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Comment by magicsmoke | Hacker News Reader

> And as has often been the case in recent years, investors find themselves faced with few attractive alternatives if they opt out of betting on stocks. The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks.

Cash: Gets eaten away by inflation. Although the CPI doesn't indicate high inflation it only measures consumer goods. Inflation is there in the price of investments. If you don't invest now, it'll cost you much more in the future to own assets with positive rates of return.

Bonds: Near 0% interest rate, practically no better than holding cash.

Real Estate: Not nearly as liquid as stocks, but the price of real estate is propped up by similar logic.

International Investments: Now this could be interesting if capital flight from the US begins occurring. However, every other economy is hurting like the US's or has significant problems with transparency and whether investors can get their money back out again.

Stocks are more than just their market price. They represent ownership in a piece of the American economy and its future dividends. As of 2016, the richest 10% of America owns 86% of its stocks / future economic output. With the economy plunging while stock prices remain high, this means the fence between being a renter and a owner just got even higher.

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I agree.

Also, I know it is hip to say that Wall Street is short-sighted, but in reality it is one of the the few fields where people routinely think decades at a time.

If you run a large pension fund or investment account you were already risk-weighted and if the cash isn't needed for 10+ years you'd much rather own a slice of the world's largest companies ten years from now instead of gold or cash under a mattress.

It's all about risk vs return. Furthermore, in the current environment of high adversity, and increased scarcity there will eventually be innovations. Some of those will translate into products and profits.

The problem is perception. Stocks are increasingly seen as a risk-free play, backstopped by a Fed that will take drastic action if prices fall.

In that world, why bother innovating? Why bother investing in innovation when the risk-free play has a huge positive expected return?

Because the Fed isn't there all the time. Under normal circumstances, you can't just sit there. Aside from competition, you won't retain quality employees.

But they are now, and that's what matters. When prices fell the first time, it didn't even take a week before the government passed the largest stimulus ever, 80% of which went to corporations. Investors know that the government will do anything to underwrite their risk.

Nah. That doesn't guarantee a return. It might mitigate the downside but there's still risk. No one takes on risk to break even.

You invest for a return. Stopping a slide yesterday has little to do with getting a return tomorrow.

The future. New products. New ideas. Etc. That's where a return comes from. Not the Fed.

The mandate of the fed is to have maximum employment and price stability. With the impact of social distancing to businesses there was no other alternative to protect employment rather than fed buying securities so the govt has funds for fiscal stimulus to prop up employers that might otherwise go bust (and may still).

The stimulus is intended to protect jobs and livelihoods, not to react to movements in the stock market (even if the current president seems to think so)

Agreed. The entire exercise has been about mitigating chaos. A freefalling stock market _and_ overwhelmed hospitals would cascade badly. Any lives saved was a byproduct.

For better or worse, agreed or not, the US' gov diverted - for now? - an implosion. The Fed can't eliminate risk. It also can't guarantee future returns.

False, most of the stimulus went to 1) direct payments to the bottom 90% and 2) small businesses with less than 50 employees.

That was a later program. You're misunderstanding because he used the word "stimulus". There were multiple rounds. The first, was a huge corporate giveaway.

The first one was .4% the size of the cares act and it was for healthcare, not corporate giveaways:

More than $3 billion for "research and development of vaccines, as well as therapeutics and diagnostics"

$2.2 billion "in public health funding to aid in prevention, preparedness and response efforts — including $950 million to support state and local agencies"

Almost $1 billion for "medical supplies, health-care preparedness, Community Health Centers and medical surge capacity"

$1.25 billion to fight COVID-19 internationally.

source: https://en.wikipedia.org/wiki/Coronavirus_Preparedness_and_R...

You are correct. The original commenter was incorrect in the assertion of the order of the bills "passing" - "it didn't even take a week before the government passed the largest stimulus ever".

I'm referencing the CARE Act.

https://en.wikipedia.org/wiki/Coronavirus_Aid,_Relief,_and_E...

Granted the one you reference was passed prior, the CARE Act was introduced first. The CARE Act was never in danger of being dropped, as the market was counting on it (it is filled with pork).

https://www.federalreserve.gov/newsevents/pressreleases/mone... , the fed is buying junk corporate bonds

They announced their intention but I don't believe they have actually bought any yet [0, 1]. Also, their balance sheet shows they are buying predominately U.S. Treasury securities and Mortgage-backed securities [2].

[0]: https://www.cnn.com/2020/05/04/investing/fed-junk-bonds-etfs...

[1]: https://twitter.com/TruthGundlach/status/1256352949787176960

[2]: https://www.federalreserve.gov/releases/h41/current/

> Investors know that the government will do anything to underwrite their risk.

The FED only steps in for once in a lifetime risks that impacts the market broadly. Any risk specific to individual firms, which is all the risk between these broad market events.

> The FED only steps in for once in a lifetime risks that impacts the market broadly.

Those risks overlap. It's not effectively once-in-a-lifetime, as of the last century.

These once-in-a-lifetime risks have been happening about every 10 years lately. It's also important to remember that there are sectors of the economy receiving huge subsidies. One of the most striking is banking, which derives a good proportion of its value from the federal government guarantees on deposits[0].

[0]http://www.adriendavernas.com/papers/valuationofbanks.pdf

Wall st is extremely cutthroat, in that if you stagnate 1 quarter kiss your market cap goodbye. Loom at the R&D budgets to judge if public companies are still innovating.

I feel like there is a decade of guillotines in the future that they are either not seeing or are looking way past.

But then I've always been cynical about the growing divide between the uber-wealthy and the other 99% of this country.

Guillotines might have worked well in the past, but with modern weapons and technology, you can use a much smaller portion of the population to suppress a much larger portion of the population.

You can pay 10% of the population well enough that they support the top 0.01%, and the top 10% can pay the next 20% to 30% well enough or provide a sufficient probability to move up (or illusion) that they are incentivized to help suppress the remaining 60%.

Also known as the "Tyranny of the Majority".

https://en.m.wikipedia.org/wiki/Tyranny_of_the_majority

Uh, you can't just pay massive numbers of the population without the wealth creation in the first place. We do not have some centralized salary authority that pays people based on loyalty to some arbitrary payment distribution scheme. This is completely contrived.

It doesn't need to be centrally managed, the situation can emerge organically just based on how people are incentivized. Especially with the impact computers and scaling at low marginal costs has and how much more one person's labor can be worth compared to another person's labor.

Oh how splendid.

That cuts both ways, so to speak. Drones and even more advanced technology can replace guillotines as easily as it can be used to have a smaller police force of the kind you mention.

I think some people don't quite understand what people are capable of when they are truly desperate. Right now, in most of the western world, people aren't at that point. But when they get there, billionaires' ability to hide on islands or yachts or whatever won't stop the inevitable. Any violent revolution is going to be very bad, even for the very wealthy who think they're insulated/protected.

Seems very difficult to evade location and transaction tracking, both which governments have very easy access to, but the rank and file do not.

That’s assuming a French Revolution style uprising, which is probably unrealistic. What is very realistic, however, is an increase in “lone wolf” terrorist attacks targeted at rich and/or powerful people. You don’t need a thousand people rolling a guillotine down the street when one person with an off-the-shelf drone could inflict just as much damage. Sure the police would find them quick, but one thing the American military is really bad at is fighting an enemy that doesn’t dress in military gear and shoot back with military weapons in military formation.

We’ve seen it recently, where a single man shut down CNN and I think some other news stations just mailing poorly-made bombs to the media and politicians. We’ve seen it decades ago with Oklahoma City.

Could a Western population stand up against their government in a real fight? No. Could they inflect the same amount of damage without actually having to stand and fight? We’ve seen it before.

Nobody ever won a war of occupation without local support. I have no doubt the US population could stand up to it's government but with the current levels of polarization I don't think that's a realistic scenario.

Individual assassinations don't change the system. How many rich people do you think have to be assassinated for the economic system that allows accumulated wealth inequality of this scale to change? Would killing Bill Gates or Warren Buffet somehow magically reconfigure how American society works? It's much harder to kill a system than it is to kill individual people. Like you hinted at, the American military has had a grand old time trying to kill off radical islam.

How many rich people need to be assassinated to change the balance? Looks like it's about 3: https://www.usatoday.com/story/money/2017/11/08/billionaires...

In any case, assassination is probably not the most effective means of wealth redistribution.

Just reverting the tax cuts for the wealthy would already do a lot of good. I also think a steep inheritance tax for inheritances over a certain amount (1 million? 10 million?, 100 million?) to preventing these concentrations of wealth from creating a new aristocracy.

But 3 billionaires owning more than the bottom half of the country doesn't have to mean if the bottom half owns nothing:

>> "Their $264.1 billion in holdings outstrips the combined net worth of an estimated 160 million people"

Simply redistributing that would mean that everybody in the bottom half gets $1600. That's not going to fix poverty. It only underscores just how little that bottom half really has.

The problem with high inheritance tax is that it only hurts the rich when it catches them off guard. In otherwise free economy there are so many legal ways to circumvent inheritance tax for the lowest rate tax that is available.

That's true. My point is just that inheriting massive fortunes is a problem because it keeps wealth concentrated across generations. But there are so many loopholes around inheritance that it's not trivial to address this.

Hypothetically, if assassinating Gates, Buffett, and Bezos were a viable method of wealth redistribution, I don't think the idea would be to give everyone $1600. It would probably be more like "we're going to look at the median and top everybody up to that level."

I'm just looking at what the bottom half of the population gets. There's on average $1600 per person available. And that's apparently also what the average person in the bottom half already has, since together they apparently own as much as these three billionaires.

So that means if you completely equalize the wealth of the bottom 50% of the population after redistributing the wealth of these billionaires, the average person in that bottom half will still only have $3200.

So maybe they can get their car fixed, but they still can't send their kids to college.

First, the military did eventually do quite well vs. isis, once proper resources were directed.

Second, look at history to tell you what will happen if the rich get disappeared. This happened in many communist nations. Doctors, lawyers, professors, bankers, wealthy landowners were mostly murdered and their wealth stolen from them. Did it work well for those nations? Are they thriving today?

France did quite well after killing the aristocracy. Most 'communist' nations on the other hand did a lot more than kill the rich and take their wealth. Compared to the vast economic, social and political changes that happened in Soviet Russia or China etc., it seems that the part about what happened to the rich is unlikely to be very consequential in its impact.

Huh? How can you just write off the unrealized potential like this?

> Individual assassinations don't change the system.

Franz Ferdinand’s assassination changed a whole lot of systems.

It was the spark that ignited the fire, but the kindling was already there. It probably still would have happened without his assassination, though possible a few years later.

There's also plenty of kindling in the world today. Plenty of current top players and upcoming top players butting heads(China and Turkey being the most news worthy to Americans), plenty of players that are sour about past/present conditions (Britain with Brexit, Germany/France over their influence in the EU), and players that are seeking allies to become an upcoming top player (India being the easiest to point out).

Plenty of friction indeed, but the big difference is that (almost) nobody wants to go to war. Just before WW1, everybody was itching for another war. China definitely does not want war with the US; they want to expand economically. Nobody in the EU wants war over anything. The US has always been the most eager to go to war, but even they seem to have learned that wars are expensive and have little benefit. Russia wants to control (pieces of) their neighbours, but again without an actual war the EU or NATO. Turkey is primarily interested in crushing anything that might start to look like a Kurdish state, but also doesn't want a war with a big player.

Wars today are mostly cold or proxy, and rarely direct.

WW1 was going to happen anyway, it was just the first good excuse.

> We’ve seen it recently, where a single man shut down CNN and I think some other news stations just mailing poorly-made bombs to the media and politicians.

That case always struck me as really odd. That guy was under surveillance the whole time and was caught in a sting operation. I think they even helped him build the devices. For what reason did they actually let him mail them? Surely, given that they were in on the entire plot, they could have simply arrested him before the devices were actually mailed.

He only has to take some material step forward in terms of the plot to get arrested for conspiracy as far as the law goes. Letting those reach the mailbox seems like a major failure on their part.

They were rewarded with promotions, published news items celebrating the arrest and increased budgets.

Don't forget this is also the country where multiple right-wing militias came out of the woodworks and engaged in a standoff against rangers for multiple days over a herd of fucking cattle. And then proceeded to do the whole thing over again in a month long siege over some cabin in a national park.

My point being in any destabiliztion event these groups are certainly going to be active, and being that they also have the exact opposite political ethos to the average gulliotine advocate, I'm willing to bet any uprising is not going to be so simple.

Think less French Revolution, and more Autodefensas Unidas de Colombia

History repeats itself: https://en.wikipedia.org/wiki/Wall_Street_bombing

System controls internet, phone network, electricity, food and oil delivery.

IF you want to stop a revolution in 21st century just shutdown everything and blockade roads. How long till people start dying? A week?

What are the rebels gonna do? Assauls tanks and machine guns? Or starve/freeze/cook to death without electricity/oil/food?

The American delusion of aremd citizens defending constitution is just that - a delusion. In real life army mops the floor with small minority of suicidal rebels, and the rest begrudgingly return to their usual jobs because it's much better than starving and fearing for life every day.

Army would at least make things so that us isn’t a laughing joke to the world unlike what the current administration is doing

On the other hand, you have seen the mighty US army not being able to suppress a few guys wearing flip flops in Middle East. So, if things get real nasty you won't have people "begrudgingly returning to their jobs". If that thing is possible to happen, there would BE no revolution in the first place, as the conditions would be not harsh enough.

This "delusion" is also mostly a straw man in my opinion. Most people who talk seriously about armed rebellion in connection with the second amendment are not talking about attempting a coup, marching on the capital, engaging the military.

They're talking about holing up in scattered rural dwellings and ignoring the law, with maybe the occasional terror attack mixed in. The Taliban has made a decent go of such a strategy so I don't it's an altogether risible position as you're implying.

The Taliban live in a failed state with barely any civilization for decades already. What's to lose?

I highly doubt average American will be OK with that.

This approach works well particularly well if the masses are decapitate by identifying anyone with high intelligence and “inviting” them into the 10% via education.

Angry masses without a leader are not going to do anything.

I think you're overestimating the value of high intelligence. I don't believe we have any accurate means of identifying potent leaders, not even a 10% slice they might belong to.

Strip the wealthy if their wealth and most will probably become wealthy again. If you don’t call it intelligence what would you call it.

> most will probably become wealthy again.

Source?

This sounds like something that a study of Chinese upper-class and their 1949 pre-revolution family history could shed some very interesting results on.

There's a book that attempts to look at this called, "The Son Also Rises."

It tracks wealth by surnames and argues that the ability to gain (or regain) wealth is inheritable. This thesis is in contradiction to some of the ways I've experienced the world, but it is a source supporting the parent's claim. For my own political inclinations I'd be happy to hear many others that support the opposite claim.

I've only dug into the briefly, so forgive me if I'm missing something obvious, but it looks like his research was mostly just tracking surnames? How would you differentiate between family lines that actually lose and regain wealth over generations, and those that happen to maintain it over that span?

Like say the Smith family was traditionally privileged and wealthy, but my great-great-grandfather lost his fortune. Am I actually any more likely to rise in fortune than the Jones' family next door that have been generationally poor for hundreds of years? Or does it only seem like that because I have many distant cousin's whose families maintained their advantages?

It tracks rare surnames, so there aren’t many distant cousins to skew the results. The point of focusing on rare surnames is so that you can be more certain that people carrying them today are actually direct descendants of people in the old records.

