Comment by danielodievich | Hacker News Reader

Comment by danielodievich | Hacker News Reader

I read The Economist which every year publishes their list of notable books. That is how I found Kleptopia: How Dirty Money Is Conquering the World by Tom Burgis of The Financial Times. That book describes how the richest people get there (mostly through ill gotten means) and what they do to hide money (lots and lots of real estate)

WaPo review https://www.washingtonpost.com/outlook/trump-among-the-klept... The Economist review https://www.economist.com/books-and-arts/2020/10/08/two-book... (might require login)

Small quote from The Economist that does a wonderful job summarizing why this book is very good:

“Kleptopia” is wonderfully if grimly entertaining, replete with tales of Zimbabwean thugs, late Soviet gangsters and kgb officers-turned-entrepreneurs, as well as a Romeo-and-Juliet romance between the children of rival oligarchs. Mr Burgis’s depiction of the interlocking worlds of post-Soviet business and politics captures the way corruption binds together economic and political power. He meticulously demonstrates how, once overseas money enters Britain (attracted by the protections of its legal system), the associated power struggles and skulduggery follow.

Except it is not just Britain, but also us here in USA - countries that he touches include USA, Canada, France, Italy, Spain, Colombia, Congo, Zimbabwe, South Africa, Ukraine, Russia, Kazakhstan, China and both Koreas.

It was a fast and furious read that made me REALLY angry at times. It does not have a happy ending:

America and Britain, he thinks, are ever-more like Ukraine, Russia and Kazakhstan: “Like a parasite altering a cell it invades, so kleptocratic power transforms its host.”

Highly recommend as a serious, if depressing read.

Kleptocracy is more blatant in Russia. Many business owners are jailed once their business gets to a certain level of success and they don't sell to the local political/business mafia. This isn't really the case in western countries where the big players aren't sharing their profits with government officials and have plenty of money to buy companies at market rates.

https://www.bbc.com/news/business-13546177

Kleptocracy is more publicized when it comes to Russia, because it's an internal affair. If the same kleptocrats just sold to foreign companies who bribed and plundered the country, like in Yeltsin's years, you'd hear 1/100th the stories.

The difference is "public companies" vs powerful single owners, and the mafia-style violence behind them.

Sure, Koch is a corrupt foreign billionaire, but it's a rare example.

There is one thing that I find fascinating and depressing at the same time - the belief that the uber rich got there with hard work and ethics alone, and that anyone can do it too, if only they work hard.

It is the belief that they themselves will get rich someday, that makes voters support (at least not oppose) all kinds of laws that benefit only the rich, often at the expense of everyone else.

I don’t know if this delusion is everywhere, but it certainly is in the U.S

I don’t think that belief exists if you’re talking about the “Uber rich”.

There is a belief that you can get rich with hard work in the US. Rich being a few million and enough cash to buy a ridiculous house or exotic car or a boat.

But “uber rich”? Like $1B+, I don’t know anyone who thinks you can do that through hard work alone.

I think it's a lot less widespread, but on the other hand, I see this sentiment from a lot of people about Elon Musk.

A few million isn't enough to do those things, though.

That’s a very Silicon Valley mentality.

It’s more than enough to retire independently in LCOL areas of the US.

What does retire have to do with:

> Rich being a few million and enough cash to buy a ridiculous house or exotic car or a boat.

iirc money mostly enters Britain because they use it as the way point for the tax havens "controlled" by Britain; their overseas territories and crown dependencies. Then it disappears into the land of political and financial voodoo of nameless holding companies, trusts and such, where nobody knows who is responsible for what, in both holdings and regulations. Mossack Fonseca's Panama Papers were a fairly big deal, but in reality that was the tiniest glimpse into that opaque world, and the revelation ended up changing nothing. Politicians still campaign about tax rates as if they mean anything when they can just be avoided.

Why bother sending it to the UK first when you can send it directly to IOM, the Channel Islands, etc?

I believe it is more the case that the banking sector in the City of London is the institution, and the secrecy jurisdictions are tools that it developed and uses. Historically money ended up in England because of the Eurodollar system, and from there banks use the secrecy jurisdictions to create trust systems across different jurisdictions for opaqueness. England as an intermediary is preferred because there is a level of trust there with their institutions that isn't there with some bank in a random backwater.

> the banking sector in the City of London

There’s no difference in regulations in or outside the city

> their institutions that isn’t there with some bank in a random backwater

It’s the exact same banks. Here’s a list for Jersey although the same is true for most Crown-controlled tax havens: https://en.m.wikipedia.org/wiki/List_of_banks_in_Jersey

By random backwater I meant some random place that wasn't involved with the major colonial powers during that period. The reason most of the offshore tax havens are what they are is because they were remnants of colonial empire that could be exploited.

I think the path dependency is what made the City of London the hub, and their trust system is how non citizens were able to access their financial system and those in their territories as well. I'm sure now there are ways to access services in these places directly now, but historically, the majority of the infrastructure dedicated to this stuff in these places was built out from England.

This is a different problem.

Gates, Zuckerburg, Musk and Thiel are not Kleptocrats.

Frankly, neither are the Walmart children.

There are soft parrallels and kleptocracy does exist.

But this issue is about power asymmetry and markets etc.

It's a systematic problem.

The 'big problem' is that a lot of small fish in the market might be in the top 20% are making 'some money' from stocks, and will push back against rectifications, all the while not realizing that though they are 'getting a better deal than the bottom 80%' ... those above them, i.e. the 5%, 1% and 0.1% are getting gigantically better deals.

