Author Topic: Pandemic and Wealth Transfer  (Read 1197 times)

ctuser1

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Pandemic and Wealth Transfer
« on: June 05, 2020, 08:18:28 AM »
https://www.cnbc.com/2020/06/04/cramer-the-pandemic-led-to-a-great-wealth-transfer.html

I generally just treat him like an entertainer. But I found myself nodding hard, in full-agreement with Jim Cramer listening to this piece. 

The wealth transfer to big businesses (and hence, by proxy, to the rich) was already brisk. The resulting inequality was already at crisis proportions. Now, the acceleration of that trend will likely precipitate bigger issues in the medium term time-horizon.

My (foggy) crystal ball tells me that radical changes (even when required) will be in short supply due to the fragmented nature of the politics here (with the exception of changes purchased and paid for by billionaires).

Will any administration (even Democratic) be able to push through the trillion dollar infrastructure plan(s) required to soak up the unemployed/underemployed and jump-start the main-street economy - like during WWII? I doubt it very much!!

There are many green shoots of innovation (AI, biotech etc) that will create great amounts of wealth for the denizens that play in the stock market (i.e. the top 10%), but it is doubtful any of that will trickle down any further down the economic classes.

How do you see this accelerating inequality play out?

Buffaloski Boris

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Re: Pandemic and Wealth Transfer
« Reply #1 on: June 05, 2020, 10:58:28 AM »
Same as it ever was. The Fed knows who it works for. Is it any surprise that if we get 15% unemployment that itís a sad predicament.  But if Wall Street gets spooked itís an existential crisis?

This is never going to change under the existing national political arrangement. You can complain and vote until youíre blue in the face. It isnít going to change. Itís not a bug, itís a feature.

But rather than bemoan the status quo, how bout fixing it? The dilemma is not so much that business is being propped up as it Is that the owners of those businesses are concentrated in a small percentage of the population. Ownership matters. The fix then is more along the lines of sovereign wealth funds and otherwise spreading the ownership.

Tyler durden

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Re: Pandemic and Wealth Transfer
« Reply #2 on: June 05, 2020, 11:57:59 AM »
I think every down turn accelerates wealth transfer. Most on this board are "buying the dips" or at the least dollar cost averaging. And we are buying shares of stock from people panicking or selling or being truly foolish and market timing. That is a wealth transfer.

The home being sold at a discount due to job loss to an investor in real estate is also wealth transfer.

I think one aspect is overlooked. Downturns destroy wealth for business people and the rich as well. They are escaping this entirely either. I think the key difference is they will recover at some point. They have the drive or capital or whatever to re build wealth. they got the wealth to begin with and intelligent people will find a way to do it again even if they hit a road block

Rob_bob

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Re: Pandemic and Wealth Transfer
« Reply #3 on: June 05, 2020, 04:13:15 PM »
I saw that article, I didn't watch the video, just skimmed over the text.  I didn't really see an explanation of how this wealth transfer is accomplished?

I don't see the effect of this in my life, I'm certainly not one of the high earnings people yet money hasn't disappeared from my bank account, my brokerage account isn't missing any shares and I still receive a paycheck.

Steeze

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Re: Pandemic and Wealth Transfer
« Reply #4 on: June 05, 2020, 05:08:18 PM »
I saw that article, I didn't watch the video, just skimmed over the text.  I didn't really see an explanation of how this wealth transfer is accomplished?

I don't see the effect of this in my life, I'm certainly not one of the high earnings people yet money hasn't disappeared from my bank account, my brokerage account isn't missing any shares and I still receive a paycheck.

I think if you have a paycheck, money in a bank, (The same amount as before), and shares in a brokerage then you are already on the receiving end of the wealth transfer. Albeit small in comparison to the CEOs and board members.

Itís the people that lost their job, business, or clients permanently, whose market share will be shifted to publicly traded companies. Those same people depleting their bank accounts, selling their shares at a loss to cover costs. Itís the people who never owned shares, never will, and will see income loss, or stagnation, with increasing prices for goods and services.