Second thing is that the fortune is typically not tracked here, because it’s really hard to get any historical data about fortune of any individuals, much less those not so famous. What Clark et al do is track status, and average out: for example, you can look at the people who graduated Oxford hundreds of years ago. As it turns out, their descendants today are overrepresented among UK’s doctors and lawyers. On the other hand, people carrying common job-related last names, like Smith or Taylor, are underrepresented as lawyers and doctors. In fact, in today’s UK, people carrying last names of Norman conquerors are still overrepresented among high status occupations in UK, although not by much, given a millennium of a regression towards the mean.

I recommend reading the book, it’s great.

Maybe I was unclear because I picked a generically common surname for my example, but I was also assuming both people were descended from a common successful ancestor.

The core of Clark’s argument is that the advantage is not due to accumulated fortune, but rather is genetic in nature.

http://faculty.econ.ucdavis.edu/faculty/gclark/the_Son_Also_...

https://press.princeton.edu/books/hardcover/9780691162546/th...

https://archive.org/details/CSPAN2_20151004_190000_Book_Disc...

https://www.worldcat.org/title/son-also-rises-surnames-and-t...

http://gen.lib.rus.ec/book/index.php?md5=76BC054612F39ED6CBD...

https://en.wikipedia.org/wiki/The_Son_Also_Rises_(book)

Did they look at societies where last names are passed on matrilineally but social status/family continuity isn't? You would get the same results if the ability to gain wealth were truly a matter of genetics, but not if it were simply a matter of environmental benefits conferred from wealth.

Being born in the right family is absolutely a major predictor of success. The wealth opens up opportunities, but even without it, the guidance and example of family members helps a lot. The name recognition may too.

Brand recognition

I think that's likely untrue if you include connections, training, and education in your definition of wealth.

American wealth is closely tied to how wealthy a given persons parents were [0]. Given this, I’m skeptical that the wealthy would become wealthy again.

The counterpoint is the richest Southern families quickly recovered their positions in the years after the Civil War [1]... but that relied heavily on racist policies, and of course these families still owned capital like land.

0: http://www.pewtrusts.org/~/media/assets/2015/07/fsm-irs-repo...

1: https://www.nber.org/papers/w25700?utm_campaign=ntwh&utm_med...

But intelligence is directly connected to it, too. And I'm not even speaking about generic aspect: it's the cultural thing of how important education is perceived to be. In Russia, two generations after the revolution you could still guess where did the family originally come from originally by this cultural divide alone.

Wealth is (obviously) corralated with many properties that make it easier to gain wealth. To look at the effect of parents' wealth (and solely that) on children, you need to look into lottery winners or Bitcoin/APPL holders.

There is no significant relationship between any measurable attribute of someone and their wealth, except for the wealth of their parents. So no.

There are a few relationships between IQ and conscientiousness and wealth, but they break down towards the extremes are not strong enough in magnitude to account for even single-quartile mobility.

It doesn't have to be intelligence but really dissent in general. Check out the Hundred Flowers Campaign where Mao and the Chinese Communist Party encouraged debate and general criticism of the regime.. and then a few months later, rounded up all the dissenters and disappeared them into labor camps.

Ref: https://en.wikipedia.org/wiki/Hundred_Flowers_Campaign

Missiles are similar weapons may be useful against other countries (remember Vietnam, however), but they will not stop revolts inside the country itself. What would the US government do if 80% of the city of New York decided to turn against the government? Throw an atomic bomb in the city? Their time may be running out.

What would New York even do? People here don't believe in firearms, let alone violence. In reality the city would starve within a couple weeks due to siege/blockades if it really united and tried to revolt.

Kropotkin's Bread Book is about exactly that! He claims any revolution will be as successful as its ability to feed everyone, and tries to outline a path to it.

To name it, "The Conquest of Bread". Very good read, kept me from snoozing off in my CS classes :p

> People here don't believe in firearms,

I don't know what that means. Guns are highly correlated with leathality and people believe in them completely. Generally, a population may not want to have possession of guns. That quickly changes for a large percentage in survival mode. Effectively, many criminals are perpetually in survival mode.

It’s not like police haven’t resorted to bombing its own citizens before.

https://www.vox.com/the-highlight/2019/8/8/20747198/philadel...

The entire Civil Rights movement is littered with examples of a police state and civilian mobs shooting, lynching, using dogs, water hoses, etc against its own citizens. It doesn’t take much to rile people up against “them” and get people to look the other way or even participate.

This is almost a kind of income equalizing. The top fraction of a % will pay a bit more to the people they are bribing not to kill them and so forth. The smart thing is the people at the top pay it all, so they control it.

There is a much simpler alternative. The general strike.

Market could still go up. The Fed just has to agree to print money until the strike ends.

Which will be very useful when the utility workers of the stock exchange strike and the lights turn off.

Not when half the country is living paycheck to paycheck.

Mutual-aid networks could be set up to subsist strikers

Yeah, people always say "Why should I pay more in taxes? It's not fair, they should be flat and the same for everybody!" and I'm always like "Do you have just as much to lose in a French Revolution scenario? You should be happy to pay more if it leads to more social stability."

The top 1% pay something like half our taxes. What share do you think is fairer?

How about equally to their share of national income?

It should be in proportion to how many % of the wealth they own. So more like 90%

The 1% earn 36% of the income[1] as of 2016, and pay 37% of the taxes[2]. Everyone happy now?

[1] https://www.cbpp.org/research/poverty-and-inequality/a-guide...

[2] https://taxfoundation.org/summary-latest-federal-income-tax-...

Income != wealth

Indeed, many billionaire and multimillionaire CEOs famously take a salary of $1. Bezos takes a salary of around $80k, IIRC. And, I'm not even sure if Bill Gates is taking a salary at all these days.

Income is taxed.

But the top 1% own much more than 37% of the wealth (and accordingly receive much more than 37% of the financial benefits of government spending) while only paying 37% of the taxes (which fund that government spending).

> and accordingly receive much more than 37% of the financial benefits of government spending

what?

They wouldn't have all that wealth if it wasn't for infrastructure, an educated population, a stable political situation, continual bailouts, and the world's largest war machine.

e.g. aircraft carriers

The wealthy produce more income via capital gains, which are taxed at lower rates. They also have greater access to tax deferred and tax free options. A married couple of high earners with a good retirement plan at work can put nearly 150,000 annually in accounts that grow tax free.

They will simply leave, or destroy the system.

How do you imagine this would work? Would no one in America found companies anymore? Would the government sit by and allow the to leave? How would companies like health insurance leave?

Imagining that the richest can hold a country like the US hostage is preposterous.

No, they would try to make a bunch of shell corps and have only 1% in each corp. Distributing the wealth (to other entities that they control less directly). It would essentially just destroy brand recognition for large companies.

They're welcome to leave. Society doesn't need rich people.

Destroying the system would do more damage, but so far it's been their system that enables their accumulation of wealth. There are a lot of poor people who want to destroy that system.

Like Sanders says, when half a million people are homeless, our healthcare system is a joke, and our infrastructure is unmaintained, we have a LOT of work to do. And a lot of spending.

There is a far-left opinion that there should be no such thing as a billionaire, that a single human's marginal tax rate should hit 100% at some point. I wouldn't say "never" to the idea at this point.

> our infrastructure is unmaintained

Bernie supporters are generally the least likely to get their hands dirty and do the kind of work necessary to build and maintain infrastructure. Pretty much everyone I meet that does that kind of work is Republican. Not saying this is a universal truth, but it's a somewhat accurate generalization.

Source for party affiliation by a sampling of occupations:

http://verdantlabs.com/politics_of_professions/

I don't respect your assertion. Not a lot of work to do when it's unfunded.

Also looking through your other comments, you seem to question peoples' sources on things without providing any for your own.

For posterity, the link was added after I commented and he probably downvoted me.

This is of course the big issue with infrastructure. The problem isn't the people doing the work, the problem is that they need to get paid for doing the work. Funding infrastructure is a political decision.

Responding to "our infrastructure is unmaintained" with "Bernie supporters won't be in the jobs actually doing the building because I found this cool infographic showing that bartenders lean Democratic and beer wholesalers lean Republican" is beyond mere non-sequitur into genuine weirdness.

It's not like our infrastructure problems are new, or weren't remarked on before 2016. They've been building for decades. They were there in the Obama administration, and the Bush administration, and the Clinton administration, and the other Bush administration, and the Reagan administration. Do you think the problem through all those years was our critical shortage of leftist construction workers?

Neither bartender nor beer distributor are building infrastructure.

That list actually does a good job comparing related professions. For example, while home builders lean Republican, architects lean Democrat. Plumbers Republican, carpenters Democrat. I don't see this support your assertion at all. Road workers or bridge builders are not listed at all.

> Road workers or bridge builders are not listed at all.

If you scroll past the 1:1 comparisons and hit expand all, there's a much bigger list of occupations, many of which would fall under the "people building infrastructure" umbrella.

Looking at those jobs it seems like it leans a bit right, but overall is fairly balanced.

It's certainly an interesting list to browse through. Some make sense, some are surprising, some don't make sense at all.

You'd expect most jobs to be roughly 50/50 divided between Republican and Democrat. (Actually, I'd expect a big chunk Independent. What happened to those?) Some lean so strongly to one side that it makes me wonder what's going on there.

Environmentalist strongly Dem and oil worker strongly Rep makes sense. I suppose high-paying jobs with authority like pilot leaning more Rep whereas service-oriented jobs like flight attendant leaning more Dem is also understandable.

But farmers lean Rep, but once they retire they lean Dem. Why? I'm a bit surprised to see stay-at-home moms as well as most religious professions lean strongly Dem. I mean, to me it makes sense that religious people lean left, but it often sounds like many Americans feel exactly the opposite about that. I guess I'm glad to see these stats make more sense than the news.

But in skilled trades, I absolutely don't understand the reason for the large differences. Why would a locksmith or machinist lean to strongly Rep, while sheet metal workers and cartographers lean so strongly Dem? I can't think of any good reason for that difference.

I see a lot of inspectors and rafety/regulation related professions lean somewhat Dem, but safety director leans very strongly Rep.

And what's the difference between a landscape contractor and a gardener? Or a landscaper and a garden designer? Could it be that some people choose to identify by a particular professional label based on their political leaning, rather than the other way around?

And how representative are the various groups? If you asked only 4 horticulturists, it's easy to get 3/4 of them leaning one way or the other. How many book publishers did they ask that all of them are Democrats? Surely there are also Republican book publishers?

They can only do so because of the bottom 80% from which they extract their profit.

Apparently they own more than half the wealth, so fairer would mean they need to pay more.

How is that any different from the proposition offered by your local Mafia muscle?

Thanks Bob. Very helpful comment. If people live a fulfilling life and are taking care by the state when they hit a bad time or go through health problems, they are less likely to want to overthrow the state. This social net requires taxes. It’s a social net, not a racket.

All governments are Mafias to some extent. That's what it means to have police. The difference is that we expect the government to leverage its Mafia-like power in a manner that best suits its citizens.

That seems like an unfair comparison. The govt has courts that can overturn it. Before trump we didn't have the whim on the executive.

It may make you feel good to blame the current guy but we've had the whim of the Executive since the beginning. The only things that has changed are a) the willingness to use it and b) the sheer number of places it can be used.

Obama ordered drone strikes on Americans. Reagan ran Iran-Contra. Kennedy tried to invade Cuba. FDR tried to grow the Supreme Court to 13.

A better approach would be for the federal government as a whole - yes, all three branches - to reign in their power so that there's less power to abuse. The odds of that are zero.

Constitution is built with the understanding that those odds are zero, and that gridlock is the natural tendency.

You only have to look at the behavior of prosecuting attorneys who are free to downgrade criminal charges as they see fit with predictable biases as a result.

A big difference is that governments should be accountable to the people. Not all are, in which case they are indeed pretty much like a legitimised mafia.

It's the democratic basis that gives a government its legitimacy.

I mean some really wealthy people seem to want to replace the government with autocratic royalist fiefdoms so I guess you may have a point in their eyes.

Social chaos, perhaps. But the 1% aren't much at risk, because they have enough resources and can isolate themselves well enough. It's the upper middle class that may get seriously injured.

Not disagreeing. But the proximal reason for this is political. Inequality is not intrinsic to capital markets. Capital markets are merely not a solution for inequality, and require some modicum of intelligent regulation to function properly.

Instead the Us is rife with regulatory capture, unenforced antitrust laws, etc.

If the democracy were representative, and the public informed, things would be better.

At least in the US, today's poor have smart phones, air conditioning, refrigerators, and better health than any other time in history. Comfort-wise, things are at historic 'best' levels.

Why would anyone in their right mind give up their life for a revolution under these conditions?

Presumably that would be after they lose all that because they can't pay for it anymore.

Then again, judging by the downvote happy people here, there may not be enough braincells left for a successful revolution.

Today in the US the working poor have cheap entertainment and no money to take vacations, no way of paying for even a 400USD unexpected payment, often rely on the state to eat (food stamps),and can't afford any Healthcare. There may be reasons some of you will want a revolution.

I don't see how they would help. There's a common refrain among Reddit socialists and whatnot about the rich sitting on some mythical "pile of resources" that needs to be redistributed, but even if you suppose that we guillotine the rich I don't think the poor can eat stock certificates.

What are they going to do if they dismantle, say, Wal-Mart? Now all the people who worked there have no jobs and the people who shopped there have one less source of goods. Sure, we might be fine without it due to the alternatives, but once you go down that road, you find out that you've ripped up a complex system of logistics that moved goods to places that people wanted them and that you don't have any sort of replacement planned.

But that's usually what happens in these revolutions, they rip everything apart and then try to replace it with something better and fail. But next time will always be better, right?

How about ripping Wal-Mart apart and replacing it with what existed before - many different shops, each owned by a local person, and many different logsitics networks, each also owned by someone in the area?

People on the right often claim to be for the free market and for small, decentralized government, but then turn around and love big, centrally planned conglomerates,just as long as they are owned by share-holders and are ruled with an authoritarian hand.

each small store will have little bargaining power when it comes to their suppliers. therefore, each little store will end up paying "market price".

Eventually, the small stores join up together to bargain for a wholesale price lower than market price to their suppliers, and thus earn a higher margin.

ala, what you see at walmart today.

What you see with Walmart is singular entity, owned by an obscenely rich family, who can strong-arm any supplier into accepting their terms.

They have the massive capital to build a megamart anywhere they want, and have it run at a loss for however long it takes to drive everyone out of business. This absolutely kills local businesses and funnels money out of the area, leaving only the low wages paid to the local Walmart staff. And because it's Walmart job or no job, people have no bargaining power.

When small businesses form cooperatives for collective bargaining, they keep ownership local, they keep jobs local, and they keep the stores in the city centres running, which is better for pedestrian and public transit access, not to mention cafe life and local bars/eateries. Compare this to a megamart outside the city where you have no choice but to drive there. You get everything there and have no real reason to go into the city. As a consequence, city life dies out.

Coops and associations work with the local shop owners and communities, whereas megacorps trample and replace them with cookie cutter faceless megamarts.

Efficiency always drives out competition. There's still room for small merchants for anyone who doesn't mind paying the premium to shop there. But not many people are willing (or able) to pay that much extra to be greeted by a familiar local face.

And no, I don't think the supply chains are actually more robust for local stores. I've had better luck at the local Wal-Mart than at other stores for TP and other hard-to-get items. If anything, early on, some people weren't checking the smaller stores, but after they got wiped out, they've yet to recover and yet Wal-Mart has.

