Half of all adults in the world have less than $2,300 in wealth (2016)
qz.com
qz.com
Just my experience, but my first world poor friends, without exception are all bad with money. They have little understanding of how money actually works, have terrible spending habits, are incredibly risk averse, and carry a "money is evil" mindset.
If it's possible for you to live within your means (edit: putting aside illness, addictions, felonies etc), you can build wealth at a good rate in the first world. You may never be a multi-millionaire, but you can be financially secure and stable.
There are a significant number of exceptions to this idea. If you dig a deep enough hole (drug problems, felonies, etc) it's hard to just keep a roof over your head.
And sure, "it's their fault", but for a lot of people the die was cast when they were very young.
(Update: I should clarify that this may be a U.S. problem vs a first world problem. The safety net here is abysmal, speaking as someone who has spent way too much time and money helping a friend manage.)
I'm in the [100k, 200k) range, and I've had to reevaluate my finances. I used to live pretty comfortably on less than half my income. I had no credit card debt, my $50k car was paid off. Student loans were paid off a decade ago. Then, I got married and now have 2 step children. Between moving into a larger place to accommodate the new family and all the costs associated with getting married, moving & furnishing a larger place, I'm just now about to start to get our heads above water. I had to take money out of savings before we could get outflow to be less than inflow.
My prior comment before removed was 5k savings, 11k 401k. I had more, but life events. For me, it's a variety of things. Largely summed up as I bought a house at 25. Had health issues that were in remission, then came back. And have been trying to get above water since.
I know a number of software engineers, who are in it just to pay the bills. As the pay increases so do the responiblities you hold.
Depending on their severity, addictions, felonies, learning difficulties and health problems (and many other things) could all be legitimate limiters on wealth building.
Not really, the vast majority of those living in first world nations don't have catastrophic events that ruin them financially.
Also, you don't need 'good training in financial planning', you just need the same amount of common sense my grandparents had - spend less than you earn, and set something aside for a rainy day.
Then my hands started hurting and I found out i had vikings disease... i type for a living. first process cost about a grand, insurance doesn't cover much of it.
Now both my hands are worse off and i'm looking at another surgery which will cost more that insurance won't cover.
My wife got into a car accident and we need two cars since i work and she home schools.
My parents are assholes and don't give a shit about myself or my family and my wifes immediate family is all dead. We inherited nothing. Raised 2 kids by ourselves, no grandma/no grandpa, no aunts, no uncles.
The world is trying hard to really fuck people over, and i've managed to stay on top of it.
Now my kids need jaw surgery and another needs teeth work - dental coverage is a joke. The jaw surgery is going to cost 5 grand and the others dental is 1700.
My property taxes are going up year over year. Maintenance costs are going up year over year, salaries have gone up but not as quickly and the tax relief was a joke.
spend less than you earn sounds esier on paper than reality of living.
we downsized our homes, we don't have cable tv, i use a company phone for cell phone, i'm always having to reduce my 401k contributions and even when i try and rollover my prior 401ks that shit is perpetually frozen and no matter where i turn or what I do it seems something is trying to stop me or block me.
it's not as easy as people make life out to be
Edit: also people wanting it and the financials of it being practical are entirely coupled together. My point was I don’t see how someone can not be for the idea of health care for all.
Germany: 15%
Australia: 11.6%
France 11%
UK: 9.7%
US: 8.5%
we also have strangely intimate relationships to our doctors. we stick with them even when were not sure theyre doing their best for us. we fear an "anonymous" doctor who doesnt know us personally.
these fears are exploited with imagery like "death panels," where faceless government bureacuracies let people with uneconically feasible conditions die untreated.
to reverse this requires stories of success from Europe told without smugness. many memes are tonedeaf humblebragging about euro healthcare that instantly turn off americans.
We prefer the private "Free Market" death panels. (Health Insurance), which effectively do the same thing. But you get a choice in who will deny you cover if you ever go over a limit or could not afford you cover.
What does that have to do with the issue? Germany has mandatory healthcare insurance, and I'm still free to choose my GP and specialists.
Lol, that's honestly pathetic - I hope it's not true.
A good idea is a good idea. You are talking about public policy here.
Or is it more common people go along with a emotionally-resonant personality and dismiss their reliance on facts and figures based on intuition?
You can be sure when I buy computer parts, numbers are the bottom line, but what if an ad for, say, an SSD offered a great price and excellent performance. Would you still buy it if next to the price tag, it said that if you did so, you're pathetic?