I am in a position to invest the majority of my above average income - my net worth is highly dependent on the share prices of the largest corporations in the world. - I have no doubt that wealth is being transferred to me every single day.

The way I see it, inequality is going to get worse and worse in my lifetime. It is already on a scale that is unimaginable. If you want to be on the right side of this thing you need to get your money parked in the same place that the billionaires are parking their money. If you have done that then you will be ok - itís the people that never are in that position in the first place that will be left behind.

Publicly traded companies will increase market share in comparison to Main Street who is losing. This pandemic accelerated that trend - years of market share transfer happened in a matter of months. The share holders won. If you are a shareholder, congratulations.

ctuser1

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Re: Pandemic and Wealth Transfer
« Reply #5 on: June 06, 2020, 12:18:32 PM »
This is never going to change under the existing national political arrangement. You can complain and vote until youíre blue in the face. It isnít going to change. Itís not a bug, itís a feature.

Perfect alignment of the political class' interests with the people is extremely unlikely. But let perfect not be the enemy of the good, or even less bad.

Shades of gray exist!!

There are only two sides, so comparison of the shades/degrees of grey is trivial among the two sides. Just pick the latest major legislative achievement(s) and see which one did a wealth transfer *to* the billionaires and which one at least tried to do the wealth transfer the other way.

I am not convinced that socialism for the masses is achievable, or that it is even desirable (because that kills innovation). However, it is without *any* doubt that the current regime of socialism for the billionaires need to be opposed. That is a very simple to do.

But rather than bemoan the status quo, how bout fixing it? The dilemma is not so much that business is being propped up as it Is that the owners of those businesses are concentrated in a small percentage of the population. Ownership matters. The fix then is more along the lines of sovereign wealth funds and otherwise spreading the ownership.

That again gets to the socialism for the masses. Just because we have socialism for the billionaires which is undoubtedly bad for everyone, does not mean 100% socialism for the masses would be such a good idea. State (i.e. sovereign wealth fund) ownership gets *very* close to that - I'm afraid!

There are many such sovereign wealth funds in the world - including some petrodollar fueled ones. How much innovation have they fueled?

Buffaloski Boris

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Re: Pandemic and Wealth Transfer
« Reply #6 on: June 07, 2020, 07:59:12 AM »
This is never going to change under the existing national political arrangement. You can complain and vote until youíre blue in the face. It isnít going to change. Itís not a bug, itís a feature.

Perfect alignment of the political class' interests with the people is extremely unlikely. But let perfect not be the enemy of the good, or even less bad.

Shades of gray exist!!

There are only two sides, so comparison of the shades/degrees of grey is trivial among the two sides. Just pick the latest major legislative achievement(s) and see which one did a wealth transfer *to* the billionaires and which one at least tried to do the wealth transfer the other way.

I am not convinced that socialism for the masses is achievable, or that it is even desirable (because that kills innovation). However, it is without *any* doubt that the current regime of socialism for the billionaires need to be opposed. That is a very simple to do.

With respect, I disagree that we have two sides per se.  We have two political factions whose rhetoric of course differs greatly, but whose leadership policies differ little when it matters, i.e. when their faction is in power. Both are corporatist to their core. I see zero chance of changing that, but in the end I don't think it's even necessary to. When your political system is focused on preserving and protecting the interests of corporate elites, I would think it obvious that you want to have your interests structured to be the same as corporate elites.   

One huge social issue that I see going forward is that fewer and fewer people within the overall population have an ownership stake in or skin in the game.  An owner behaves differently than an employee who behaves differently from someone who is completely on the outside.  You can call it socialism but I prefer to think of it as increasing ownership for those who own little.  Some clever use of soverign funds at say the state or even local level is one way to achieve that and spread that across a wider swath of the population. And we already have models that work.  GIC and Temasek in Singapore.  The Permanent School Fund in Texas.  The Alabama Trust fund.  Another is the Alaska Permanent Fund, which provides a dividend to Alaskans. Not a UBI of course but a dividend. UBIs are socialist and dividends are capitalist. They of course spend the same, but hey, we need keep up appearances.