There are still supply chain issues, don't get me wrong, but mostly they're upstream a bit from the customers. Think of things like meat packing plants having trouble finding any way to operate safely or having a lot of production that had to shift from commercial packaging to retail packaging and distribution.

The problem is that this efficiency comes from being a huge corporation with a tight hold on the market. Not an outright monopoly, but with the ability to bleed money in some areas to outcompete smaller stores and the ability to negotiate big contracts by virtue of sheer clout in the market.

Walmart is so big that it utterly dominates the market, to the detriment of everyone else. But because they're able to sell everything at the lowest price, people go there. It's impossible to compete with Walmart.

It's a clear example of why the invisible hand of the free market is a dangerous myth.

How is Wal-Mart a monopoly? I can't name any single good there which can't be gotten elsewhere and they have plenty of competitors for any given product line. There are dozens of other places I can get clothes, groceries, sporting goods, tools, etc. You say it's impossible, but does Target no longer exist? They directly compete with pretty much everything Wal-Mart does and many other businesses compete with them on specific product lines.

Economy of scale is not at all the same as monopoly power and conflating the two only makes your point more confused.

Finally, the "invisible hand" is really just a survival of the fittest type effect. It's every bit as random and imperfect as that is in nature, but the effects are no less real, or we'd all be peasants living at 1800s level standards instead of typing to each other on a globe-spanning computer network.

If anything, I'd say that Socialism is the dangerous myth. Always promising utopia, as if you can create a utopia with unconstrained mass murder from a Socialist revolution. If we were the right kind of people to live in that utopia, we'd be sharing our stuff willingly right now, not seeing talk of guillotines and forcibly taking stuff, as can be observed in this very story. The proper way to get closer to that would be to encourage people to share and be generous.

As the song says, first it was a tragedy, now it's a farce: https://www.youtube.com/watch?v=QwqnRYPcrl0

Walmart has a history of building stores in areas where local stores already exist, letting them bleed money while they outcompete everyone with their lower prices, dominating the local area and driving other stores out of business.

They can afford to this due to their enormous size and domination of their suppliers, which means they can sell their wares at lower prices than anyone else. They can afford to bleed money for as long as they have to, in order to win in an area.

That is almost the textbook definition of a local monopoly, facilitated by sheer size and entrenched market position on a larger scale. They are so large that they can have everything in all of their stores, they don't have to worry too much about certain items not being profitable in certain areas, because they're big enough to carry everything everywhere, unlike smaller local stores, who cannot afford the space nor the losses.

Walmart banks hard on the convenience of everything being available in the same store, which is something they can only do because of their sheer clout and economies of scale that only work for really big powerful companies.

The end effect is that Walmat (and other similarly huge chains) drive smaller businesses out of the market, because a free market always rewards those who dominate others, and rewards domination by affording even better tools and methods for dominating competitors. It's a surefire way to make sure the market is owned and run by just a small handful of very large and powerful entities.

A truly free market is one that is sensibly regulated, in order to foster competition and prevent monopolies from taking over, according to Adam Smith, not one that is completely unregulated, as many free market proponents seem to argue for.

> Walmart has a history of building stores in areas where local stores already exist, letting them bleed money while they outcompete everyone with their lower prices, dominating the local area and driving other stores out of business.

So it's not a monopoly at all, they just offer things at cheaper prices and drive more expensive businesses out of business, while many reasonably efficient competitors still exist.

Walmart leverages their dominance over the supply chain and their position as a huge chain with locations all over the country, to outcompete local competitors who do not have the same benefits to draw upon.

As a consequence of this, local businesses die, jobs are lost and people either have to move away or accept Walmart jobs with well-documented bad pay and bad working conditions.

All of this is a deliberate business strategy by Walmart, because the US political climate and "business-friendly" ideology from both major parties prioritizes giant corporations with enormous lobbying power, over small business owners.

As a further local effect, business life is driven from the city centers to outside the cities, causing fewer people from the suburbs to go into the city centers, leading to urban neglect and decay.

That's competition. Monopoly is when you don't have real competitors. And yet somehow they compete vs. Amazon, Target and a thousand other stores.

They don't have control over the supply of any particular good, it's not like an ISP where they have covenants with local governments that limit competition, they're not Standard Oil. They're not even at the level of Microsoft, because there's not much they can do to exclude competition.

But I guess some people have tried this tact, before. Here's an article which discusses many of the points you've made and explains why they don't make sense:

https://truthonthemarket.com/2006/07/10/the-unconvincing-ant...

Walmart quickly becomes a local monopoly, because they dominate over the local competitors who cannot leverage the same economies of scale to lower distributor prices nor afford to bleed money in one area in order to take over the local market.

Honestly it seems you either refuse to read what I wrote, or you are invested in a free market ideology. The link you posted is nothing more than a hard-libertarian free market fanatic opinion blog, heavy on snark and lacking in value.

Read about the damage Walmart does to communities and why even their mere presence in the market completely distorts it:

https://money.com/walmart-stores-closing-small-towns/

https://www.citylab.com/life/2012/09/radiating-death-how-wal...

https://m.dailykos.com/stories/2013/03/28/1197622/-The-Walma...

This goes for all megamart chains, Amazon and the like, but Walmart is among the very worst.

> How about ripping Wal-Mart apart and replacing it with what existed before - many different shops, each owned by a local person, and many different logsitics networks, each also owned by someone in the area?

You underestimate, vastly, just what they've done to their supply chain, distribution network and logistics to make it that efficient and therefore cheap for their customers. It's part of the reason people switched from buying from local shops and went to them instead.

I chose them as an example because business people know a lot about what they did and the general public doesn't have a clue. I don't even like Wal-Mart, but I'm also aware of some of the reasons they're so successful. They're literally studied by people who study supply chain management because of what they did, e.g. -

https://www.skubana.com/walmart-leading-way/

I used them because it's fashionable to hate them, but anyone who knew what they had actually built that's not visible to the public would know that it's not something that you can just replace that easily. So that lets me separate the replies according to how informed they are.

Finally, your attempt to connect large companies to "central planning" is at odds with the fact that one works and the other does not. Central planning doesn't work because different people have different needs and no single plan can accommodate so many unique individuals. I don't think you will find many businesses that aren't planned, but they're not managing so many unique needs, either. And in those times when they really do end up in a situation like that, they end up being spun off as separate companies for that very reason.

Those supply chains may be efficient and cheaper, but due to their massive cnetralisation and optimisation, they're also more vulnerable. Just yesterday there was a discussion here on food supply chains and how small-scale local supply chains were more robust in the face of the current crisis.

It's not about dismantling walmart. At least from the 'socialist' point of view, its redistributing capital that is just sitting idle. For example, take away the majority of zucks and bezos stock, and just give it away evenly to the people. That's not dismantling the company, its just a redistribution of wealth that has been earned off the backs of middle class.

The middle class signed up for the trades offered by zuck/bezos. Why are they owed?

I don't really agree with it, I'm just trying to explain the viewpoint.

They're not owed in a fully capitalist system, but I can see some merit for the idea that inequality has gotten so bad that there needs to be external intervention to fix that, and redistribute the wealth that is currently concentrated in the top 1%. Giving normal people that money would be a good thing for the economy, and I can see some benefit to it.

Now of course in practice it wouldn't be legal and getting that money from them would be near impossible, but its interesting in theory.

If you give them money, they'll spend it at Amazon and bezos will get it back. What's the point?

The rich are the first to encourage a witch-hunt against the rich. It drives up business.

I don't see how you can you say too many people "signed up" for the system we have. 99% are simply born into it with little to no understanding or bargaining power whatsoever.

To the extent that consumers do have a choice, that is somewhat true, but the examples of Facebook and Amazon are as much incredible luck of being in the right place and the right time, exponential explosion of brand new modes of communication and commerce, and all kinds of unintended consequences. Again, to say the middle class "signed up" for this is hardly the case.

At the very least there are issues of power and information imbalances. Take the example of someone comparing the price of something at Amazon and the same thing at a local bookstore and deciding that it's worth the $0.50 savings to go with Amazon. It is easy -- and incorrect -- to say, "well, they signed up for the massive corporate supply chain consolidation and the dissolution of many local economies' autonomy that transactions like this will precipitate when performed at a large scale."

The average consumer simply doesn't have the access to data that corporate boards and politicians do, nor do they have the historical and statistical training to make an educated analysis of their implications.

Finally, even though there are people and organizations who urge alternative consumer patterns, the reach and the volume of their message pales in comparison to the marketing, PR and advertising armies employed by large corporations and their political allies.

You assign too much reasoned behaviour to 'luck'. Its impossible to discuss reason if you hide it behind luck.

The average consumer doesnt need to be given a bachelor's degree in economics to make a choice on making a company bigger or smaller with their purchase. I know people who support smaller business and it is independent of education.

Amazons offer to the end consumer, is not a hard sell. Theres no drug dealing physical addiction, nobody wakes up with a horses head in their bed and no guns held to people's head. The offer is buy an item that costs money. That's it.

People sign up. They want 0.50c cheaper with overnight delivery. The people see the benefit and convience of internet shopping and choose it. Small businesses failing to keep up and relying on thinking of the population as dumb and unlucky to force redistribution of wealth are not helping their own case.

Many small businesses have succeeded massively off the same medium amazon is using, the internet and it's not 'luck'.

But their capital isn't idle. For the most part it consists of ownership via the stock market in large conglomerates that employ huge numbers of people and provide goods and services to significant portions of the planet.

That's why I don't see what good "dismantling" them does. Say someone offs Google tomorrow. The website dies and we're left with a bunch of people who have no job and some servers and buildings and whatnot that are less useful to anyone than when you started.

I want to know why this "guillotine" thing has become so big recently? It has largely been Bernie/DSA people. I find it a bit disturbing. I've seen even very innocent things like simply being a landlord as "guillotine" worthy on social media. This is pre-COVID. While most landlords are actually middle class people trying to make a side income. I don't think people actually know what they are asking for, they want revenge on a perceived (false) notion, not reform to make it better; it's a very dangerous path.

I would bet if the far right were making this type of threat, it wouldn't be brushed under the rug.

It seems popular among certain sociopolitical groups to see other people getting nice things and feel entitled to getting those same nice things yourself, without regard for any effort expended or risks taken by the first group. It's pure "you have, I see, I want, I should be able to take".

I honestly believe your thinking here is one of the biggest misunderstandings of our time. Is it really so hard for you to believe that the majority of constituents in these groups want equality rather than them being envious of others' wealth?

I suggest you try a little harder to understand things before you comment on them lest you be mistaken for a fool

I've always assumed it's meant firmly tongue-in-cheek, but it's very morbid humour. But it's also a reminder of how powerless people in the past still managed to take action to rectify injustices, even if it happened in an overly brutal manner. In free, democratic societies, people should have more power to create the change society needs, but it doesn't seem to be working.

But it's also a reminder that if the powerful people in society offer too much resistance to the change the people need, at some point the only way to get that change is by extreme overreaction.

Personally I'd rather see the revolution happening by the soap box or the ballot box rather than the ammo box, but when media and voting systems get gamed and corrupted while people's rights and needs keep getting trampled upon, at some point a more violent solution may become unavoidable. But that's going to be very hard to steer and have many harmful side effects.

I loathe the guillotine rhetoric - did they all sleep through the rest of history class and that it ends with massacres of innocent people not even tenuously connected and getting a fucking emperor? Really it is an all too common attitude - they don't want to fix anything or even think; they just want to feel good about hurting people.

The Anciene Regime ceased to exist and that was a good thing. Many revolutions require violence but that doesn't mean they're never worth it. Nobody could have predicted Napoleon but he was still much better than the monarchy.

I'm surprised the average Americans (the 90%) don't get that they are providing insurance to the 86% wealth of the top 10%, but get almost none of the gains.

again it comes down to options. name something that:

1. the government eats the loses.

2. liquid

3. better returns.

> I'm surprised the average Americans (the 90%) don't get that they are providing insurance to the 86% wealth of the top 10%, but get almost none of the gains.

Are you so sure that they don't get this? I guess that many do understand it and either would like a much more inequality-reducing tax structure, or envision themselves as (somehow!) becoming part of the top 10%.

Ofcourse a small portion will always be ambitious, enterprising and expect to join the 10%. But we are all convinced (and I assumed this too) that the stock gains are good because it helps average Americans increase their 401k, but the stock ownership ratio is so skewed to affect the majority. If the stock market crashed, it wouldn't really afffect most American's net worth which is so interesting? I'm sure companies will shut down and there's be trickle down job losses but that can happen in stock boom times too (like now). A quick Google search showed where this number comes from https://www.nytimes.com/2018/02/08/business/economy/stocks-e...

> or envision themselves as (somehow!) becoming part of the top 10%

I don't disagree with you but want to add some insight to this... My entire life I've been told the lie that if I "just work harder" I can be rich etc. Most of America thinks about themselves in this same way, and it's taken me years of traditional employment + risky startup opportunities to realize that no, success is not guaranteed if you "just work hard"... Honestly you just get nailed with the majority of work as an IC who's trying to crank it out vs. your peers who are off having "dev beers" at the trendy bar down the road.

The peers that I see that are "well off" often had huge monetary injections from their parents in either fully-paid education, first houses, vehicles, incestuous "investments" in their business, etc. Now, those same people that had everything handed to them on a silver platter are invested, some own rental properties, etc. to the point that they can choose not to work for long periods of time to just collect dividends/rent. Funny part - they still define themselves as people who have pulled themselves up by the bootstraps!

So yea - in the US we have a really unhealthy view/mentality around success and ignore the fact that the IT'S THE EXCEPTION for someone to truly "pull themselves up by the bootstraps" into any sort of significant wealth. Truth is most "rich" people had an incredible amount of external financial support and stability to get themselves there and maintain it.

Bring the downvotes, because you're darn tootin' I'm bitter about all of this.

The original formulation of the statement of “work hard and you’ll make it” was created in the context of 17th-19th c. Europe, where no matter how hard you worked, if you weren’t landed gentry, you simply could not make it. The idea was that any opportunity existed. The universalist position you described is a rosy reimagining of a history that never was.

This is super interesting to me and I would actually love to learn the origins of this... do you have any resources you may be able link? Books, articles etc.

Precisely, My ancestors left Denmark and Sweden. Hundreds of thousands left doing the later period of the 19th century. Mainly because how the land was distributed and taxed in such a way that you could never get ahead.

Nice anecdotes! Here’s some more. Everyone I know who’s “made it”, top 10% came from poor or lower-middle class beginnings.

Probably more a factor of where you came from, who you know, etc.

This seems incredibly dismissive of what I was trying to say with your whole "nice anecdotes!" bit.

Obviously it's situational.

what seems very weird to me (as a non US citizen), is that most working class people in the US seem convinced the 'american dream' is synonymous with being a millionare/billionare and introducing legalization to level the playing field of the latter will hurt their own changes at becoming part of the former.

It might also be the reason social democratic/socialistic parties never got a foothold in the US post world war 2.

Home ownership is a core part of the American dream, and in pricey places like the Bay Area, you pretty much have to be a millionaire to own a house.

Thanks to inflation "millionaire" doesn't mean as much as it used to. Billionaires are a completely separate class though.

Exactly. Even setting aside the house prices, if you have exactly a million dollars in your retirement account, you should plan on spending only about $40K-$50K per year from that account. That's hardly a luxurious retirement; yet "you're a millionaire!"