It is not your fault, and it sucks. But the fact of the matter is that ~MOST people don't end up in as unlucky of a situation as you ended up with.
Your unluckyness is the exception, and not the rule, and the vast majority of people don't end up in horrible, life-changing medical situations.
At the end of the day, someone's life is still wrecked through no fault of their own, and "the system" — which is us — just stands there, all, "Sucks to be you."
I remember being so poor growing up that I used my first paycheck to buy a loaf of bread and a tube of cheap sausage and it was the first time having anything approaching a real meal in a few days.
Costs happen. Kids get sick/injured, cars get damaged or break down, taxes only ever increase.
I save aggressively, consistently live below my means (not miserly, but frugally), do all of the home maintenance and car work I can do safely and legally, and cook almost all of my meals at home from relatively basic ingredients.
And you know what? I have a pretty damned good life. I had to move across the US to a place with a lower cost of living and better job opportunities. My wife had to switch careers. I had to work several years at crappy jobs.
When you buy a thing, evaluate it's lifetime cost. When something breaks, fix it quickly and correctly. Avoid unnecessary costs. Prefer mending to replacing. Save for the unexpected, and then save some more. When dealing in dangerous waters (legal troubles, real estate, complex investments or financials), hire a skilled expert, even if it means lowering your quality of life. Keep enough insurance, and do the work to get multiple quotes or bids for any kind of job.
Our system is designed for people to fail. Even our own president has bragged that another depression would be a good thing since he could buy things up at a discount. (yeah, there is a tweet for everything)
My wife got into a car accident and we need two cars since i work and she home schools.
Why does homeschooling require a car?
"Homeschooling" doesn't mean "never leave the house".
I can appreciate having a car can be useful, but I'd not call it a necessity. Perhaps things are different in the US of A. The perceived poverty threshold is a lot higher. In many countries, if you have clothes, a roof over your head, and can eat regularly, you're good.
American urban planning is heavily car-centric. They talk about "walkable communities", because the opposite is the norm. A large proportion of American towns and suburbs are sprawling, low-density and strictly segregated between residential and commercial developments. Public transport is often meagre or nonexistent. Parts of America are practically uninhabitable without a car. It's probably true to say that Americans are unreasonably attached to driving and averse to walking, but at this stage it's a self-perpetuating cycle.
I live in Austin Texas, you need a second car to survive. Getting wife and 2 kids around town for everything in uber/lyft isn't economical and my wife also runs a not for profit and volunteers with charity and runs events and I have after work activities such as volunteering for first robotics, girl scouts and such.
This is a well documented phenomenon.[0][1] The state of being in poverty has a significant effect on your cognitive processes evaluating risk and reward and future planning. For people who grew up in poverty, those programmed biases can be extremely challenging to overcome and limit their upward mobility. There's also the aphorism that it's "expensive to be poor." The boots metaphor and all that.
As to building wealth at a good rate, doing that from a state of relative stability vs a state of relative poverty are two entirely different scopes. "Escaping poverty requires almost 20 years with nothing going wrong." When 5 years of savings can be wiped out by a car repair that means you can't get to your job, you can lose 5 years of progress in one bad event.[2] The problem with that statement is whether it "is possible to live within your means." It can be exceptionally challenging and complicated to live within your means while impoverished but still move upwards and respond to emergencies and disasters. And it's doubly much to ask that kind of complex planning from someone affected by the deleterious cognitive effects of poverty documented above.
[0]http://behavioralscientist.org/can-neuroscientists-help-us-u... [1]https://blogs.scientificamerican.com/sa-visual/this-is-your-... [1]https://www.theatlantic.com/business/archive/2017/04/economi...
> Mani et al. (Research Articles, 30 August, p. 976) presented laboratory experiments that aimed to show that poverty-related worries impede cognitive functioning. A reanalysis without dichotomization of income fails to corroborate their findings and highlights spurious interactions between income and experimental manipulation due to ceiling effects caused by short and easy tests. This suggests that effects of financial worries are not limited to the poor.
Comment on "Poverty Impedes Cognitive Function" (PDF Download Available). Available from: https://www.researchgate.net/publication/259207757_Comment_o...
All kinds of ways to do this. Younger kids could be shown how regular investment compounds over time using games that pay out the reward at the end of the school year. Older kids can do mock investments in mutual funds, etc.
I still don't know what I'm doing, but I've got a nice nest egg, I seek knowledge on how best to handle my excess money, and my wife and I are executing her higher interest school loans.
