Re: Larry Summers says Elizabeth's economics advisers are con artists
« Reply #19 on: October 30, 2019, 09:50:22 AM »
Quote
Something else that is missed in today's world is that pretty much anyone with a $30,000+ salary is a millionaire. How so?
Incredible the lengths people will go to rationalize away inconvenient facts.

Next time you meet someone on the federal poverty line, go tell them, "no wait, you're ACTUALLY worth about 600,000, so cheer up buddy!"

Next time you meet someone on the poverty line ask them how many packs of cigarettes they smoke a day, how many lottery tickets they buy and how much they spend on beer.

Half a pack a day would be about $4, say 1 $10 lottery ticket a week and one 6-pack of natural light beer a week $5. = 2k a year and 6% of income (assuming 30k).

Not saying this is true of everyone nor am I saying these people have zero excuses and they all should be millionaires upon retirement. Plenty of people are in crap situations with a very slim chance of getting out. But 2k compounded at 6% for 30 years is probably about 350k. Add in their SS, possibly 401k with match and they would have a sizable chunk for retirement. A bit anecdotal but I worked at a veneer plant/ lumber yard one summer. Everyone would take 2-3 smoke breaks a day talked about lotto and how they couldn't wait to get off and drink or head to the local watering hole. Not saying I blame them as that job was miserable, but I'd imagine that trend exists among many low income factory type jobs.

There is also smart people like this guy:
https://www.cnbc.com/2016/08/29/janitor-secretly-amassed-an-8-million-fortune.html