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To Redistribute or to Not Redistribute?


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2013 Oct 27, 9:01pm   4,073 views  13 comments

by EconPete   ➕follow (2)   💰tip   ignore  

It is true that the top 1% of wealth holders in the U.S. have 40% of the wealth and that the bottom 40% of wealth holders hold about 2% of the nation's wealth. But these numbers don't show the fact that the wealth that rich people have is tied up in illiquid assets for their businesses. Like, yes, the owners of Wal-Mart are worth billions... but all that money is tied up in product inventory, Wal-Mart buildings, shopping carts, shelving units, and a bunch of shit nobody wants to really own yet is essential to their businesses. Would it be better for society if the owners of Wal-Mart were poorer and needed loans to cover these business expenses and sent those interest costs on to the customer by increased costs of 30% to 40%? No, so the fact that there are wealthy people in society allows for the production of all the things the lackeys consume. The more stupid people call for more wealth redistribution, the more they increase the costs of, or completely eliminate, the products and services they consume on a daily basis, thus reducing the happiness they can attain through consumption.

The people who complain about wealth inequality are the same people who are stupid enough to spend all their money and have nobody to blame about being poor but themselves. The people who attained true success and wealth got it from free market transactions, yet the people wanting to redistribute wealth want to steal from people. Teachers, Policemen, Firefighters and all other Government workers are NOT successful members of the economy because they have a higher average wage than the median private sector worker. Just because Governments can incessantly steal their revenue and thus pay higher wages does not mean those workers are more successful than lower paid private sector jobs. It just means they are closer to the scum that are in charge of stealing the hard earned funds that business owners rightfully achieved via other free acting agents purchasing decisions. Why punish people who serve the public by providing productivity and reward the people who provide inactivity, complacency, and stupidity? So what side are you on; theft, destruction, and equality; all be it an equally low existence for everyone? Or freedom, production and inequality; yet everyone are better off than before because enough good paying jobs that provide value to the economy exist. The answer should be quite clear.

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1   tatupu70   2013 Oct 27, 9:31pm  

EconPete says

but all that money is tied up in product inventory, Wal-Mart buildings, shopping
carts, shelving units, and a bunch of shit nobody wants to really own yet is
essential to their businesses

No it's not. It's in Wal-Mart stock which is (for the most part) liquid and desirable to own.

EconPete says

No, so the fact that there are wealthy people in society allows for the
production of all the things the lackeys consume.

Wrong again. If the Walton family went to Vegas and lost their fortune, they would have to sell their stock, but customers at WalMart would see no difference.

EconPete says

The people who complain about wealth inequality are the same people who are
stupid enough to spend all their money and have nobody to blame about being poor
but themselves.

I know it probably makes you feel better to think this--but that couldn't be farther from the truth. The people that complain about wealth disparity are the folks that understand how an economy works. The people that realize that when half of the population can't afford to buy anything, demand is weak. And when demand is weak, supply shinks to match it. And supply shrinking = layoffs and high unemployment.

The rest of your rant against teachers and firefighters is all garbage and not worth a reply...

2   EconPete   2013 Oct 27, 9:49pm  

tatupu70 says

EconPete
says



The people who complain about wealth inequality are the same people who
are
stupid enough to spend all their money and have nobody to blame about
being poor
but themselves.


I know it probably makes you feel better to think this--but that couldn't be
farther from the truth. The people that complain about wealth disparity are the
folks that understand how an economy works.

If they knew how the economy worked... Why would they choose to be poor? Ha-ha. It sounds like they think they know how the economy works, but their lack of wealth explains it all!

3   tatupu70   2013 Oct 27, 9:59pm  

EconPete says

If they knew how the economy worked... Why would they choose to be poor?
Ha-ha. It sounds like they think they know how the economy works, but their lack
of wealth explains it all!

I see. All it takes to be rich is to know how the economy works? Interesting. Please tell me more.

4   anonymous   2013 Oct 27, 10:24pm  

The only people that know how the economy works, are the ones who vote democrat. They know that the economy is based on rentier activity like hording land and demanding the highest rents possible, pining for a 3% hike in income taxes for six figure earners, and social programs that boil down to cutting fat checks to fat tards that sit in their rent subsidy abodes, while watching 12 hours per day of television and gorging themselves on HFCS sunsidized food substitutes

5   tatupu70   2013 Oct 27, 10:26pm  

errc says

The only people that know how the economy works, are the ones who vote
democrat. They know that the economy is based on rentier activity like hording
land and demanding the highest rents possible, pining for a 3% hike in income
taxes for six figure earners, and social programs that boil down to cutting fat
checks to fat tards that sit in their rent subsidy abodes, while watching 12
hours per day of television and gorging themselves on HFCS sunsidized food
substitutes

Glad to see you haven't lost the art of a strawman argument.

6   control point   2013 Oct 27, 10:44pm  

EconPete says

Would it be better for society if the owners of Wal-Mart were poorer and needed
loans to cover these business expenses and sent those interest costs on to the
customer by increased costs of 30% to 40%? No, so the fact that there are
wealthy people in society allows for the production of all the things the
lackeys consume.