I really don't feel I have that much more knowledge than I did. I simply have the will to plan for my future life. In my early 20s I just didn't care (for various reasons).
Kids learn all sorts of things that they ignore. As a race, we seem to be really good at shooting ourselves in the foot.
Related to education though, I feel that these patterns of ignoring what is good for you is what is really at fault here. This has wide reaching implications in my mind, and is the cause of anti-intellectualism in America that is quite concerning. We just don't.. care, as a society. Until we do, I don't foresee education on finances drastically improving quality of life.
Note that I of course will always back education, I'm definitely not advocating against it. I just see this as part of a really large problem, and I've got no idea how to solve it.
I think your idea of having younger kids start learning this early (before its "uncool") is key. My sister says 1st grade is probably a little too early. I think maybe 3rd-6th might be right to start introducing the concepts.
Anything would be better than what we're doing now.
That's true if you're well insured, never become disabled, can find & maintain regular employment that pays a living wage, have access to a reasonable cost of living, and are savvy enough to figure all that out.
OP is referring to those.
Where I'm from, and in the various countries I've lived in (including the US), I've met plenty of people who for one reason or another couldn't - bar sheer luck - get a job that pays anything decent. Be it lack of connections, no idea how to build those connections, lack of ambition, lack of education, whatever. There were good reasons, and probably not so great ones, but in practice I seldom got the feel it was about good spending habits or slacking.
If anything, and anecdotally, I probably met more people with terrible saving habits when interacting with segments of the population that were rather well off to begin with - that is, they had excess cash or the potential for it. The "worst" example I can think of was a patent attorney who charged $500/hour, worked a single client per month to make ends meet, and enjoyed life the rest of the time. $10/hour or $2/hour people just don't do that insofar as I've interacted with them - and I did quite a bit while traveling. The "worst" I've encountered on their end were people deciding to work less hours after they got a raise because, you know, they only need so much to make ends meet and were happy with earning just that; and no assets/low income folks getting subprime loans just before the housing crisis.
Admittedly it's only a small unrepresentative sample at the end of the day, but I honestly never got the impression the low wage earners I interacted with were slackers or spending like there was no tomorrow. Mostly (if only potentially) mid- to high wage earners were, and they oftentimes had some savings or could earn money in a heartbeat if they really needed to. They're far from the majority of the population.
Keep in mind, health problems are actually a major cause of bankruptcy in countries with universal coverage like Canada as well. It's nice when your healthcare is paid for, but if you can't work, bankruptcy is a major problem as well.
The first step is to track your incoming / outgoing financials.
Just like programming, in order to fix the problem you need to understand what the problem is and tracking your $ for a few months will show you exactly what's going wrong.
If you get an older copy, just don't take the investment advise too seriously—it's pretty out-of-date. Everything else is gold.
over 50% of households make >$50k a year in the U.S. but many of them have very little net worth...some of them are unlucky, but many of them make decisions that keep them with very little money in their pocket...
― Herman Melville
True.
"but my first world poor friends, without exception are all bad with money." ROTFL. What about your third world friend? This may give you an idea.
I'm confused what you mean here - isn't a degree of risk aversion good? I feel like "most people" are incredibly not risk averse, in that they recognize that they have little savings to no savings, emergency funds and etc but still behave like they are not at risk.
I however, keep a 4-6mo fully liquid because I'm terrified at the thought of only having 1mo in liquid. Tbh, I'd love to have 12mo, but anything beyond 4-6 and it starts feeling obscene not investing the extra.
Let that sink in a while.
That would include vehicles, houses, clothes, everything.
I am musing on this problem from my air conditioned office at work. We truly have first world problems.
If I have an interest only loan on something like a taxi medallions (thanks Planet Money for the example!), I generate cash flow with that asset, and can walk away from the debt at any time through bankruptcy of the owning entity, that’s still positive wealth (cash flow).
The less capital you need to obtain access to greater amounts of cash flow, the better the cash on cash return/investment quality.
Furthermore, if you pay for something very long, you are also going to be paying a lot of interest. You wouldn’t be paying that long if you could afford it and you would be getting a better credit rate if you could afford it.
Unfortunately not everybody is able to invest smartly and thus good debt easily becomes bad debt. It doesn’t help that most people potray reale estates as good debt because they really aren’t that good unless you know what you are doing.
You and I must have very different ideas of what the word "extremely" means.
> walking away from the property is always an option
That is only true in twelve states. In the other 38, the lender can sue you to recover the difference between the house's value and what you owe even after they foreclose.