     
But rather than bemoan the status quo, how bout fixing it? The dilemma is not so much that business is being propped up as it Is that the owners of those businesses are concentrated in a small percentage of the population. Ownership matters. The fix then is more along the lines of sovereign wealth funds and otherwise spreading the ownership.

That again gets to the socialism for the masses. Just because we have socialism for the billionaires which is undoubtedly bad for everyone, does not mean 100% socialism for the masses would be such a good idea. State (i.e. sovereign wealth fund) ownership gets *very* close to that - I'm afraid!

There are many such sovereign wealth funds in the world - including some petrodollar fueled ones. How much innovation have they fueled?

I'm advocating expanding ownership and dividends across society.  And while there is a lot of talk about how America's advantage is innovation, I'd argue what we really export to the world is debt.  Folks can't seem to get enough of it.  OK, so why not leverage our greatest export to the benefit of a larger swath of the US population? Sovereign wealth funds are one way to do it.  And here is the fun part: you don't need to have some sort of national political consensus that you'll never achieve to get there.  A state could do this.  A city could do this.  A town could do this.  Heck, a private charitable endowment could do this.

ETA: Further US examples of SWFs, correct the name of those in Singapore.
« Last Edit: June 07, 2020, 08:58:35 AM by Buffaloski Boris »

ctuser1

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Re: Pandemic and Wealth Transfer
« Reply #7 on: June 07, 2020, 10:01:57 AM »
I don't "disagree" with the eventual direction you hope to get to (with sovereign wealth funds and such). My gut feel is that they would be great idea at a very small scale, but would distort the market too much at the massive scale necessary to actually change societal habits. I don't quite have any data driven research to back this gut feel, while you *do* have solid data points that it works at a small scale.

For this post, please allow me to change focus to the other premise you used to arrive at your eventual point - where I *do* have a dispute backed by solid data.

With respect, I disagree that we have two sides per se.  We have two political factions whose rhetoric of course differs greatly, but whose leadership policies differ little when it matters, i.e. when their faction is in power. Both are corporatist to their core. I see zero chance of changing that, but in the end I don't think it's even necessary to. When your political system is focused on preserving and protecting the interests of corporate elites, I would think it obvious that you want to have your interests structured to be the same as corporate elites.

Let me pick the last two legislative achievements of the elephants and the donkeys. The donkey's did Obamacare. Did that do wealth transfer from americans to the billionaires? Or, in general benefited the Americans?

I downloaded "NHE Summary" spreadsheets from the cms.gov website - https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.

After some number crunching, this is the year-over-year growth rate of the national health expenditure?
1997    6%   2008    4%
1998    6%   2009    4%
1999    6%   2010    4%
2000    7%   2011    3%
2001    9%   2012    4%
2002    10%   2013    3%
2003    9%   2014    5%
2004    7%   2015    6%
2005    7%   2016    5%
2006    7%   2017    4%
2007    6%   2018    5%

Do you notive how Obamacare bent the growth rate curve? This is *exponential* improvement - in money that was saved for all Americans.
(~5 to 6% growth is still not sustainable since it is > GDP growth. much work is still needed. But the direction of what the "corporatist donkey's" - as you might call them - achieved is pretty clear here).

Now let's talk about the latest tax reform. That essentially "stole" $2Tln from my children's generation, with 80% of that of the loot going to the top 1%, and the vast majority of *that* to the billionaire class.
Which way did that wealth transfer happen in that case, in your opinion? From Americans to billionaires or from billionaires to Americans?

------------------------------
I am fully aware of how "corporatist" the donkey's are. Joe Lieberman was representing me in the Senate when he killed the public option for Obamacare. If that was driven by a concern that "too much of a good thing too fast" can produce too many unforeseen side effects, especially when he had 50k+ constituents who relied on medical insurance companies for their paycheck  - that would be a legitimate legislative action. Based on his history, however, I suspect it could as well have been driven by his "corporatist" nature and some quid-pro-quo. There are many such "corporatist" examples from Clinton years (what of the "prison reform" that put tens of millions of $$ in the hands of private prison companies, with a perverse incentive to imprison as much as possible to goose up the profits).