It's also interesting how the scale has slid up so much that many people now believe the "American Dream" is to become a millionaire/billionaire. When originally it was merely the idea that if you do the right thing your children will be better off than you were. It wasn't until the gold rush in the 1850s that the American Dream, for some, became this idea of get rich quick scheming.

I can't speak to everyone, but my parents are children of the 50s and their idea of the "American Dream" was the nice house in a safe neighborhood in the burbs.

Thankfully pretty much everybody still has the ability to buy into a safe neighborhood with a good school district in the Bay Area.

is that most working class people in the US seem convinced the 'american dream' is synonymous with being a millionare/billionare

That's true, but I have no idea where it came from. "The American Dream" was never about becoming a millionaire, it was the idea that you could start with nothing and have a nice, comfortable middle class existence in the US.

How many blue collar millionaires do you know? My two anecdotes are one guy who opened a machine shop with his dad in their very lower middle class garage and one guy who worked his way up to having a few taco bell franchises from the bottom rung. If you don't know those kinds of millionaires, your perception of the world might be tinted by being in a career path that is popular for a certain category of children of wealthy families.

The issue is not that these cases exist, but that they are sold as being the standard, which they're clearly not. To became wealthy coming from a poor background requires a lot of effort, sense of opportunity, and frankly, luck. But all this is sold as something at grasp to anyone in this country, which is clearly false.

Of course luck plays a role in everything. It's merely luck that I've never been run over by a bus, or any number of other problems. But can you help me understand how a lot of effort and a sense of opportunity is not available to the common person?

42% of children born to parents in the bottom fifth of the income distribution ("quintile") remain in the bottom, while 39% born to parents in the top fifth remain at the top.

Okay, more than half of the people at the bottom rise up out of it. And less than half of the people at the top stay at the top. What are you hoping for? Please be as specific as possible.

And what does this have to do with whether a lot of effort and a sense of opportunity is available to the common person?

Most every other developed nation has greater social mobility than the US [1]. Why can't the US reach Scandinavian levels of social mobility?

[1] https://markets.businessinsider.com/news/stocks/ranked-the-s...

A full explanation is too complicated for a single post. But here's two good starters.

https://wtfhappenedin1971.com/

https://www.ineteconomics.org/perspectives/blog/how-why-gove...

Now that we've addressed your off topic question. Could you please try to explain how hard work and a sense of opportunity is not available to the common person?

Advocates of big government love these metrics that have been put through the academic ringer, so-as to spit out whatever tortured output is expected. Why look at this kind of esoteric figure at all? Why not look at, you know, real numbers?

Spending as percentage of GDP: Denmark - 52% of GDP Norway - 55% of GDP Finland - 53% of GDP Sweden - 50% of GDP Iceland - 42% of GDP

Average - 50.5%

USA - 22% of GDP

What does all that extra spending get them?

Poverty rates: [0] Denmark - 13% Norway - Not reported Finland - Not reported Sweden - 15% Iceland - Not reported USA - 15%

Unemployment rates (2017): [0] Denmark - 5.7 Norway - 4.2 Finland - 8.5 Sweden - 6.7 Iceland - 2.8 USA - 4.4

Household Incomein US dollars (2018) [3] Denmark - $34,712 Norway - $39,555 Finland - $34,497 Sweden - $34,301 Iceland - Not reported USA - $50,292

Household Debt as % of disposable income (2015-2018): [1] Denmark - 281% Norway - 239% Finland - 145% Sweden - 189% Iceland - Not reported USA - 105%

Household Net worth as % of net income (2014): [2] Denmark - 553% Norway - 318% Finland - 359% Sweden - 526% Iceland - Not reported USA - 601%

[0]https://www.cia.gov/library/publications/the-world-factbook [1]https://data.oecd.org/hha/household-debt.htm [2]https://data.oecd.org/hha/household-net-worth.htm#indicator-... [3]https://data.oecd.org/hha/household-disposable-income.htm#in...

Interesting numbers. Where are the spending per GDP from? IMF numbers in Wikipedia put US spending at 35%.

Also should comparing the spending numbers take into account that healthcare, schools and universities are paid by government spending in the Nordics and not from household income?

Honest questions, I'm really interested in these differences between systems.

Ah, I forgot to add the citation on that line. The spending numbers come from the CIA World Factbook site, [0] above.

Your number likely includes State, Regional, and Local spending (which was presumably excluded for all nations in my numbers).

Even with the 33% figure, for the US to make up the ~15% difference would require ~3 Trillion in annual spending.

The existence of Social Healthcare programs in those countries is a huge chunk of the difference, I'm sure.

Okay, but are they worse off because they can't afford as much stuff? They don't seem to be in more poverty, they're healthier, more fit and highly educated.

I can spend an extra 20k as well or poorly as I like.

That 'extra 20K' of income is easy to sneeze at for the affluent, but it means that Americans have ~40% more disposable income. That's huge.

> They don't seem to be in more poverty

They're clearly not 'more in poverty'. The point is that they spend (the US equivalent) of Trillions of dollars per year for comparable outcomes.

>They're healthier, more fit and highly educated.

This is a matter of culture, not economics. The US already spends more per pupil than all of the 'top 5' nations, with worse outcomes. [0]

[0]https://data.oecd.org/eduresource/education-spending.htm

Suppose that higher incomes are also a matter of culture.

The US poverty rate is very misleading. It’s not the percent of people in poverty. It’s the percentage of people below a level of income at which not being impoverished is impossible.

Yeah, my impression is that the US has far more real poverty than Scandinavia, so I really wonder what the basis for these numbers is.

What data have led you to that understanding?

Being unable to afford food and a place to live, yet being well above the poverty line.

This link provides more detailed information: https://www.irp.wisc.edu/resources/how-is-poverty-measured/

“ The Census Bureau determines poverty status by using an official poverty measure (OPM) that compares pre-tax cash income against a threshold that is set at three times the cost of a minimum food diet in 1963 and adjusted for family size.”

Regarding my definition in the previous comment, I’m unable to find my original source. Sorry.

Or 58% born in the bottom fifth move up, and 61% born in the top fifth fall down.

It's the classic Trump small loan of a million dollars scenario. Sure not many are as lucky as Trump was. But even t hese examples of blue collar success have a bunch of luck in them.

Not everyone can start a machine shop with their dad, or own or even operate a taco restaurant. You need to be at the right place, the right moment, have the right amount of money and or the right equipment, interests and skills. And only then your sense of opportunity and effort will take you places.

For the common person it's a lottery just to be allowed to play the game.

For the common person it's a lottery just to be allowed to work at Taco Bell and do what the Taco Bell handbook tells you? And then, once you become a manager to save your pennies until you have a down payment on your own store?

Gimme a break man.

How many people do you think working the counter FT at Taco Smell can save enough money to afford their own franchise location?

> The cost of opening a new Taco Bell restaurant is between $1.2 million and $2.6 million. Taco Bell also charges a $45,000 franchise fee, an ongoing royalty fee equal to 5.5% of gross sales, and a marketing fee equal to 4.25% of gross sales.

https://www.businessinsider.com/what-it-costs-to-open-a-taco...

Give ME a break man. LOL.

I expect about 0% of people to go from the bottom level position at Taco Bell directly to owning one. But I'm sure you're smart enough to have known that. So why did you feel it would be useful to frame the scenario in such a disingenuous way?

I am 100% dialing it back in good-faith to explain why I just framed it as you put it.

1. I read tinco's comment to state (paraphrasing): "it is difficult to start a business, and for the common person it is a game of chance." Which, I absolutely agree with when I measure it against my life experiences/knowledge.

2. You replied with two questions, also paraphrasing: "It's a lottery to work at Taco Bell?", and, "And assuming you do work at Taco Bell, that you would become a manager who could save up to own their own store?"

---

Given that scope of the conversation, I assumed you were positing that someone could seriously start working at a Taco Bell, start saving their money, and then some day afford their own franchise location.

The first question of 2 is an absolute possibility, ie: it is not a lottery to work at Taco Bell and it would be silly to assume otherwise. That may have confused me leading into the second question, asked rhetorically, as something that you deemed possible. This is to say, "A person could absolutely work at Taco Bell, and they could also save to own their own some day."

The "Gimme a break man" in reply to someone saying something that I deem 100% rational (#1) with two rhetorical questions that seem to paint the situations that they posit as rational possibilities confuses the crap out of me.

Simply put: You submitted two arguments, seemingly painted as possible realities, in an adversarial way to something I saw as a rational and relevant statement. I fired back thinking you thought that was possible because there's not much context to figure otherwise.

If I confused your comment I apologize.

Quick Edit: When I posted this reply I saw another person, harimau777, answering similar to myself with another credible source (also with a much higher caliber quality of language - I'm goof sometimes). What I'm trying to say is I'm not the only one who took your statements this way.

I told the story of one person I knew who started working at Taco Bell in high school and then worked his way up to eventually owning a few of them.

The response to that was, "Well, just a lottery winner" with no argument whatsoever. How can you have taken that seriously?

I'm out man. I feel like this is getting super adversarial and into the fray for HN. Sincerely - sorry if I offended.

This was just the result of a quick Google search so perhaps the numbers aren't accurate, but this website suggests that you need a net worth of 1.5 million to open a Taco Bell franchise.

https://www.lendingtree.com/business/small/how-to-finance-a-...

I think that would be out of reach for many if not most Taco Bell managers. Presumably it would be even harder in parts of the United States with higher costs of living.

Well that's at least impressive. Was it a good investment for him to have spent his saved pennies on a Taco Bell franchise? If it hadn't worked out, could he do it again on another restaurant? I still feel he was lucky to have been able to save so much, you'd need to save like $400 every month for like 10 years, on a small salary. But you're right there was likely a very large amount of self determination at play.

> You need to be at the right place, the right moment, have the right amount of money and or the right equipment, interests and skills. And only then your sense of opportunity and effort will take you places.

If you flip that around, you get "Anyone, anywhere, any time, with any amount of money and any (or no) equipment, interests or skills should be able to be start and own a successful business." Does that really sound like a reasonable expectation?

The amount of opportunity available to a given person can vary greatly. For example, one person could have college paid for by parents, another could work to pay for college, and another could not have the opportunity to work to pay for college (e.g. perhaps they are taking care of younger siblings or sick family members).

Available effort could likewise vary. For example, someone with a disability might have much less effort available or their effort may be significantly less efficient. Someone who has to expend a great deal of effort on other matters (e.g. providing for basic needs, self protection, caring for others, etc.) may have less effort to expend towards things like career advancement or education.

The argument as I see it is that a person expending a roughly average amount of effort should be able to achieve a reasonable quality of life with the luck and opportunities that are available to them. (There will of course always be some variance in the effort required and the outcome received, but that's fine as long as it stays within a reasonable distance of this goal.)

The increasing anger over inequality seems to me to be because people are being asked to give above average effort (e.g. working multiple or demeaning jobs) in exchange for a low quality of life (e.g. difficulty affording healthcare, housing, retirement, raising a family, etc.).

I know a lot of Indian-Americans and Ukrainian-Americans for whom this is the norm.

Step one: arrive in the United States as a child.

Step two: a childhood of grinding poverty.

Step three: make tons of money in STEM.

It happens with extreme regularity. It is the rule, not the exception.

Ok - maybe I’m exaggerating a bit. I’m sure some of them don’t “make it.” Someone is staffing those food vans.

But it’s not unusual either.

I think you defined perfectly the defining problem of this generation in the US: nepotism. It is the root cause of so many structural problems that we see as unrelated. In particular the failure of the press to do their job and hold the powerful accountable. Not so easy when you went to the same school as them; got an internship thanks to them; were at a NYC roof party with them last week.

Positions once available to anyone who worked hard, are now reserved to the children of the already wealthy. The consequences are severe.

> nepotism

85% of American millionaires are self-made.

"The Millionaire Next Door" by Stanley

Is there any data on where wealth increase has come from for those people?

e.g. started own business, vs savings + stock market, vs investing in real estate.

I recommend getting the book, it's cheap and a good read. It also lays out a path for those that want to accumulate wealth themselves.

Yea - I'll second that even though you don't think I've read it.

"The Millionaire Next Door" was published in 1996 when the economy was booming, the dot-com bubble had yet to burst, and the employment market meant anyone slightly skilled could get a FT+benefits career.

In the 24 years since that book's publishing I absolutely argue that ladder has become more difficult to climb. But hey - what do I know? I'm just a lazy millennial who's now living through his second major recession, with the first one landing directly on when I was entering the work world FT. Thank goodness for my tech career because let. me. tell. you... my peers were struggling. Especially the ones who persisted in Cedar Rapids (blue collar Iowa town).

But sure - 85% of American millionaires are "self-made", whatever the heck that means. I don't doubt that's how they feel about themselves and self report!!!

The market has done even better in the last 10 years than in the 90's.

Besides, I heard the same lament in the 70s, 80s, 90's, 00's, and 10's.

> I don't doubt that's how they feel about themselves and self report!!!

Always better to guess than pick up the book and read it!

The market has done great since 2008! Wonderful time to have already had a lot of money on hand to invest, for sure. And man, I tell you, all of the houses I bought have gone way up in value, even faster than earnings! What do people even have to complain about?

If you had a regular plan where you invest every year, and don't sell, you would have ridden out the 2008 fiasco just fine.

Yes! But if you were still in school in 2008 and putting your money into food and paying off student loans, the market performance isn't necessarily the thing that impacts your future wealth.

The 2008 recession didn't last that long.

But paying off student loans probably did.

My point is that "the market did great" means investors did great; doesn't mean that everyone did great.

This thread is about investing.

This thread relates to investing, but more specifically it is debating whether or not the following fact

> The market has done even better in the last 10 years than in the 90's

is an adequate response to address the GGGGGP's claim that

> that ladder has become more difficult to climb. But hey - what do I know? I'm just a lazy millennial who's now living through his second major recession, with the first one landing directly on when I was entering the work world FT.

Nobody here is denying your claim about the market performance.

What does self made mean to you?

I read that book when I was in my early 20's. I followed all of its advice, which basically comes down to "live below your means, save, and invest." The truth is I was already following it anyway. My parents lived below their means, and my dad taught me about investing when I was a teenager.

Every generation has recessions to deal with. By the time I was in my mid 30's, I was, indeed, the millionaire next door, though just barely. This was despite the dot-com crash and the great recession...

"Self made" is an over-simplification of a complicated process... one which you impressively admit you've achieved. Which, 100% - that is amazing, and you should be proud of your accomplishments.

My definition of "self made" is not important, my point is that everyone's definition is going to be different.

Here's the thing - I have no idea who you are, what your history is, and I can't make a single comment on the validity of how you got from point A to point B... that is outside of the above compliment really.

What I will tell you is that my anecdotal experience is that no one is out there admitting, "OH YEAH, my parents totally dropped $120k on my education, bought all of my cars, paid my rent, and gave me a free-reign credit card into my 30's." and ironically... I've ran into a TON of those people who self-identify as "self made" which is why I don't take the term seriously and see it as 100% subjective.

TLDR: "self made" is subjective as all heck. I can't comment on your life man - I have no idea who you are. I stand by my original comment that things are getting more difficult in regards to building wealth from nothing. I got snarky against a comment that seemed to just posit a book from the 90's as the entire content of a reply as if that's valid to any conversation.

Thank you... but I never said if I thought I was actually self made!