I only use non-recourse mortgages when investing in real estate. YMMV.
Real estate is only one investment vehicle where you don't need a large amount of capital to realize substantial cash flows. Whenever possible, seek out leverage opportunities.
I've known several people who wanted to "get into real estate" so they bought duplexes and became landlords. All of them lost money or broke even because they went into it without doing their due diligence. My parents ended up just walking away from their "investment" property and declaring bankruptcy, that's how much they lost out. It isn't buy property -> profit like people think.
Leverage cuts both ways - it magnifies both gains and losses.
[1] I personally know at least three people who sold houses for less than the bought them 7-10 years later. My parents have owned their house for 25 years and while the dollar value went up it hasn't kept pace with inflation (recently got three appraisals) even though they have cared for it and even added an extra bathroom.
If you're investing in real estate by purchasing a cash-flowing property like apartments, then you'd be crazy not to use leverage. You can easily calculate your ROI based on property cashflow and projected value based on rent growth. And your ROI is always going to be bigger if you only put up 25% of the value and let the bank pay for the rest as long as you're cashflowing more than the mortgage payments.
Your health is also of massive value, and indeed is something you can sell -- a healthy kidney alone is worth $250k.
Yeah, but the house itself is most likely worth at least the same as the loan.
If you remember your accounting courses: assets are equal to the sum of all liabilities and equity. Meaning mortgage debt and home equity combine to form your total home assets. A person may have $1m in assets and $900k in liabilities. Or a person could have $200k in assets but $50k in liabilities. Which person is more "wealthy".
I suppose its a matter of opinion because, after all, we haven't defined a goal. Is a low debt to equity ratio desirable? Depends on what you're trying to accomplish. Is high cash flow desirable? As an end state, yes that's desirable but what if that end state requires a large amount of debt to achieve?
Is that really a thing? Do many people really go beyond the standard 30 year term of their mortgages?
The standard simple calculation for net worth is assets minus debts, so credit card debt, mortgages, etc. would be negative.
But even though the mortgage is negative, the value of the home would be positive, and the net difference between the value of the home and the debt owed on the mortgage could very well be a positive component of net worth.
I think it's illustrative to compare assets across the world but perhaps a more normalized metric would be overall "happiness", whatever that means (no its not easy to define).
My own western-biased experience tells me it's a bit of both. Money does in fact bring freedom of time which can bring happiness, but I've met some extremely happy people living on peanuts, eating very healthy and living on islands off the coast of Japan.
Look at the native American population. They were happy until the weren't: when a culture with greater financial power wanted what they had and they didn't have the power to stop it.
Or look at Somali pirates: happy fisherman. Until foreign powers dump waste in their fishing waters for decades, then they lose their economy and have to arm themselves to defend their waters. No more happy. Because they couldn't fund a proper navy.
The point being -- know the difference between weather and climate.
There is still value in the comparison. Products like mobile phones are going to have similar prices around the globe. Also, it affects the capability to travel.
With my European salary, I can travel anywhere in the world. Norway is more expensive than Turkey, but I can travel to both.
We had a team member for a secondment that came from a country with lower salaries. Our company had a policy where you pay first and then you get refunded. He needed to get all expenses pre-paid because of his full salary not being enough to pay for the expenses.
If you can buy a house in your country for 2,000 dollars. I can also buy a house in your country at that price. Probably I can buy a few of them once I have my basic needs covered in my own country.
So, there are more interesting data points than purchasing power in dollars. But it is relevant when we talk about wealth distribution.
https://en.wikipedia.org/wiki/Secondment
The more common usage I've heard of this word is that someone has been seconded to another group.
>Products like mobile phones are going to have similar prices around the globe.
This is a false assumption, and why controlling for purchasing power is important. Even expensive electronics don't have the same base price everywhere and local costs can add a significant amount. The overwhelming majority of consumer purchases cannot take advantage of international travel to countries with lower costs and better exchange rates. Even when they can, duties may apply when trying to bring things back. If it was so easy everyone would do it and the laws would have to be rewritten to prevent it.
>If you can buy a house in your country for 2,000 dollars. I can also buy a house in your country at that price.
This is also a false assumption, many countries have laws limiting foreign ownership and unused real estate, and getting credit for a home purchase can be even harder. The vast majority of homes are the primary residence of the people who own them, having a cheap second home in elsewhere does nothing for them
On the other hand, consider how much people pay in America for things which are not globally-transportable, such as housing, or services which are ultimately based on the labor rates of the people around them, like child care.