The 0.1% is screwing over the 1% as bad as the 1% is screwing over the 10% as bad as the 10% is screwing over the middle class as bad as the middle class is screwing over the working class.

I feel that this is true, and the 'natural result' of a system in which everyone believes they are 'doing much better than those below them' - but have no insight or information into the layers above to grasp how bad they are being screwed.

Middle class don't quite understand Doctor/Dentist pay, who don't understand Executive/Banker pay, who don't quite understand mega wealth income.

In Monaco, you can tell what 'class' people were by looking at them, and even if you wore a $2K suit, and were a high paid banker, you 'had a job' meaning you were still 'working class' to the 'true elite' there.

And by the way, the other greatest source of inequality is housing.

Everything I just said about housing is even more true: the first time owners think they are making bank, without realize the middle class is making more, and those with $3M homes even more.

When everyone is making more from their property investments, which are not productive, then the people paying the price are those with the least leverage, i.e. working class.

But politics is what it is, and you can basically never attack the middle class - while they are sympathetic to the 'working class', they're not going to actually really want to give up massive benefits - and - working class people are less likely to vote. This is a huge systematic problem in Canada right now, with the government pandering hard to 'middle class' who are effectively leveraging themselves over working people with money-printing that is being plowed into homes. It's not productive, it's just rearranging deck-chairs, with 1 more chair going up the stack every time they are rearranged.

Once your Return is greater than your Income - you're in a different class of people.

This is true for everyone retired. It's true for a lot of people >55. And it's true for almost everyone in the top 1% by wealth (by definition you have >$10.5M - which even with average returns would net you $787,500 in capital gains per year - which is greater than the cut off for the top 1% in earned income).

Outside of that dynamic, I don't think there's as big of a difference between the top 20%, 10%, and 5%.

It's all relative to wealth - and the curve doesn't get ridiculously steep until you get into the >2% (of wealth).

A 'top 20%' earner can put money in equities and gain some leverage but that's it.

A top 5% can have access to some special opportunities, be an insider at a company or have stock options.

A top 0.5% will be CEOs, Bankers, and connected individuals (through family/school networks).

Top 0.1% gets access to giant deals via government, international industrial or political relationships, access to major financing (i.e. SPACs).

As you can see in the charts from the article the 'jump' from each of the tranches is oddly about the same.

Investment income relative to wealth is the best classifier for wealth class. When one person's net annual income is another's net wealth, they're in different classes. This puts most people in the .middle class with about 100k income through work or investment. That bracket ends at about 2m net worth as they make about 100k off their investments. Then you hit 40m where the 40m net worth person is making 2m a year. Then 800m at 40m per year. Then 16bn at 800m per year. At the end of the day, everyone past tier 1 doesn't have to work, but there is a lot going on between each of those layers.

What is your proposal to ‘fix’ this ‘problem’?

This is where the actual issue is I think. The usual solutions proposed are to increase taxes on the 10%, and increase spending much more than that, and inflate the money supply. A lot of people see all of this as the exact mechanism which transfers wealth to the 0.01% at the expense of everybody else.

Has there ever been a centrally-planned economic policy implementation that actually reversed concentration of wealth and power?

Deflation would make debt more expensive and affect the relative incomes for labor/capital, but it's a dirty word among economists.

> The 'big problem' is that a lot of small fish in the market might be in the top 20% are making 'some money' from stocks, and will push back against rectifications, all the while not realizing that though they are 'getting a better deal than the bottom 80%' ... those above them, i.e. the 5%, 1% and 0.1% are getting gigantically better deals.

> The 0.1% is screwing over the 1% as bad as the 1% is screwing over the 10% as bad as the 10% is screwing over the middle class as bad as the middle class is screwing over the working class.

I don't want to sound flippant when I say, I think that GME and a lot of the Reddit hype has helped to alleviate this among that successful 20%.

I think many of that group are seeing that, while the structure of the system does allow them to succeed more than the other 80%, the system isn't built with them in mind. So, when the system is threatened, it will hurt them happily. Furthermore, I think they have started to not just know, but genuinely understand, that the top of the top is further away from them than they realise and far, far more advantaged than they realised too.

That, of course, is just one recent and notable example of these realisations.

The big thing is that there is a tectonic shift when you go from the top 20% to being wealthy enough that employment is no longer a meaningful part of your income. I think this is the big realization that puts things in place.

But of course even amongst the 0.1% for which employment is genuinely counterproductive financially, there is the stratification stated above.

> The 0.1% is screwing over the 1% as bad as the 1% is screwing over the 10% as bad as the 10% is screwing over the middle class as bad as the middle class is screwing over the working class.

This is nonsense.

It's right in the charts. The financial leverage along each step is similar. The mechanisms of that leverage are identifiable.

Purchased. Finding a good book makes wading through a thousand asinine comments worthwhile. Thanks for the recommendation.

Treasure Islands: Tax Havens is one more good book if you are interested in this topic.

Dirty Money on Netflix is pretty good.

...and all this has been possible without crime-enabling cryptocurrencies

Bu bu bu tether something something

...and the fact that these things happen without the aid of cryptocurrencies is not an argument that cryptocurrencies won't further enable these things, if that's what you're getting at.

I don't assume that is what the gp is saying.

The more obvious point is that the forces that result in inequality don't originate in crypto, and any serious attempt to oppose these forces should target the origins.

> forces that result in inequality don't originate in crypto

Of course. But, this is either a ridiculous argument, or so obvious it's not worth stating. Inequality has been a thing for thousands of years.

Reply on news.ycombinator.com