What if I tell you that my parents did pay for my education? And they gave me a car when I was 16? Or they were fortunate enough to be able buy a computer when I was in elementary school, which definitely contributed to my interests today, many decades later? Am I still self made? Or did that give me too much of a "head start" so I'm not? Was it so long ago now that it doesn't matter?

TLDR: I agree, it's all subjective...

Ha - I mean... self made or not that's freakin' amazing. I envy that stability and hope to be there myself some day =)

I'd personally say, me too in so many ways... I had my struggles with an early death in the immediate family but it did provide the money to support me into my early start!

Here's the thing - struggle or not I absolutely have been around poverty and have actually done a bit in advocacy in the area. I don't say this for a gold star - just to qualify what I'm about to say.

Being poor is hard. Like really hard. It's expensive in sooo many ways and I freakin' wish more of us had empathy for those people that are struggling in that situation. I see WAY too many folks on HN that are comfortable in highly-paid positions like myself that don't acknowledge these things and even sound angry in regards to how people are "suppose to be"... lemme tell ya... as someone with struggles - man sometimes it's really really hard. Even with some of the insane privileges that I've been afforded.

All-in-all ... I wish more people admitted "man I had a lot of help" regardless if it's a computer in elementary school, or investments in education, etc. I know this has a negative "SJW" spin to it these days, but man... I have been privileged. holy crap I've been privileged. Doesn't diminish my accomplishments, but we need to come to terms that as a society everyone should have as equal of a playing field as possible..!

> My parents lived below their means, and my dad taught me about investing when I was a teenager.

I'm surprised nobody's come along yet to tell you that you're not self-made because you had parents and they taught you about investing.

Of all things, nepotism seems like an odd thing to single out. Do you have any numbers for this claim? It would be useful to hear e.g. what percentage of people secure positions through referrals/family members.

I suspect you'll get a different answer if you weigh by numbers.

But when you weigh by total wealth the Walton and Mars families skew the data in favor of nepotism. It also depends on your opinion of source of personal wealth of Ms Bezos or Ms Jobs (and anyone in similar position) - nepotism or self-made?

Why do you find it odd?

Many people make the claim that the fundamental problem of the US is wealth inequality, or no social safety net, or disdain for the poor. I believe these claims are much more common (and in my opinion could be considered more fundamental) than the claim that nepotism is the fundamental problem.

Well, symptoms of problems tend to be more evident than their root cause, so commonality of claims is not a particularly good reason to rule out nepotism being a problem.

Evidence would be nice to have though.

As for me, I've had enough anecdotes to think it's plausible. Just recently we hired a new CTO at my company, and he got the job simply because he was friends with our CEO and he needed a job. Turns out he's completely incompetent...

It's not about working hard, it's about working smart (i.e. choosing the right things to work on).

Also, part of working smart is owning meaningful equity in a business likely to generate meaningful returns. Startups are high risk, high reward, and if the GP doesn't care for how their luck has played out at startups, there are many other lower-risk opportunities to build equity: writing books, teaching, consulting, a bootstrapped SAAS app... and plenty more outside of the software engineering landscape.

> books

Most books don't pan out and if I don't turn myself into a marketing personality good luck. I say this as someone who's marketed books professionally as a web product across all major publishing platforms. I'm a nobody and prefer to focus on my engineering.

> teaching

Sure - because there's tons of money in teaching? Uhhh...?

> consulting

I've made a killing here and am likely going into my next 1099 tomorrow so yea. No arguments here. It DOES take a solid network though to do consulting so if you're not sociable you're likely screwed in this arena. I have two sales people who are my guardian angels hawking my services for top-dollar so I'm incredibly blessed in this department.

> bootstrapped SAAS app

Currently working out licensing with two corps on one of these myself as well. Finding the foot in the door for industry, then collecting user data on problems to solve, then pushing through solving them, and then gambling on the problem you solved is INCREDIBLY risky.

Plus - if you're the startup engineer things fall near-100% on your shoulders unless you're willing to play the outsourcing game. Which I have and my god that's a FT job itself even for the most menial of applications.

---

All-in-all I am actually the guy who pulled myself up by the bootstraps to probably 10x what my parents made in small town Iowa. So yea. But all of my original comment absolutely stands. It was hell on earth and I worked my entire 20's away hustling my BUTT off to get out of the trailer park and out to California.

I still absolutely posit that my story of "just pull yourself up by the bootstraps" is the exception and shouldn't be sold as "anyone can do this if they work hard enough!!!" Most people can't.

Your list makes it seem like those things are easy - and as someone who has experience in them (minus teaching)... it absolutely isn't. Those are all serious endeavors that take time, commitment, failure, getting back on the horse, and ultimately years of pursuit/work.

> owning meaningful equity in a business likely to generate meaningful returns

That's exactly what the stock market provides an opportunity to do.

American institutions should be controlling for this inherit classism, instead, the most prestigious continue to employ race-based selection criteria.

Middle-class America seems to have a particular disdain for the less well off.

This divide is the driving force behind Trump. It's the same divide we're seeing play out now over reopening the economy. Suburbanites with cushy WFH jobs, chastising the poor who have been laid off, as they have the audacity to want to put food on the table tonight.

> Middle-class America seems to have a particular disdain for the less well off.

Hell as someone who's struggled early-on... Poor America seems to have a particular disdain for the less well off too. I feel like I'm constantly surrounded by entitlement regardless of the person - and I'm no better as I am constantly trying to quash my own crap attitude with this... We were brought up this way across the board, to the point that I'm convinced childish entitlement is in our DNA as a country.

It's just a whole bunch of finger pointing while ignoring the elephant in the room... but hey people seem to get off on the hate so the folks in charge keep us divided and subdued to their interests.

Not disagreeing - just my own take being exposed to many diverse backgrounds rich/poor, rural/metro, etc etc. Everyone wants to point a finger because it's MUCH easier than acknowledging difficult societal problems/self-reflection.

> incestuous "investments" in their business.

This is open to anyone, but of course it's not guaranteed. You have to put yourself in a place where you're more likely to encounter these folks, and demonstrate value.

I think it is a pretty widely shared consensus in economics that "the American Dream" was the truest in the beginning of the 20th century, when European regimes were aristocracies and peasants were regularly starving to death. That was why waves of immigrants arrived from Europe to the US.

After WWII the situation basically got reversed: Europe experienced such a shock and disruption to the existing social order/redistribution of wealth etc., that it went really left-wing/"social democratic". In the meantime, the US saw a greater and greater concentration of wealth and the division between the rich and the poor got increasingly stark, and social mobility is much worse than that in, say, Northern Europe. The American Dream as people knew it is pretty much dead. This is also one huge reason behind the polarization in politics that we see nowadays.

Unfortunately, a lot of narratives in the US don't seem to realize/willingly ignore this situation and still seem to talk about the old idea of "bootstrapping" and American exceptionalism in this regard, which is really kinda one century out of date already.

"39% of Americans will spend a year in the top 5 % of the income distribution, 56 % will find themselves in the top 10%, and 73% percent will spend a year in the top 20 %."

from https://medium.com/incerto/inequality-and-skin-in-the-game-d...:

What are these numbers actually taken from? I'm betting the vast majority of this is counting the sale of a home or a one-time windfall (e.g. small inheritance, gambling winnings) as income for "a year", but I'm not going to buy the book just to see.

Russ Roberts has a fairly thorough treatment of composition effects impacting income statistics: https://medium.com/@russroberts/do-the-rich-capture-all-the-...

Thanks for the link.

These stats just backup what I've always heard - the top 10%, 1%, whatever, is not static. Neither is the bottom 10%. Many people usually start their careers at the bottom (i.e. college student working part time) and then eventually make it into the middle class and plenty make it further than that. Of course, some never make it out of poverty.

I've heard otherwise that this mobility (which nobody denies exists) is about the lowest it has ever been and growing more static. I'm sure some searches about social mobility stats would bring up lots of stuff.

If you do a google search on mobility, you'll find papers that say a whole lot of different things - some that say it's gotten worse, some that say it's gotten better.

The biggest problem is data. It's not that great.

If every American worker started buying $100 worth of stock per month, they could start chiseling at that 86% number. Not every worker has the financial means to do so, but many could if they practiced financial constraint (delaying consumption now, in exchange for greater consumption later). To the extent it is feasible, it would be wonderful to see Americans fight back against wealth inequality by buying the ownership. Imagine how much progress towards equality could be made. Each household makes a choice with how to spend their money.

Considering many American workers are in debt with high interest rate products (sub-prime car loans and credit cards), those would first have to pay the interest on their debt on top of the capital gains on the $100 when they sold it (provided they invest wisely). In other words, it makes no sense to invest when the return wont consistently match your debt interest payments.

Depends on the type of debt, which is individual to the consumer. Mortgage, auto, and student loan debt compose 88% of consumer debt. [0]

These types of debt typically have low interest rates. Market returns for the past decade have exceeded the interest rates. Paying the minimums, and investing the difference? The consumer would be ahead. 12-15% YoY stock returns compound faster than 4% mortgage debt.

[0]: https://www.experian.com/blogs/ask-experian/research/consume...

I don't think it's wise to project guaranteed 13-15% stock market returns, or suggest it's better than paying off debt. It may have been the case last few years of the cycle, but may well not be the case for the next 5 years.

You're arguing for taking out loans to invest in the stock market, which sounds irresponsible to me.

Actually, corporations do do things like borrow to pay dividends or buy back stock... because they get to deduct debt from their taxes. Individuals can take advantage of this with mortgages: your mortgage interest is deductible. [1]

Not all debt is equivalent: credit card debt and payday loans are examples of pretty punitive debt that really should be avoided. The return on investment from paying off debt is roughly equivalent from the interest on your debt; if it's lower than you can get by investing elsewhere, then it may make sense to invest elsewhere, especially when you factor in second-order effects like tax laws.

[1] For the record, I think the tax-advantaged nature of debt is absolutely inane and should be removed. But that is unlikely to be politically feasible.

Are you saying every person who buys a home with a mortgage, while still throwing 5% of salary in their 401(k) is irresponsible? Many, many people do this.

If you think you can count on YOY 12-15% returns on the stock market, you should be buying 10% OTM LEAPs instead of shares. You'll be the world's first trillionaire in a decade or so

You don't need a 12-15% stock market return for your investment returns to beat the growth of your interest debt. For most mortgages, it's a fixed rate. About 4%, some well-qualified borrowers have in low-to-mid 3%, for mortgages originated in the last 12-24 months. Long-term, will an index fund stock market investment exceed 3% returns? Historically speaking, it's a likely outcome.

Even if they all did that, they still end up buying after all the really wealthy get in, whether it's investment bankers, venture capital, hedge funds, or whatever else, normal income people just end up buying from the 1% and 0.1% who got in privileged and early. Add on top of all that, think about all the investments with minimums that are thousands of dollars and it's obvious that regular money will always be behind even if its investing maximally because less money always has fewer opportunities.

No, this is just atrociously wrong. It pains me to see because the post you're responding to about getting everyone to chip in a small amount to investments every month is one of my pet goals that I've helped many friends with.

Everything you've said is wrong. I don't know what you mean by "getting in after all the really wealthy get in"... VCs, IPOs? That's not even close to necessary. Investing in simple index fund ETFs is fine. And "all the investments with minimums in the thousands"? Well... don't buy those! Again, buy simple index fund ETFs. Most brokerages don't even charge a commission on that, so you can easily add small amounts each month.

People just don't seem to know that investing in the stock market is easily done, and so extremely worthwhile. Income inequality being what it is, the wealthy will probably own more of the stock market for a long time (or always), but that 84% could easily come way down if people just knew what to do!

But I feel like your comment is counter-productive fear mongering that will turn off people on the margin, thinking everything is stacked against them, the "good" investment opportunities aren't available, and so they just shouldn't even try.

>> less money always has fewer opportunities.

That's a fact of the US system.

> I don't know what you mean by "getting in after all the really wealthy get in"... VCs, IPOs? That's not even close to necessary.

That's a strawman. What's necessary, isn't the subject.

> And "all the investments with minimums in the thousands"? Well... don't buy those!

The wealthy have more opportunity, got it. Pointing to some other instrument, saying "it's also good" is not a correction.

> Everything you've said is wrong.

If you find yourself saying this, you're probably about to say something stupid. It's trite nonsense.

I'm not saying it's necessary, I'm just saying the previous poster can't seriously expect that the 84% (86%?) number will decrease much from everyone investing if that percentage's owners are able to always outperform - even if the top 10% (or even 1%) only have a 2% advantage because of better or earlier access it's just going to compound non-linearly compared to everyone else's returns over time. And it being non-linear means for that 80-something% number to go down the $100/month folks have to continually increase in population at a rate greater than the difference between their rate of return and the rate of return of the top 10% or top 1%.

That is zero sum thinking and misses the point entirely. You don't decide based upon more or less than others but the best option for you. Judging by percentages is like saying "Why jog or walk if you will never be a supermodel?" Invest because it is an end in itself.

The reason VCs and hedge funds get in early is because they can afford to fail a lot and have their successes outweigh their failures. It isn't because of some caste gatekeeping to monopolize the wealth while twirling their moustaches but because without that level of capital it is a very good way to lose your life savings. First rule in investing is never risk what you can't afford to lose.

It's not zero sum thinking. Clearly investing is likely better than not investing.

My point wasn't that people shouldn't invest, it's that previous poster suggested everyone investing would "chisel away" at the "86% number," and my general presumption is that so long as the return on wealth is nonlinear to the quantity of wealth, as enabled by the ability to access more expensive/specialized/higher-return investments, it's a lost cause as a simple comparison of function order and rate.

If those who are already richer are likely to have a higher rate of return from greater levels of access or unique opportunities and that rate of return compounds non-linearly, no matter how many regular people invest it's still basically comparing functions with nonlinear differences in rate of increase.

It's more the latter I suspect. The fear that they can't become art of the elite if they reform the system currently keeping them from being the elite anyway doesn't register with a surprisingly large number of folk.

Possibly because they haven't read this book (https://en.wikipedia.org/wiki/The_Wealthy_Barber) or understood it.

The Richest Man In Babylon is going to apply for the next decade, but all the negativity about romantic investments is countered by the billions being made in romantic investments. It's the wet blanket approach, it only has ten percent to consistently soak up in the flood times. When you have to make money by creating something, it breaks down.

It can't handle Bitcoin, space rockets, jordan peterson, self driving cars, hyperloop, neuralink, starlink, ect. There's huge and reliable money to be made riding the flame. Or rather there was, it's all about to be flooded out and those of us who don't like being formless, liquid money & stock chasers will have to wait for the next desert to appear in fifteen years time.

Can you send me explain where the figures are coming from?

Scream this from the rooftops.

https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserv...

To all the economists that like to pontificate on the market structure / monetary policy and what not on this site, feel free to read a book about the history of the federal reserve. It also covers the theory of money thru out the ages.

No mater what side you are on this will provide a detailed history of Congress, Federal Reserve, politics and the politics of monetary policy.

"Knowing is half the battle" G.I. Joe

The other half of the battle is lasers (25% blue lasers, 25% red lasers)

Nice!

This is not at all the situation. Reality is the 1% (wealth) making the 10% (income) pay for the 90% (both) to support their investments with consumption and debt.

>average Americans (the 90%)

In what sense is 90% average?

You have 100 items, 5 are zero, 5 are 100 and the rest are 50. Your average is 50, and 90% of your items are average. These are your average items (the 90%)

In this case, though, average is meant in its colloquial form of another way of saying "normal".

For 2017, the average household income was $89k, which corresponds to 65th percentile [0].