Between locations there can be definite asymmetries in the balance between goods, labor, and rents.
Buy a car, which now has immediately lost value (in general), and you may have negative net worth for some time. But this is not bad, nor is it long term poor.
As such, I don't think wanting everyone's net worth to be the average value of a car is realistic. Maybe averaged over a lifetime, or some such non-time-static metric would be better.
70% of the world's population lives on less than $10/day. And that is a significant improvement over most of history. If it's really half of the world that has $2300 that sounds very promising to me. I guess "awesome vs not awesome" really amounts to "compared to what?" Compared to the fantasy in my head of how life could be, it's terrible. Compared to real world history, it sounds pretty good.
Never mind the idea that there's still an extreme minority of the population in possession of an obscene ratio of the world's wealth is "awesome" in the sense that it "inspires awe that our society has continued to allow this to happen" but that doesn't mean it's good.
That should be a wake up call.
An important thing to know here is that this is net wealth, not gross wealth. IF you have a $500,000 house and a $400,000 mortgage and nothing in the bank and no student loans and so on, you have $100,000 in net assets.
This is why 33% of Americans and 90% of Russians have less than $10,000 in assets. Massively, massively in debt, or massively, massively income deficient relative to someone from New Zealand or Switzerland.
Within a nation you can measure and track inequality with something like the GINI coefficient, and for nations like the US, inequality has worsened over time.
Within the world, we've seen massive improvements over time (at least that was my impression reading Hans Rosling) and it seems rather inexorable that globalization will make it improve even more over time.
I'm guessing the problem there is like how "privilege can make greater equality feel like oppression" - if the levels continue to normalize over time, then the richer countries will get (relatively) poorer. But if the richer countries have higher inequality, then that burden will be mostly felt by the richer countries' poor.
Would be cool if you could transfer land titles via blockchain, then you don’t need a middleman. If you can provide tiny lots to purchase for people who don’t traditionally invest in land, it could potentially be a great way to help those who are in poverty build a bit of wealth.
You borrow a dollar from the bank. You buy something from me for a dollar. I put it in the bank.
I have a dollar in the bank. You have -1 dollars, a debt to the bank. $0 net dollars between us. $0 average money-wealth. This is what most money is, debt. The average amount of debt-created money.
If you keep borrowing from the bank, buying from me, and I keep putting money in the bank... both sides of our combined balance sheet will keep growing. For every dollar in my account, you will owe another dollar. The average & sum will always be 0.
So.. if we are looking at just the money part of wealth, it never grows in total.
If you borrowed to spend on consumption, then the story ends here. If you borrowed to buy non-money assets, then you still have those durables. For example, say you borrowed $1 to buy a house. I built it for you. I have a $1. You have -$1 and a $1 house.
In reality, it's hard to differentiate between real assets and money assets. What is a security, really? This part gets hard so I'll leave it at that.
The upshot is that a lot of our collective wealth adds up to $0. For every dollar someone somewhere has in the bank, someone else owes a dollar. In the currently prevailing banking/money/governance system, a lot of the debt is owed by governments so they take a big chunk of the negative side. This leaves more room for people to own rather than owe money.
If you subtract each persons share of national debt from your median person, I would expect the number is negative.
But that would make no sense because that debt is also owned by other people, including a lot of citizens.
It's also been happening for years with social security redistributing wealth from younger workers to older retirees
If you think it's not happening I suggest you put all your assets in an account you won't access and then try and live for a few years off a retail job
Additionally: No shit, I taught myself programming and I'm an engineer now. Not everyone is capable of doing this, and the fact that I managed was down to just as much luck as it was skill and effort.
It also doesn't change the fact that we are taking money from society and giving it to companies
With the benefit of hindsight I could have done much better for myself,but I would not expect someone at that age to have the foresight to prepare for just how fucked your life plans can get
I'm curious what you believe would happen if we could magically remove all welfare programs. Do you believe those employers would be forced to raise wages? Or do you believe the lives of the poor would just be that much worse?
I agree with this, which is why I disagree with your first sentiment:
>Everytime a company pays their employees so little they need welfare to live, that's redistributing wealth from society to shareholders
Since we agree that employers would not pay more if welfare is removed, then the value of those welfare programs must not be subsidizing shareholders.
Society is providing a workforce to employers at a wage that is not sustainable without the welfare
So then you believe if we eliminate welfare that employers would be forced to raise wages, because employees would be unable or unwilling to work there for their current wages. That is the opposite of what you said before.