But you are still left with donkeys who sometime, may be by mistake, do pro-American things, and the elephants who have ALWAYS been anti-American without fail for the past 50+ years.

Is there any specific reason you need to boil things down to black and white??
« Last Edit: June 07, 2020, 10:09:04 AM by ctuser1 »

Buffaloski Boris

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Re: Pandemic and Wealth Transfer
« Reply #8 on: June 07, 2020, 01:28:50 PM »
I don't "disagree" with the eventual direction you hope to get to (with sovereign wealth funds and such). My gut feel is that they would be great idea at a very small scale, but would distort the market too much at the massive scale necessary to actually change societal habits. I don't quite have any data driven research to back this gut feel, while you *do* have solid data points that it works at a small scale.

This is the interesting topic for me. And I donít believe it needs to be on a national scale to be effective. Various places can try various things to see if they work. There are cities and even states that are profoundly corrupt and/or incompetent. I doubt a sovereign wealth fund is going to help.

Quote
For this post, please allow me to change focus to the other premise you used to arrive at your eventual point - where I *do* have a dispute backed by solid data.
Let me pick the last two legislative achievements of the elephants and the donkeys. The donkey's did Obamacare. Did that do wealth transfer from americans to the billionaires? Or, in general benefited the Americans?

I downloaded "NHE Summary" spreadsheets from the cms.gov website - https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.

After some number crunching, this is the year-over-year growth rate of the national health expenditure?
1997    6%   2008    4%
1998    6%   2009    4%
1999    6%   2010    4%
2000    7%   2011    3%
2001    9%   2012    4%
2002    10%   2013    3%
2003    9%   2014    5%
2004    7%   2015    6%
2005    7%   2016    5%
2006    7%   2017    4%
2007    6%   2018    5%

Do you notive how Obamacare bent the growth rate curve? This is *exponential* improvement - in money that was saved for all Americans.
(~5 to 6% growth is still not sustainable since it is > GDP growth. much work is still needed. But the direction of what the "corporatist donkey's" - as you might call them - achieved is pretty clear here).

Now let's talk about the latest tax reform. That essentially "stole" $2Tln from my children's generation, with 80% of that of the loot going to the top 1%, and the vast majority of *that* to the billionaire class.
Which way did that wealth transfer happen in that case, in your opinion? From Americans to billionaires or from billionaires to Americans?

------------------------------
I am fully aware of how "corporatist" the donkey's are. Joe Lieberman was representing me in the Senate when he killed the public option for Obamacare. If that was driven by a concern that "too much of a good thing too fast" can produce too many unforeseen side effects, especially when he had 50k+ constituents who relied on medical insurance companies for their paycheck  - that would be a legitimate legislative action. Based on his history, however, I suspect it could as well have been driven by his "corporatist" nature and some quid-pro-quo. There are many such "corporatist" examples from Clinton years (what of the "prison reform" that put tens of millions of $$ in the hands of private prison companies, with a perverse incentive to imprison as much as possible to goose up the profits).

But you are still left with donkeys who sometime, may be by mistake, do pro-American things, and the elephants who have ALWAYS been anti-American without fail for the past 50+ years.

Is there any specific reason you need to boil things down to black and white??

Thanks for the detailed and well thought out post. However this is the part of it thatís not so interesting to me. Iím apolitical, donít vote, and donít agree with the prevailing cultural mythology that citizens arguing politics and casting ballots accomplishes anything particularly worthwhile.

So we might as well ask: why does an atheist reject religion in such black and white terms?  My ďblack and whiteĒ  views on politics are based on a lot of life experiences. Many years of involvement in politics with both factions at various times as well as a third faction at one point. Coming to the conclusion that the thousands of hours of my time spent in politics over the years was really a waste did wonders to clear up any lingering sense of ambiguity. I do consider myself fortunate: I at least realized my folly with with what I hope are plenty of years left on my life clock.

So with that Iím going to recall the sage wisdom I saw on Facebook once ďI changed my political views based on a post I read online!Ē - said no one ever. And leave the partisan politics to off topic.