There are many "us vs. them" thresholds to choose from; curious what was special about this one.

[0] https://dqydj.com/2018-average-median-top-household-income-p...

The hypocrisy is astounding. I could understand someone that thought no one should be bailed out by the government, but the ‘only bail out the rich’ position is beyond my ability to understand.

Where are you pulling 90% from?

The top 50% pay 97% of taxes. That means 97% of the insurance is being paid by 50%. The top 10% paid 70% of taxes.

How much of the TINA phenomenon could be due to lack of capital formation throughout the economy? e.g. if 90% of America is too capital poor to form businesses or dream up new economic needs, then wouldn't it follow that printing money into existing asset classes would simply raise their price with no viable places to invest the money?

Yes. I'm sure plenty of Theranos / WeWork style opportunities will emerge to pick up the slack.

It's a fundamental problem of capitalism: the market's notion of "value" is weighted by wealth, without growth to stir things up wealth concentrates, and those looking to create value are increasingly forced to search for marginal "rich people problems" rather than tackle obvious "poor people problems." You wind up in a paradoxical situation where there are lots of obvious problems that could be fixed by obvious application of labor (e.g. crumbling infrastructure) yet nobody can find a job.

This is why inequality is bad.

Equality is bad because then you can't incentivize people, but that point generally gets enough air time already.

To optimize this system, we should identify which extreme is currently posing a larger threat and back away from it.

Exactly, you get rich by doing what the rich want, not what most people want, that’s why Lamborghini owns Volkswagen! Wait..

Serving the middle class is an excellent strategy precisely to the extent that the middle class has money.

Serving the middle class was an excellent strategy precisely to the extent that the middle class had money.

Serving the middle class will be an excellent strategy precisely to the extent that the middle class will have money.

You think Volkswagen makes cars for the poor? Show me a poor person who can buy a new car and I will show you someone who is borrowing.

"Cars for the rich" is not their MO.

Their MO used to be "The People's Car".

The People do not buy new cars without massive credit anymore, and in general do not buy new cars at all.

“They do not buy new cars” is a great way for car manufacturers to lobby for more benefits.

Looking at sales numbers, “they don’t sell as much as they used to” is waaaay more accurate.

I didn’t imply that they made cars for poor people, I implied they don’t make cars for rich people.

There’s a lot of people that are neither poor nor rich, that people keep thinking in those terms baffles me.

"If you want to dine with the classes, you've got to sell to the masses."

> To optimize this system, we should identify which extreme is currently posing a larger threat and back away from it.

Except to back away from it is to alter a relationship where the incumbent ruling class holds all the cards and controls all the influence and narrative. Which they don't want to do. So they don't, and the government they bought and paid for just write them windfall blank checks for trillions while the poor threaten governors since they are going to lose their homes and are going hungry.

The US had a chance to right the power balance when it was at its most equal in the post war boom period. But instead America decided times were good enough to let scrutiny slide - complacency in plenty and the optimism of the post-industrial were powerful drugs. Since then its just felt like the late Roman republic in its glutinous downfall. The feudal lords will pillage the state until the house crumbles from the inside with nothing left holding it together while the robber barons run wild and happy in their Deus Ex style post-capitalist dystopian corptocracies.

Neither Theranos nor WeWork were trying to solve rich people problems.

arguably, they solved a problem of where to stick money to try and get a greater than x% return. To do so both companies took on insane levels of risk by trying to solve impossible business/science problems on the basis that they could maybe just spend enough money and fake it till they made it. In WeWork's case some rational investors may have thought that they'd end up with a monopoly on B-tier office space as a failure mode.

Right, the fact that the market is chasing such high risk investments when there's lots of obvious low-risk work that needs to be done means that the low-risk work has gotten "frozen out" of the economy. Poor people problems aren't problems, as far as the economy is concerned.

Still, WeWork and Theranos are only examples of the "bubble" side of the effect, not so much the "freezing out" side, and they don't really illustrate the contrast between unworthy, overfunded endeavors and worthy, underfunded endeavors. I originally had a more visceral, abstract example that did a much better job, but it was attracting so many drive-by downvotes that I decided to retire it while I searched for better wording/examples. Here is the original:

Economists invite you to ignore this effect by conflating "value" (the economic notion, which is weighted by wealth) with value (the philosophical notion, which isn't, at least not to the same degree). For example, consider the prospect of feeding starving African children. This action has 0 "value" -- the market will not pay you to do this because the kids have no money with which to pay you -- even though the prospect has loads of value in the philosophical sense. Now consider the prospect of merging up the banks so that they can charge higher fees and offload risk to the federal government. This action has loads of "value" -- it gives investors a return, at scale, and investors have lots of money, so their opinion counts heavily -- even though this prospect has zero or negative value in the philosophical sense. Because it is weighted according to wealth, the economic notion of value diverges from the philosophical notion of value in proportion to inequality, and with exploding inequality, that's a big problem.

> they solved a problem of where to stick money to try and get a greater than x% return

That is literally any company, be they large or startup, that is trying to attract investment. These were both "disruptive" types that had the backing of a few notable investors and interested parties, and looked juicy to those who could stomach the risk.

Theranos was trying to solve blood testing problems, to make them quick, cheap, and to disrupt the handful of companies that dominate the medical testing field. The whole idea was that poor folks could get a cheap, reliable blood test at Rite-Aid.

WeWork was an REIT designed to resell coworking space to low-to-mid scale clients; rich people and big companies aren't getting coworking space, they're just getting their own private offices.

> the richest 10% of America owns 86% of its stocks

I don't buy that, as a much larger percentage of stock ownership is pension plans, where ordinary people indirectly own stock.

The 86% number was (more or less - the article says 84%) supported by the times in 2018. Their analysis includes pension plans.

https://www.nytimes.com/2018/02/08/business/economy/stocks-e...

The article shows 45% of American households have a pension plan that's invested in stocks.

Right, but:

> A whopping 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. And that includes everyone’s stakes in pension plans, 401(k)’s and individual retirement accounts, as well as trust funds, mutual funds and college savings programs like 529 plans.

That’s entirely orthogonal though, isn’t it?

The point is they are participating in the stock market and benefiting from its gains.

That’s true. I suppose there’s not much else they/we can do and the 86% represents the status quo even after their efforts.

I mean, if 0.1% of your savings is in the market, you're "participating" in some sense, but not with any real impact. My sense is that, for the great majority of people in the United States, the stock market's value doubling would mean little for their financial health. Having a retirement fund that goes from $10,000 to $20,000 (or even $100,000 to $200,000) has a relatively small impact on the prospect of retiring [1].

[1] Depends on circumstance, but people are generally supposed to have at least $1,000,000 in savings by 67. https://www.nerdwallet.com/investing/retirement-calculator

> if 0.1% of your savings is in the market

That means you chose not to participate in the market, not that you were prevented. In which case I can't accept grousing about not getting the gains from investing in the market.

> retirement-calculator

Use it. It'll show how much you need to invest monthly to retire a millionaire. Your money will do a lot better than double.

>That means you _chose_ not to participate in the market

You can’t invest money you don’t have.

May I suggest examining "if 0.1% of your savings is in the market" again? Like what happened with the other 99.9% of your savings?

Without sperging out about the specific percentage: a situation where people have a tiny amount saved for retirement, and almost all their net worth in a house and car, is actually quite common.

Spending on a car is not an investment. It's no joke that a new car loses 30% of its value when you drive it off the lot. Essentially all cars lose value constantly, and that's not even counting the finance costs.

I couldn't agree more. Just trying to explain the situation of someone's pension accounting for such a small portion of their net worth. It's sadly common.

Asking about the other 99.9% is a good point! Mostly I was pointing out how meaningless the idea of "participating" is for evaluating the material impact of the market on an individuals' financial wellbeing.

We can go back and forth about how theoretical people could invest theoretical savings, but unless you have another source, it seems like the reality we live in is one where 90% of the country share 16% of the stock market. Whether that 90% have low savings (all of which are in the market) or better savings (little of which is in the market) - either way their financial health doesn't seem very tied to the market.

The people who do invest in the market are providing the money that drives jobs and economic growth.

You can't separate the two.

Why can't you?

The vast majority of businesses are privately held[1]. Those businesses hire most of the people and buy most of the goods. Even for companies that are listed on the markets, the majority of their financial assets come from doing business.

It's true that companies raise money on the public markets to expand and thus hire more people, but the idea that most economic activity happens there is false.

[1] https://www.forbes.com/sites/sageworks/2012/10/01/private-co...

Big business doesn't work without a stock market, and big business is the engine that drives an economy.

Small businesses are the future big businesses.

Both are needed for an efficient, productive economy.

Various times countries have tried to prevent big business from operating, and always gave it up after a while.

> you're "participating" in some sense, but not with any real impact

just like voting has no real "impact" right?

Participating has an impact. The impact may not be as big as you'd want, but it's there. and it's better than not participating.

I agree that participating is always better than not, but I think you're making an inappropriate comparison. The question I was trying to talk about is the connection of the market to the wealth of most americans. I'm saying that it's fully possible for everyone to "participate" in the market without significantly benefiting from it (though, as you say, it's better than nothing). If the market were to double in value, mostly wealthy people would get wealthier and, I think, few middle and working class people would have their lives changed significantly.

The reason I don't think the voting metaphor holds up is that everyone who's elected does so by "getting" the most votes. Obviously there are forces at work here (turnout, voter suppression, get out the vote efforts, etc), but there's no official alternative way to be elected. The voting comparison would make sense if the stock market was the only possible way to gain money - in which case I would agree! But it's not. There are lots of other ways we can ensure people gain wealth.

No. It is comparing different things. The percentage of Americans who own stocks is different that the percentage of stocks owned by americans. Say 90% of americans "own some stock" but they are dirt poor. Their share of the total stocks available could well be 1%. The rich 10% then own 99% of the market AND 90% of the population own some stock. One fact does not negate the other.

Remember that the median income in the US is about 30k. If you have any sort of actual pension plan, there is a good chance you are in the top 10% in terms of net worth.

I think you've just supported the claim that the two facts are entirely orthogonal.

You greatly overestimate how many americans have pension plans and underestimate how rich the richest americans are

It's mostly the latter. Looks like 32% have 401(k) plans and 13% have pensions. They may not have a big share of the total market cap, but a stock market crash would blow up a lot of retirement planning.

>> a stock market crash would blow up a lot of retirement planning

The low interest rates we've experienced over the last decade, which have only gotten lower as of late, have actually blown up retirement plans.

Used to be, $500,000 saved at 8% meant you could retire off the $40k interest + social security. It also meant that growing a savings account into $500,000 was not out of reach, even on a modest income. This was the plan many people in the 60's, 70's, 80's worked towards.

Now, getting to $500k in savings is much more difficult as compound interest is so much lower. And if you happened to get there, you'd earn a whopping $5000, maybe less, in interest per year.

Wow, never considered how a stagnating economy will hurt retirement. This was eye opening in terms of numbers

Which is a good thing to me. I’d rather people “work” to earn rather than easily collecting rent through interest. Work in quotes since applying capital in risky investments is work compared to stashing money in an interest bearing account.

Also shows why having everybody "earn" a living off interest & investment income isn't feasible - if everybody's doing that, nobody's doing the work that generates the cash to pay the interest in the first place.

The best you could hope for is a younger generation of increasingly productive new workers being able to spin off enough profits to provide a return on the capital that generated that productivity. But the demographic time-bomb of relatively few Homelanders supporting relatively many Baby Boomers is going to upend that, and the stagnating productivity of the last couple decades isn't going to help.

Just as much rent is getting collected, but it's going straight to the top rather than into retirement plans.

What? Putting money in an index fund, or buying Apple stock, or a 401k, is "work"? Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing.

Banks use deposits to create loans whose funds go directly to the companies receiving those loans. Banks which interview the loan applicants, review financials, ask for references, and which themselves tend to be pillars of the community (before the proliferation of national banks) and have a vested interest in helping it to thrive.

So, no, your premise is 180 degrees wrong. Savers were once paid high interest rates precisely because their dollars were necessary to directly fund risky investments like a new business or expansion. The bank's function was to determine high vs low risk and allocate depositors' money efficiently. Meanwhile, buying an index fund or Amazon stock and having a few irrelevant proxy votes on decisions already made, is the definition of "stashing" it away with zero utility.

> Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing.

There would be no IPO market without a secondary market. Almost nobody is interested in buying a stock at IPO and holding it forever without being able to sell it.

> Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing.

But they can issue new stock at the inflated values to fund expansion, which itself allows the company to grow profits and potentially grow future dividends. E.g. Tesla stock price quadrupled over the last year and then Tesla issued $2 billion worth of new shares in February.

Putting capital in risky investments is “work”. Expecting a 7% guarantee return on capital is rent-seeking. There is a difference.

> buying an index fund or Amazon stock and having a few irrelevant proxy votes on decisions already made, is the definition of "stashing" it away with zero utility.

that's absolutely not true.

The buying stocks (or indirectly via index funds) must mean somebody else is selling.

The person who sold the stocks will put the money obtained from the sale to use somewhere else. It moves capital just like any other economic transaction.

It may be that the seller will "just" buy another stock - and it looks like nothing's changed. But eventually a seller down the chain is either going to invest in something other than stocks (e.g., a bond), buy new IPO stocks, or to consume the money (e.g., retiree selling stocks to fund their living cost).

The problem with banks doing loaning is that they have to be conservative. They cannot loan out money that might not return - since they must return their depositor's money.

Investors, on the other hand, do not have this conservatism (for the right price). That's why stocks exist, and that's why bonds exist (for those willing to risk less than stocks).

Yes, obviously, stock markets are essential and efficient capital allocators, in aggregate. Perhaps I shouldn't have simplified. But a single retiree's $500k purchase of some megacorp's stock will have effectively zero impact, like a drop in the ocean. As you say, it's up to someone "eventually down the chain" to actually deploy the capital. Investing in an index fund adds even more layers. In contrast, a community bank deposit will get multiplied and quickly deployed directly to local businesses or homeowners.

The point being, `eanzenberg`'s idea that money in a savings account just sits there idly doing nothing, is false.

i would argue that money invested in stock market has an even higher investment velocity than a bank deposit.

after all, a bank cannot invest in risky assets. "eventually down the chain [of stock investments]" is very fast in terms of timing, and i guarantee you it is faster than a bank's loan process for small businesses.

I think you would benefit from a course in how capital markets work.

If you want to dig into this more, this paper has a lot of tables about wealth holdings (and what forms those holdings take) over time and at different strata https://www.nber.org/papers/w24085.

Edit: I think this is the relevant table: https://i.imgur.com/h8Fo8yx.png. If I'm reading it right, this is likely the source of that 84% number. Note the line "Stocks, directly indirectly owned", and the note that it includes retirement plans. I'm guessing this also includes pensions, since that would be a retirement plan. There are many interesting tables in this paper, however.

>pension plans,

is that still thing for the average american?

45% of households have a pension plan.

22% of workers, 13% of private sector workers, and falling.

I probably should have specific average american worker. Retirees aren't important in this context.

I would bet that the majority of Americans do not even have 401k plans or pension plans, and those that do have very little money allocated in them.

> I would bet that the majority of Americans

No need to guess. Google is just a quick click away!

That's my point -- this is something that doesn't even have to be Googled!

I'd be careful about that. A lot of popular internet economic theories get holed below the waterline with simple google searches.

Hehe, of course you're right! To be a responsible internet user...