I claimed that there is redistributing wealth from society to business owners via welfare for low paid employees. In my understanding of the world the wages that are necessary to sustain the work force are $X and employers are paying $X -$Y. That $Y is the amount covered by welfare and what I am considering to be the wealth redistribution from society to the business owners.
That seems consistent with the idea that if the $Y subsidy is removed, then employers would be forced to raise wages or lose their workforce.
For example: if I have a nice car that my parents cover the lease and they stop covering the lease,I will either have to increase the amount of money I spend on the lease or lose the car. Just because I can respond to the change doesnt mean wealth wasn't being redistributed from my parents to me
Edit: it also appears that we are triggering hn's anti flame war measures as I have to wait some time to reply to you now. This has been a unheated discussion to me, but there will be delays in any responses now
Now you're saying that if welfare is removed employers would be forced to raise wages or go out of business. If that's true, then yes, welfare is subsidizing shareholders. Given that belief, do you support removing welfare programs so that we (society) can stop subsidizing shareholders?
As to what I support. I would be for a UBI system so that every company would no longer have to worry about supporting their employees basic needs. It would allow for better competition as employees would be in a better negotiating position since no one would need a particular job. It would be still be a wealth transfer but I think the improvements to economy would pay off and it would give every citizen a benefit directly by not making them tied to employment. Road repair from damage from trucks is another situation where it looks like a wealth transfer from society to businesses, but the payoff in terms of the improvements to citizens lives are worth it.
As it stands currently the benefits from this current setup only go to owners of companies with low paid employees and I don't believe that the benefit of lower prices on some goods outweighs the harm that is caused by increasing the inequality between business owners and employees without giving employees a way to improve their lives
This concern could be alleviated by phasing out welfare over time rather than instantaneously removing it. I feel like you dodged the spirit of the question, so I'll ask it again. Ignoring UBI as a possibility, given the world as you understand it today where welfare is a subsidy for shareholders, do you support removing welfare so that we can stop subsidizing the wealthy?
UBI vs welfare doesn't really change the situation here. UBI may be more economically efficient than our current form of welfare, but that's a different discussion altogether. I'm only interested in the question of whether you really believe that welfare as it stands today is a subsidy for shareholders. Because if you believe that, then it seems the rational proposal would be to get rid of welfare.
Short answer: I do not support removing welfare even though it subsidizes the wealthy
Long answer: I don't believe that wealth redistribution is a bad thing inherently and I would not be for removing welfare to replace it with nothing. I think UBI is economically and socially Superior to our current welfare system but our current welfare system is better than nothing.
The cons to our current system are that it's increasing inequality and benefiting a fee people massively at the expense of society, but I'd rather shoulder that expense than let people die by exposing them to unfiltered capitalism which I believe would lead many people to bring entirely jobless and destitute
I feel like you're trying to have it both ways. On one hand you say that our current welfare system simply subsidizes shareholders. You seem to believe that if we phased out welfare that the poor would wind up in the same place they are today because they would demand higher wages. In other words, it provides no benefit to the well-being of the poor. And yet you say it's better than nothing. How can that be?
I don't think the poor as a group would end up in the same place. I believe the wages would end up rising but less people overall would be employed. If you remove welfare then the people who end up without a job are going to be without anything and homeless/starve to death. The amount of time it would take for the new equilibrium to be met would also cause a lot of pain and suffering in the interim.
Interesting, what are your thoughts on the minimum wage?
>If you remove welfare then the people who end up without a job are going to be without anything and homeless/starve to death.
I feel like if your options are working or death, there will be many more people working, not less as you suggested above. But I also think the imagery of people starving to death is unrealistic. Over 70% of the world's population lives on less than $10/day. The American poor is very wealthy by global standards and they have a loooong way down to go before they start starving to death. The worst case scenario of the American poor losing welfare while simultaneously somehow not being able to demand higher wages looks more like the American poor inching ever so slightly closer to the global average lifestyle than starving to death. I don't want that situation any more than you do, but let's not be overly colorful in our language.
I understand why UBI is more economically efficient than our current welfare systems. Anything that moves towards giving the poor money they can spend on whatever they want is a bonus in my opinion. I'd start with Medicare and Medicaid. Instead of paying directly for healthcare we should just cut a check to the elderly/poor and let them spend those funds on whatever they wish. However, I don't understand why you feel it would behave differently than welfare with respect to its "subsidizing the shareholder class." Unless you expect UBI to be high enough so that nobody would have to work, and then I'm not sure how the economy doesn't collapse on itself with so few people doing work and so few taxpayers.