This is a poor example because Walmart is now a publicly traded company, though the Walton family owns about 50% of it. Walmart also has about $67B in debt excluding accounts payable. The combined net worth of the Walton family is north of $150 billion - so they could, in effect, pay off all of the debt of Walmart and still have $80 billion left over. Wouldn't this allow them to lower prices further? Or, if you believe as the rest of the world does, that prices are set by the market, couldn't they improve their margins by doing so? The fact is even the Walton's use leverage. Why did apple stock increase in value after they announced debt offerings (the company was previously debt free)?

When a company can borrow at 2% but its ROE is 2.5%, debt seems pretty smart, no?

The bottom line is even Walmart needs demand. Billionaires, even the Waltons, don't shop there. And the more money Walmart customers have, the more demand for Walmart products, the more profit Walmart makes.

7   zzyzzx   2013 Oct 27, 11:02pm  

Obligatory:

8   lostand confused   2013 Oct 27, 11:21pm  

it is a mixed bag. On one hand you have offshoring and free trade, which has destroyed the livelihood of tens of millions of Americans. The govt actively encourages this. Then you have people who are just lazy and think the world owes them a decent standard of living. They can live on Sec 8, get fat, watch cable TV, pop a few kids and enjoy the ride . They don't have to do anything in return-except complain about the wealthy. This attitude has been fostered by the feminists who think equality means watching TV, eating bonbons and then taking the man for every dime and then some.

If the govt didn't give so much welfare and families weren't broken up by govt mandates and laws-then this country would still be run by common sense. You don't ship off all your jobs, import cheap junk in return and still expect to be prosperous. Equality means standing on your own two feet-not living of another's work. But logic and common sense have long since been banished from discourse. Instead it is a bunch of lying hypocrites vs crazy loons.

9   zzyzzx   2013 Oct 28, 12:51am  

I just bought a new car headlight bulb at Walmart over the weekend. Sylvania brand and was made in USA. I did not know that I could even but a car head light bulb made here any more.

10   mell   2013 Oct 28, 1:00am  

control point says

The fact is even the Walton's use leverage. Why did apple stock increase in value after they announced debt offerings (the company was previously debt free)?

When a company can borrow at 2% but its ROE is 2.5%, debt seems pretty smart, no?

Ah leverage! Here you're onto something. Especially since everybody rich can count on never perishing leverage, no called-in loans and suppressed interest rates below the return on their leveraged assets. Because when the market tries to correct as in 2008, the Fed will just bail out the failed and leveraged at the expense of the taxpayer and the middle-class will bear the brunt of the inflation/debasement necessary to keep leverage flowing. All you need to reduce wealth inequality is let debt become expensive enough so that prices and asset valuations correct as it happened in 2008, then you don't have to punish savers and people who make capital gains without leverage and sufficient reserves. These blanket redistributions starting at 6 figure incomes harm economic growth and are inherently unfair, but continuously raising taxes and increasing debt for future generations has never been a worry for kicking-the-can-down-the-road-politics. Why not borrow at negative rates, then everybody borrowing is automatically making money - winning! ;)

11   control point   2013 Oct 28, 1:07am  

mell says

Ah leverage! Here you're onto something. Especially since everybody rich can
count on never perishing leverage, no called-in loans and suppressed interest
rates below the return on their leveraged assets.

The bulk of Walmart's debt is in corporate bond offerings. If the debt market collapsed they would explore buying back their bonds at a discount.

The coupon (interest) expense for Walmart debt service is fixed and known many years into the future.

12   mell   2013 Oct 28, 1:09am  

The Professor says

EconPete says

So what side are you on; theft, destruction, and equality; all be it an equally low existence for everyone? Or freedom, production and inequality; yet everyone are better off than before because enough good paying jobs that provide value to the economy exist. The answer should be quite clear.

I am with the American producers. So let's tax all of those outsourcers, like Walmart, that send our wealth and jobs to china out of existence!

Does anybody know what the percentage of foreign-made vs domestic goods/sources sold at Walmart is? I'd expect it to be like 90+% foreign, e.g. China, but who has hard numbers? They even started selling local produce now, and as zzzyx demonstrated they are selling car light bulbs made in the US ;) This is a news PR by them, it looks like they are trying to change their image:

http://news.walmart.com/news-archive/2013/01/15/walmart-to-boost-sourcing-of-us-products-by-50-billion-over-the-next-10-years

13   mell   2013 Oct 28, 1:24am  

control point says

mell says

Ah leverage! Here you're onto something. Especially since everybody rich can

count on never perishing leverage, no called-in loans and suppressed interest

rates below the return on their leveraged assets.

The bulk of Walmart's debt is in corporate bond offerings. If the debt market collapsed they would explore buying back their bonds at a discount.

The coupon (interest) expense for Walmart debt service is fixed and known many years into the future.

Yeah, they get the lowest rates because they are perceived as credit worthy as the US. And the bond yields are somewhat tied to the interest and market conditions at the time of issuance, so they have been heavily influenced by ZIRP. High bond prices at ultra-low yields is another anomaly caused by central bank intervention.

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