Corporate bonds are... interesting... now. I've been looking at airline bonds that mature in the next 6 to 18 months. Quite a few of them have yields-to-maturity north of 7%. I figure airline bonds aren't super risky (at least for the majors in the US), since the US gov't will prop them up until the end of time. Some of these aren't rated investment-grade anymore, but I don't particularly trust the ratings to be all that useful at this time.

Airline stocks probably have a bigger upside, but they're quite a bit riskier. Bondholders do get priority in a bankruptcy, if it comes to that (though I'd doubt it).

Just because you believe the government won't let the airlines go away doesn't ensure that the bonds are safe. Sometimes keeping a company in business involves a restructuring such that those bonds won't pay out as you're expecting.

Like United Airlines.

Genuine question: if a company didn't pay out on its bond, that's a default; how can it default without going bankrupt?

Going bankrupt means lenders and shareholders are wiped out but the company can be restructured and continue operating.

I believe what you’re missing here is a “Chapter 11 Bankruptcy”, as opposed to a “Chapter 7 Bankruptcy”.

Chapter 11 means the business keeps running, but the owners lose their money, Chapter 7 is what most of the world considers to be a bankruptcy / going bust / liquidation. Uncle Sam probably doesn’t care if Delta does a Chapter 11, as long as the planes keep flying.

I guarantee that Uncle Sam doesn't care if Delta files chapter 11.

https://money.cnn.com/2005/09/14/news/fortune500/delta/

holy shit. And there was a guy here who bought delta bonds, saying he would make an easy 7% by the end of the year.

sometimes bond holders are given the option to convert the debt into equity (at probably pennies to the dollar, which is a steep discount and therefore, a good deal) - that's what restructuring means.

I suspect many airlines will go bust before this is done. Not all of them. A few are going to come back strong. You could diversify, buy JETS (airline ETF.)

> many airlines will go bust before this is done

My bet is there will be a large number of hard hit industries (e.g. airlines, cruise lines, hotels, car rental companies) which will see widespread ch 11 and bankruptcies. Makes sense if then they can reemerge after eliminating a good chunk of debt and also roll back labour agreements. Likely a bunch of consolidation/merges on their way as a result too.

Should see the ball start rolling after the mid-year results come out early July.

If you allow me to complement your breakdown:

- bonds: Definitely not 0% interest rate, definitely better than cash. You can expect around 1.5% in the US for IG bonds. This is all relative to the default risk of course, the stronger your central bank, the less risky are the bonds, the less interests you earn.

- Real estate: you don't have to own it directly. This exposes yourself to a huge idiosyncratic risk. You can easily get real estate exposure while maintaining diversification and liquidity through REITs, which are trendy since at least 10 years.

There's a whole lot of other investments if you dare to look into it. You can play with currencies (FX, IRS) if you have macroeconomic views. You can play with debts (CLO, CDS) if you have views on the corporate debt market, etc.

Most bonds in the EU are below 0% interest rate.

Hu... No. Only short term notes are negative.

> You can expect around 1.5% in the US for IG bonds.

Sure, but the fed's target inflation rate is around 2%. That means you're in fact losing 0.5% of your purchasing power per annum. That's just losing money slower.

There is in fact, no alternative.

Also the interest will be taxed.

Not sure how taxes work in the US exactly. Here in Hong Kong we have withholding tax but no capital gain tax, so you can effectively buy zero coupon 3 month govy notes tax free.

Depends on the bonds. Bonds issued by the government (local/municipal/etc.) are often not taxed as an incentive to get you to lend money to the government.

Isn't currency (and many others) more of a zero sum bet -- useful for hedging if you are a business with expenditures in one currency and income in another.

But if you're looking to invest cash on hand, and looking for a long-term upside. I'm not sure currency is good idea.

No, it's not "zero sum bet". There are real market fundamentals which you can take advantage of.

Definitely not a 0 sum game. You can perfectly have real strategies and earn money just betting on currencies, either intra curve (buy/sell different maturities on the same currency) or cross curve (one currency versus an other one). Theres actually quite a lot of hedge funds doing that. You will most likely want to start with a "carry" trade: buying a cheap currency by selling your $USD, and enjoy the higher interests on that currency.

High interest savings accounts are still beating bonds.

High interest saving accounts are bonds. There is no magical returns for no additional risk.

I don't think it's unreasonable to not want to be holding cash (if one doesn't need it) in the face of so many monetary injections. 2008 showed us that all this stimulus money eventually ends up in assets, aka trickle-down economics, but in reverse.

If have been buying since the lows, you're just front-running the FED. The worse is over in that it is now very unlikely that the stock market will retest the lows in nominal terms.

Faith in humanity: buy stocks. No faith in humanity: buy gold.

Large cap stocks are to some degree an international investment.

REITs: well they are down, maybe more of an opportunity if only because the good stocks are so high.

> Faith in humanity: buy stocks. No faith in humanity: buy gold.

Speaking to a friend who bought stocks recently, they said, "I'm bullish on America."

I might say if you are the opposite of bullish, then buy gold. And if you have no faith in humanity, buy a survivalist bunker.

> And if you have no faith in humanity, buy a survivalist bunker.

What’s the rent on a bunker these days? If it’s cheaper than an apartment in SF I might go in on it

I bet you can build your own luxury bunker somewhere in midwest for way less than a dinky studio condo would cost ya in SF. The real issue is the cost of land and zoning laws, not the actual entity built on that land (obvious exceptions apply, e.g., we are talking about buildings that fit a few families tops, obviously not something like a highrise with over a hundred of units).

Unless you think the bombs are going to fall, you'd be better off getting some sort of cabin than a bunker. Living underground has a lot of challenges; it's expensive to build down there and you'll constantly be fighting moisture and mold.

I think the threat model is packs of desperate people looking to take your stuff, not bombs.

Being underground won't help much if your assailants decide to smoke you out. To stop that you'd need to shoot back or have a very robust and well designed fortification, with air filtration and redundant hidden vents. If you were committed to fighting back, an above ground fortification made out of reinforced concrete would be easier/cheaper to construct and would probably give you a better view of your surroundings. You'll also need several people you trust living there with you, so you could keep lookouts stationed around the clock and cover for each other.

All in all, it seems like a hopeless scenario. A better approach is probably to make friends with your neighbors and try not to look like you have anything worth stealing.

> try not to look like you have anything worth stealing

I think you said it all :)

Invest in bunker REITs in Eastern Poland![1] Either way bunkers tend to be blown up by one side or another...

[1] - https://en.wikipedia.org/wiki/Wolf%27s_Lair

> If you were committed to fighting back, an above ground fortification made out of reinforced concrete would be easier/cheaper to construct and would probably give you a better view of your surroundings. You'll also need several people you trust living there with you, so you could keep lookouts stationed around the clock and cover for each other.

A castle. You're describing a castle. :)

If you're only building a small "bunker", it's not that expensive to build down there. Just a backhoe, a few hours, 6 sides of concrete and a tin roof.

The best thing you can do is make friends with your neighbors. Surviving disasters is a team activity.

If you have no faith in humanity as a whole, make friends with the people around you. When things go bad, people help each other out, and if you believe in a societal breakdown, the people around you are going to be your biggest resource, not your greatest threat.

society will not break down if your neighbours are going to remain your friends.

The breakdown happen precisely because you can no longer trust even your neighbours. You got the cause and effect backwards.

Societal breakdown is what happens when you can't trust institutions. When that happens, your neighbours are the ones you help and that help you. https://www.theguardian.com/world/2011/jan/30/egyptians-make...

As far as I can tell, the extreme versions that turn into warlordism occur mainly in response to outside threat.

The survivalist bunker idea is so stupid for the kind of people I see investing in them. These are Silicon Valley guys with $10+m in the bank but have never even been in a fistfight. If the shit truly hits the fan they are going to be very quickly relieved of their nice bunkers by a few Bud Light drinking boys 2 years removed from their Army deployment.

That's why the bunkers are in the mountains of New Zealand with some serious physical security. Your Bud Light boys are going to be duking it out with the rest of the riffraff in the suburbs while the bunker owners are going to be on a private jet.

The stock market is not the economy, don’t make a false dilemma on being bullish on America or not. You can totally be bullish on America and imagine a reset of the prices on the secondary market.

I have a REIT (in the UK) Tritax that speclises in big box warehouses for amazon and the like - that's going to recover.

> Faith in humanity: buy stocks. No faith in humanity: buy gold.

Nothing like a good oversimplified false dilemma for a complex economic situation. Don’t give the secondary stock market a greater purpose than what it is.

At the end of the day, stock prices have to be justified by earnings. A massive over valuation isn’t sustainable for very long.

I wonder. Investing is all about relative yield. If stocks return 0.5% and treasuries return -4%, stocks will sustain higher ratios than the historical mean.

But I’m putting my money where your mouth is and betting on a correction.

True but you are taking say a -30% loss risk for only 0.5% expected return. I don’t think any risk manager is going to be very comfortable with that risk/reward.

Cash might have a similar risk (inflation).

Just use dynamic hedging, risks will be smaller.

> -30% loss risk for only 0.5% expected return.

vs the alternative - a guaranteed loss of 4%?

And the expectation of only 0.5% return is only going to be short term. Long term recovery is a good bet imho.

Why? A lot of the value of a stock is ability to resell at a high price later. If everyone (including U.S. Fed and gov) agrees to continue to push prices high for the forseeable future, then it seems like prices can lose connection to e.g. ownership in a company.

That’s the definition of a bubble.

Yeah, it made me laugh that the OP stated it in such a matter-of-fact fashion, as if it’s normal or good.

If you're talking about me, I don't think it's normal or good! But I do think it's a matter of fact.

I agree, or pretty close. But it's not axiomatic that bubbles always pop (at least on the time span one expects).

> But it's not axiomatic that bubbles always pop

You can only call it a bubble once it pops. So therefore, it is axiomatic. This stock "bubble" might not pop, and hence, it might not be a bubble.

Your definition of bubble and the one I was replying to are fundamentally incompatible - I don’t really care which term one uses though

Stock prices are forward looking - what do you expect the stock to do in the future.

That's how you end up with companies with negative net income having valuations in the billions.

Australian, South Korean and New Zealand's currencies jumped in value because they handled the pandemic very well and are now very attractive investments.

As a counter point, the AUD, KRW, and NZD all buy fewer USD today than they did on 2020-01-01.

The three currencies have risen from the big drops on 2020-03-18, but are still worth less than earlier in the year.

The currencies have little to do with the wellness of how the gov't handled the crisis. It has more to do with demand, and theres' just a lot of demand for USD, simply because it is considered a reserve currency, and a lot of people would rather hold it than their own native country's currency.

I think that's because during a crisis people flock to USD for safety, now that it seems to be under control, people are selling those USD again.

Buying stocks has never been more democratic. Anyone with $100 can buy stocks. No brokerage fees, and fractional shares are now common.

We also just passed what in hindsight will likely be seen as a historic buying opportunity.

Inequality is huge, just because you can buy 0.0000001% of IBM doesn't make that fair/democratic.

If you buy stocks, you'll have the same proportionate gains/losses as everyone else who buys the same stocks.

Sounds fair to me.

No, because workers are underpaid to get stocks to rise. Capitalists get to have their cake and eat it.

So, become a Capitalist. You can start with $100

I'm pretty sure the top executives and management don't pay 30% dividend tax, if they pay any at all.

If they receive dividends, they pay income tax on it.

Note that poor people pay 0% income taxes on capital gains and dividends.

> We also just passed what in hindsight will likely be seen as a historic buying opportunity.

Almost as likely to be a historic selling opportunity. The 35%-ish bottom isn't close to the bottom of the really huge recessions (and every non-stock-price signal is saying "really huge recession"). And the volatility we just saw resembles the movements from early 2008 to summer 2008.

Of course, the market can stay up in defiance of any bad news for years at a time, too, if the participants want. We won't have the hindsight until we have the hindsight.

Historically, the optimistic people do better in the market than the doomsayers.

Besides, it doesn't make much sense to claim that it's unfair people are making money in the market, while saying it's too risky to invest in it.

$100 in stocks is a meaningless "investment"

e.g. https://www.cnbc.com/2018/01/18/few-americans-have-enough-sa...

> Only 39% of Americans have enough savings to cover a $1,000 emergency

So you're part of the 61% of americans with less than $1k on hand, but you put it into the stock market, congrats! At the end of the year you have $999 + 6% roi = $1059. Best case scenario you're looking at less than $10k for retirement after 30 years of this.

A career spans 45 years. $1000 at 6% ROI compounded annually yields $13,747. Now consider adding $1000 to that each year.

If you only have $1000 in the bank, it’s not because you can save $1000 / year - it’s because that’s all you can save.

And I used 30 years because 61% of americans aren’t 20 years old right now.

And this is still the scenario where you don’t have a >$1000 emergency any time during that 45 years.

My point is not that investing doesn’t work, my point is that most people don’t have enough capital to be a part of that system.

> If you only have $1000 in the bank, it’s not because you can save $1000 / year - it’s because that’s all you can save.

But at least we all have our big screen TV's and iPhones, right?

Massive eye roll. Yes let's blame the poor for their bad purchasing decisions, instead of idk not getting paid enough?

Like, ok... an entry-level iPhone ($20/month) and a big screen tv ($500, lasts ten years)

That's $50/year + $240/year, call it $300 a year to get an iphone and a big screen tv. Amazing. Are you really here trying to tell me that $300/year is going to make the difference between crushing poverty and a healthy life and retirement?

Now compare that with a $2/hour raise, which amounts to somewhere north of $300/month extra. $3600/year. Yeah, THAT is getting a lot closer to the difference between crushing poverty and a reasonable retirement.

Yes, I see that eye roll. This is a stereotype that comes up regularly specifically because it is such a prolific problem.

I guarantee that a single iPhone purchase and a single big screen TV purchase are not the only poor purchasing decisions being made here.

Yes, lets consider a $2/hour raise. That gets wiped out with a daily trip to take-out instead of regular meals at home, or even by a 750/mo car payment.

Compare it to burning calories. It's much easier to not eat that 500 calorie hamburger than it is to run 5 miles.

Our society should be giving our kids financial literacy instead of bombarding them with advertisements.

"The best minds of my generation are thinking about how to make people click ads. That sucks." - Jeff Hammerbacher.

> most people don’t have enough capital to be a part of that system.

Most people are not in the bottom quintile of income.

Where are you getting bottom quintile? If you don't have $1000 for an emergency, it doesn't matter what quintile you're in you're still not going to be maximizing the profitability of your excess capital using the stock market

> $100 in stocks is a meaningless "investment"

Actually, buying $100 in stocks on a regular basis is the foundation for good investing.

Is that 86% figure a portion of the public market, or of the entire market?

> cash: eaten by inflation.

americans haven't had real inflation since the military backed greenback. it will be very interesting to see how much that outdated system can hold after being stretched so much by the feds (fed and federal govt).

not true at all. The inflation has been gigantic, when expressed in as the price of owning a home or getting educated.

the traditional measures of inflation expressed in the price of other goods are not capturing the real story. Those good are much cheaper today and mask the actual decrease in purchasing power.

Agreed: home, college, basic surgery... Some of our costs are through the roof. Others have been kept low due to technology, hyper optimization, or leveraging slave wages in a developing country.

Indeed. Pegging inflation to the cost of labour-intensive goods is a thinly veiled lie.