If you require companies to pay enough to support the lifestyles of employees, than any person unable to generate enough value for a company will not get a job, will not have the opportunity to gather job skills to maybe get to that point, and will require full support from the government. And mandated higher wages leads to inflation, which puts the most vulnerable even further behind.
It's fairly reasonable for the least skilled to get a job that pays accordingly, with society picking up the slack. If that person ever increases in skills to move out of this, then they too will pay more in taxes to support the new group in need or least skilled.
Regardless of any of those arguments, I was responding to someone who said they hoped wealth redistribution didn't happen in his lifetime, and gave examples of it happening right now
As such, I'm much more in favor of targeted assistance to make the most use out of limited resources.
And every one I've looked into will suffer from terrible inflation, probably defeating any gains. For example, if a person is willing to work a crap job to pay rent, this will not change no matter the money scaling. Give enough free money, then rents will simply rise (along with all other things for the same reason), to absorb the excess, and the same people will still end having to do the same work to keep their standard of living.
Free money is almost always inflated away by markets.
Housing is another example. We don't have more empty house than homeless people in America. We don't necessarily have more house in downtown SF or NY but if we could set up a system where you could accept a house, with no real control over where, it would relieve some pressure off of people as a number of the population would accept that offer
I agree on the free markets inflating away free money. University costs are a perfect example where demand was artificially inflated with federal student loans, but the supply was not equally increased so the price just went up. If we started providing basics I'd believe they'd have to be controlled more like a utility. We try not to let market forces control water because weve decided that basic for everyone. So we give a company some garunteed profits in exchange for them not being able to wrong every last dollar out of the economic niche. We lose some efficiency, but gain stability
Targeted assistance might help better, but it's extremely difficult for the government as a single entity to try and provide help on the demand side without constraining the actions on the supply side. The increase in beuracratic costs also eats up much of the benefit
This would likely just be absorbed into inflation. It's hard to simply give people free money without prices increasing to make the time/work tradeoff for the good simply remain constant.
> you could accept a house,
If you've ever been a landlord, you'd realize people would likely destroy the properties. Many homeless are not homeless because they don't have a dwelling; they're homeless because that have fundamental other issues that make them owning and maintaining any property impossible.
>If we started providing basics I'd believe they'd have to be controlled more like a utility
Any country in history that tried to centrally plan such a large chunk of their economy failed. It's a sure way to get massive shortages and corruption and cronyism.
>Any country in history that tried to centrally plan such a large chunk of their economy failed.
There's problems and it wont go perfectly but we should still try to improve everyone's lives. I also disagree that anyone who tried to centrally plan such a large chunk of the economy has failed. Look at water and electricity, those are massive industries that are centrally planned. Central planning is not as efficient as a market based economy and is not the way to grow an industry or develop new technologies. It does work better than a market based economy when it comes to uninterrupted coverage which is why it's used in the utility model
And vastly lower on total return. Investing in education will likely increase output overall. Investing in food and alcohol and TV will not.
And consumption will not even be increased if inflation eats the money, which it likely (and historically) will. It will simply rescale the dollar to make no one better off.
>There's problems and it wont go perfectly
Ignoring that it has spectacularly failed and destroyed lives and countries is not simply "problems." Repeating things that have been demonstrated to be terrible ideas is again a terrible idea.
>but we should still try to improve everyone's lives
Then let's use targeted use of scarce resources instead of wishful thinking and ignoring history. Otherwise we repeat ideas that sound good but fail such as rent control. The things you present are not new ideas. They have been tried and failed. Ham-handed allocation of scarce resources is almost always worse than targeted allocation. This is simple economics.
>I also disagree that anyone who tried to centrally plan such a large chunk of the economy has failed.
List a country that has succeeded at planning as large a piece as you're suggesting.
>Look at water and electricity, those are massive industries that are centrally planned.
No, they are not. They are locally planned, compete with each other, trade resources, and have plenty of free-market features to trade futures, trade stocks, and compete. They are absolutely not centrally planned.
Venezuela is an example of what happened when the central government takes over such markets.
If you don't like the idea of UBI and think market only solutions are better, that's fine, but this is different than the government telling everyone they're making A widgets this year instead of B widgets
They don't often compete directly for you; the government gives them local monopoly. They compete to sell excess product on the open markets, which is why energy trading is a massive industry. By competing on that market, they indirectly compete for you, since your utilities can often buy capability from other markets. In short your pipes are limited, but the product you get from them is created in open markets, with your utility company being the last middleman in the chain to deliver goods locally. It's also why you can sell capability back into electrical grids in many places. There's a market for it.