I can't find it at the moment, but I remember a graph that showed the price of goods over a period of something like 30 years. Things like clothes, food, gadgets, cars, etc., we're shown to have decreased in price. Things we actually need like education, medical care, and housing had risen astronomically. So even if the dollar itself doesn't inflate much, it still can have significantly less buying power, as you say. What's worse is the cheapness and ubiquity of gadgets serves to mask the problem by making everyone think they have more wealth than they really do.

even if you account the unofficial inflation, name one single country that had similar (or even close) to the US ratio of printed money to total economy, since the the 1970s. after 2008 was just the cherry on top.

What about high yield bonds, are they worse than investing in stocks right now?

Depends on the issuer. As I mention upthread, I think US major airline bonds are probably ok, more or less regardless of rating, since the gov't will always bail them out in the end. The largest hotel/hospitality chains may befine as well (though I haven't looked into their financial situation). But businesses will still continue to disappear over the next year from this, so I would tread with care.

> I think US major airline bonds are probably ok, more or less regardless of rating, since the gov't will always bail them out in the end

tbh, i think the US gov't really shouldn't be doing bailouts. Equity and bonds _should_ come with appropriate risks, and these risks should be discovered (via pricing of the interest rate for bonds, and for the expected risk-premium in equity).

The distortions happening right now is that the Feds backstopping bankruptcies is causing money to be lent out much more freely than it would've been. This means more worth businesses do not get their chance.

It's like the analogy of bushfires. Big firestorms will clean out the undergrowth, kill the weaker trees, and let the new seedlings grow afterwards. The pain is short term.

If the gov't wants to ease the pain, they need to make unemployment benefits greater, rather than bailout existing businesses. I say this, even tho i own shares, because to not do so means to entrench the moral hazard of socializing losses and privatizing gains.

> Bonds: Near 0% interest rate, practically no better than holding cash.

You can still buy bonds of a bit less-developed nations. E.g. "new" EU nations. They usually offer better RoI than Western EU bonds.

When calculating in risk of default, I think finding a better treasury note deal than U.S. TIPS will be hard.

That introduces the risk of currency exchange, unless you find bonds that are hedged to your local currency.

The risk premium is always quite fair with bonds imho.

These less developed nations will have a higher default risk. Buying them can make the bond act more like equity than bonds!

So what would you say are liquid, relatively low risk alternatives to holding cash? Worth diversifying into other currencies?

No, every other currency is going to inflate faster than the dollar. Gold is a good hedge, whether physical or ETF or gold mining stocks.

But why buying stocks of companies that will be bankrupt in the coming months?

> The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks.

> the price of real estate is propped up by similar logic.

This is where the idea falls apart. They can't both be propped up by the fact that there's nothing else around. They're two different things.

"No alternative" means "no better alternative". They can both be equally mediocre.

But is that true though? also, isn't "no better alternative" in the eye of the beholder?

Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.

While a modest fraction of people trade individual stocks, a lot of Americans have some type of 401k, pension, or retirement account that is tied to the stock market.

This pegs it at 50% of private sector workers and 80% of public sector workers. https://www.pensionrights.org/publications/statistic/how-man...

Additionally, in many cases, couples may just have one person with access or contributions to the market - but this still leaves them exposed (for good and bad) to the market.

Pension are 403b which is 401k equivalent just fyi. I'm on it current shift toward tbill/bonds.

Because many Americans can’t even pay their current bills or save literally a single dollar. So fractional shares are irrelevant unless they are free.

There's a gap between those folks, though, and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing.

Well, you can't live inside stock certificates :-)

Sorry I’m not sure I understand the point you are making.

Most models have the numbers of Americans living in poverty or lower class as above 50% of the US population.

It’s unlikely if even what they term “lower-middle class” owns real estate.

Any model describing the median American as “lower class” is being unreasonable. Most Americans - not all, but most - live a comfortable life.

Citation needed. “Comfortable” is obviously subjective, but the discussion was around ownership of stocks.

Even these[0] models have it at >=50% and they are at least 15 years old, and disparity has only increased since then.

[0] https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta...

One annual out-of-pocket max (broken arm, bad fall, car wreck, appendicitis, pregnancy) away from having your financial plans disrupted for a couple years isn’t comfortable. One of those plus any one other problem at the same time from severe financial distress (maybe lose home, maybe bankruptcy) isn’t comfortable. No matter how many x-boxes you have.

> , and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing.

Given that stock ownership is about 55% of the public, the median household likely has at least a few shares.

https://news.gallup.com/poll/266807/percentage-americans-own...

That includes 401k and IRAs etc. which obviously very few living outside of middle class have.

In addition, stock ownership has been on steady decline for everyone but the upper middle class.

Well you're not wrong on the overall trend over the past twenty years, but over the past four or five, the rate has been trending upward. Most of the downward movement was during the recession, for which it's not obvious that the reason ownership went down is not mainly panic selling (i.e., individual choice and risk tolerance) instead of anything systemic.

I know plenty of middle class people who stay away from stocks - they don't understand them and view them as very risky investments.

They stick with bonds and such.

The sad truth is many folks are afraid of investing. Much of the financial services industry is built off this. How many financial advisor offices do you see around? Instead of educating themselves, they'd rather pay a "professional" who often does no better than they'd do themselves if they just stuck to simple index funds.

> they don't understand them and view them as very risky investments.

which is a shame. Stocks (or owning businesses in general) is the real way to get out of the rat race.

I wish that financial education is part of the standard school curriculum. Financial education such as what stocks are, what bonds are, and how do you "save" money and budget, and what it means to invest and what risks "mean" etc

Most people are scared of stocks because they think it's "risky" - they'll lose all their money if the company bankrupts.

While that's true, the other factors not considered is inflation risk (of bonds or, of bank savings account). The risk of not investing for the long term is just as bad.

Man this site is harsh some times, I think there is a lot of depth to this question. It’s easy to look at statistics and say that it’s because of massive wealth imbalances and that is 100% an accurate statement. But from experience / polling there’s also a ton of people who have bad financial hygiene, people who could & should be way more invested and aren’t. So I think there’s also very big educational issues at play / wealth imbalance glosses over a lot of smaller but still important issues.

Also, what if people don't want to be part of the very system which causes wealth inbalance?

or is the stockmarket a "the only way to lose is not to play" kind of deal?

The not being a part of a system bit is tricky. One of the more exciting emergent trends in finance imo is ESG etfs which pick stocks based on good environmental, social and corporate governance criteria. So there is already this idea that capital should have organization patterns for people who value this & I hope that iterates in really positive ways.

But yeah I’d trend towards “the only way to lose is not to play” side of things. It’s really hard to find other ways to efficiently save/grow your money, interest rates are crushed for saving money outside of the market.

the sad part about "the only way to lose is not to play", is that playing in this case further entrenches the very system which requires you to effectively play in the first place.

There is very little, if even any way to recourse this without massive societal change. And getting such change in action is even harder.

> There is very little, if even any way to recourse this without massive societal change. And getting such change in action is even harder.

getting water to flow up hill is massively hard. And in the foreseeable future, not possible. Until the day humanity discovers unlimited energy and move into a post scarcity society.

So play the game as much and as well as you can, and build up wealth for your family and future family. That's the only move left, unless you want to sacrifice yourself and your family's financial well-being for a cause that you nor your children will benefit from.

I'm a lot more cynical about the trend. ESG funds serve the sell-side's desire to charge higher expense ratios and the buy-side's desire to feel clean and ethical. It's much less clear that they have had any positive impact on corporations' behavior (or even stock prices).

The "G" is also there mostly because it's the only thing that can be quantified across every company. For that reason it dominates the sampling, even though most values-driven investors care much more about the E and S.

You can do what I did and lose 5% of your net worth on wallstreetbets

37% of Americans struggle with hunger [1] and 57% of Americans have less than $1000 in savings. [2]

Would you be buying stocks if you didn't have enough to eat?

[1] https://www.feedingamerica.org/hunger-in-america/facts

[2] https://finance.yahoo.com/news/58-americans-less-1-000-09000...

EDIT: Apologies, first should be 37 million Americans (NOT 37%)

It probably doesn’t apply to those struggling with hunger, but just because people don’t have savings doesn’t mean they don’t have expendable income. It could just as easily mean they prioritized stuff over savings, and I bet that’s the case for most of them.

https://www.cnbc.com/2019/12/12/americans-spend-over-1000-do...

That’s an average per consumer. It’s likely skewed way up by extreme outliers. Need to see median, 75th percentile, 95th percentile to really understand it. The headline seems like deliberately misleading journalism.

Per the US government, the median American household has more than $12,000 per year in cash to burn after all ordinary expenses. That is a lot of money for savings and/or beer.

Your link [1] says 37 million Americans, which is 11%, not 37%. (Still a shocking #!)

The second is a pretty bad survey. I have a relatively sizable net worth but $0 in a savings account. That's because savings accounts have shit yields.

If your net worth is negative servicing your debts has a better risk adjusted return than investing in stocks unless the interest rates on your debt are extremely low.

Yup. If you have a bunch of credit card debt at 20+%, and/or are paying off a car in the high-single-digit percent range, then you really want to pay that off before you consider investments.

If all you have is a sub-5% mortgage (though even that's pushing it), or a low-interest student loan, then you should put money toward retirement if you can.

On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt (making regular payments, of course), for peace of mind I paid it off as quickly as a could. I think a lot of people are in that boat, or worse, having been taught that all debt is bad for you.

>On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt (

Right, but near or sub inflation rate student loans are mostly a non-existent thing anymore. They're much more likely to be at 8% and because of their special treatment in bankruptcy they're usually better to pay down than other loans at similar rates.

As a child I learned how to compute compound interest then shortly after saw a TV advertisement for some kind of predatory loan (not sure if there were payday loan places in the late 80s/1990, but something like that), did the math and for a long time thought all loans were essentially scams (not realizing that the interest rates of payday loans weren't representative). ... it turned out to serve me well: there are worse financial mishaps you could make than avoiding reasonable debt. :)

For small investors, I suggest US Treasury I-bonds: inflation protected, liquid after one year.

This of course is, after paying off all high-rate debt, and maxing out 401k contributions.

You have to put your 401k contributions somewhere, even if it is selecting your plan’s auto pilot option.

For anyone looking, the term is "Real Return Bonds". And if you are in Canada watch out, there are not as many of them and the average maturity is quite high so you can expect some wild swings (e.g. XRB ETF).

Yeah check the rates on I-bonds right now, they went down 1% this month. It's not even worth it anymore. I was earning 2.55% APY now it's barely 1.5%. You can get the same return in an AMEX savings account.

Who said they were inaccessible?

Because the priority order is:

a) Consumption spending

b) Real estate

c) Stocks

When middle class people hit diminishing returns on electronics and vacations, they upgrade their houses. Appetite for remodeled kitchens and bigger, nicer, better-located houses is voracious, so relatively few people satisfy it and fall through to stocks.

Making sacrifices on housing in favor of your stock portfolio is of course possible, but will get you a lot of weird looks and pressure from family, particularly if kids are involved.

Do people actually get family pressure to remodel their kitchen?

My wife’s side pressure her (me) to “upgrade” her wedding set every few years. WTF. They’re terrible with money, of course, and constantly make passive-aggressive comments about who’s spending what. I don’t think they even realize they’re doing it, it’s just a really, really awful and deeply middle-class-anxiety attitude they’re stuck in.

LOL me too. They know I have rental properties but are always bitching about my small house and why I am not doing this or that. They don't know that my real estate portfolio is worth upwards of $5 million and when the mortgages start to be paid down, will eventually be generating $20,000 a month in rent. Look forward to telling them to get fucked when they come looking for some of that money.

Heh I had to look up what a wedding set was. Upgrade... wedding rings? Isn’t a big part of the symbolism the permanence factor of the rings? The symbolism of upgrading the ring seems a bit unfortunate...

Anyway, sorry to hear, that probably gets really old.

The stone itself is supposed to be permanent; the band and the setting (receptacle for the stone) are less weird to change.

Interesting, that seems a bit diamond-industry-marketing-driven, I thought a band was the symbol, and that the stone was a more recent invention. Especially since the wedding band is what you get when you actually get married. Many people in my family only wear the wedding bands and leave the engagement rings off.

But these are largely just assumptions on my part.

The biggest tax advantages for investing go to the rich, who can arrange their businesses and finances to max out retirement accounts, and very highly paid professional with fat 401k matches. No matter how someone with a normal salary and a 2% match tries they cannot get anywhere near maxing out a 401k, due to how they’re structured (over 50% of the max can only come from an employer, and the employee can’t make that up on their own). They benefit the already-well-off much more than the middle class or poor. So there’s discouragement to savings built into our tax law (or stronger-than-appropriate encouragement available only to the already-doing-quite-well, if you prefer)

"Rich" typically do not care about their retirement accounts and do not have an employer. They typically benefit from owning a business, having a stream of passive investments and compounding growth. But this may depend on your definition of rich.

It’s my understanding that one can arrange for oneself (and family members) to be employed by one’s businesses such that 401ks are maxed out. This can amount to a huge de jure employment benefit but a de facto slow-motion tax-advantaged inheritance over, say, 20 or 30 years. Just live off trust assets and the rest of your wages (or whatever) until you can draw on retirement.

Though yes it’s probably too small-potatoes for the rich rich to bother with. Mere tens-of-millions business owners are more the audience for that maneuver. Like everything else it seems one is likely to be smacked down for attempting to use it while not-rich (need enough legitimate business activity to make the wages to relatives plausible)

> So there’s discouragement to savings built into our tax law (or stronger-than-appropriate encouragement available only to the already-doing-quite-well, if you prefer)

Only the latter "version" of this is possibly true. Nothing you said shows a discouragement to savings. At best you showed that the wealthier are more encouraged to save.

This is very true! I know plenty of people who when they have extra money, investing or saving is the last things on their mind.

Housing is arguably an investment, or at least the people doing it think it is.

That’s true. I know people who say stocks are too risky, but real estate works for them.

Having stocks is definitely better now than when I was younger.

Fun story: I was interested in investing as a kid, family member opened an account for me as a minor, with enough money to pick one investment to buy and hold. It had a bad month, account went below some threshold minimum balance I didn't know about (I'm sure it said somewhere, I didn't get to choose who the account was through), and suddenly account provider started liquidating shares every month for an account fee because of a balance below some amount, and we ended up having to close the account at a loss to avoid fees eventually wiping it out.

Obviously a lot of lessons packed in there, but at the time it seemed obvious that the whole system was designed to prevent regular folks who couldn't just start with many $k accounts from buying and holding.

Now there are tons of low cost options for things like robo-investors, ETFs and index funds, monthly low value investing, etc. It's a whole different world, which on one hand is nice, but on the other leaves me with the feeling that "regular" investments are some kind of loss-leader or tool to enable some other means of profiting the big players.

In addition to everything else said in this thread -- all good stuff -- it's worth noting that there's often an upfront expense that's hard to overcome in order to invest in the stock market in any sort of meaningful way. For example, some of the stocks recommended by the likes of Mr Money Mustache require a $3,000 minimum first-time investment. That's a big hurdle for some, myself included. I'm in music and media, not tech, and while my income is pretty solid, my overhead is absurdly high relative to it. Putting aside $3k on top of doing the financially responsible things like maintaining rainy day funds, saving for retirement, etc, is just tough.

MMM is definitely recommending Vanguard mutual funds, either VFIAX (US 500 biggest) or VTSMX (total US market). But the ETF's are equivalent and can be purchased fractionally literally $1 at a time. I.e: Open robinhood brokerage, purchase $1 of VTI (ETF equivalent of VTSMX)

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