So in that sense, probably every one of them competes.
This trading directly happens because there is no central planning. Central planning, as usual, is inferior to letting pricing determine how goods move. Your claim was this industry was an example of central planning, but it is not. Capability is not centrally planned - markets react to move goods where they are best prices by local merchants, like any other free market good. If you've never seen how this works here's an intro[1]
>Also no one has actually done UBI long term and on a large scale
If there is evidence that it fails on short term and small scale do we really need to make it bigger and longer to hurt more people before we address the reasons it fails? There have been several places that have tried portions of it, and they have matched what economic theory said would happen. At some point it needs a new idea or method before more people are subjected to historically damaging ideas.
UBI is simply welfare for more people. Those paying for it necessarily get less than with no UBI, and those getting it will receive more welfare. No UBI proposal I have seen is anything more than this - tax some people more to give others more.
There is ample evidence among countries that more welfare correlates with more people working less, and less overall productivity. Even the Canadian UBI experiments found this to be true.
When people work less, less is produced, and as a result society has less.
>At this point I feel like you are being disenguous.
About utilities? You think they're centrally planned and don't compete in markets. Both are wrong. So I don't think I'm being disingenuous - you're simply uninformed how things work. It's disingenuous to claim you understand something that you have not simply googled to see where your understanding fails, then not admitting it.
[1] https://www.investopedia.com/articles/investing/042115/under...
This will never work.
First, it is a myth that X amount of money provides adequately for everyone, in part because there is no standard issue normal person.
Second, money reduces friction in trade, thereby providing valuable efficiencies. But if income is entirely unrelated to creating or husbanding some kind of value, the entire system can rapidly come unraveled.
Historically wars and unrest seem to be critical for redistribution of wealth once inequality increased to unsustainable levels. I wonder what will happen now in this era of unprecedented peace.
If so that’s a huge difference maker.
On 6 September 2011, the Swiss franc effectively became fixed against the euro: the Franc had always floated independently until its currency appreciation became unacceptable during the eurozone debt crisis. The Swiss National Bank set an CHF/EUR peg that involved a minimum exchange rate of 1.20 francs to the euro, with no upper bound in place. The Bank committed to maintaining this exchange rate to ensure stability. The peg was abandoned on 15 January 2015, when renewed upward pressure on the Swiss franc exceeded the Bank's level of tolerance. https://en.wikipedia.org/wiki/Switzerland%E2%80%93European_U...
Are you saying that there is a large group of people who have less than $2,000 of 'wealth', but also have Swiss Bank accounts?
> The overall results from the survey show that 62 percent of Americans have less than $1,000 in their savings accounts, and a third of those under-savers have no savings account at all. The portion of savers with balances over $1,000 is 29.1 percent.
People are "hung up" on it because, per the linked article, the survey literally asked about savings accounts. I have more money sitting in cash at home than I do in my savings accounts. The only reason my wife and I have savings accounts is Bank of America's Keep the Change thing.
Low risk emergency fund or sunk cost funds.
If you purchase everything on credit or debt, you're asking for trouble in the long run. Debt or credit involves substantially more risk.
Note the survey question literally asked about "savings accounts". I would answer that question with a number below $1,000, but I still have a significant reserve and no credit card balances.
In the US, the median disposable income -- money you can either save or spend on luxuries after all typical living expenses -- is about $1000 per month. Savings are not an issue for the majority of Americans. Unless you define it as having a savings account with money in it.
Not sure why banks make any sort of distinction anymore.
EDIT: maybe if my savings account paid meaningful interest I'd use it more, but most retail banks these days don't.
Most of my savings are for short-term things currently (tuition mostly) and so it sits in a savings account with one of the higher APY banks (Ally, Alliant credit Union, and the like). However, when it's money I wouldn't have to pay back somewhere soon, it would definitely go to index funds.
Savings accounts are essentially restricted checking accounts, so what's the point? The interest rates on both types are the same, at approximately zero (pennies of annual interest on a thousand dollars).
Zero risk, but higher returns than a checking account. You may not care about the difference between 0% interest and 1.5%, but it is nice to have a few hundred $$ extra at the end of teh year.
I have a savings account at Marcus and it's 1.7% without any minimum, a high $1M max and no goofy rules to jump through.