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Old 06-10-2014, 06:54 PM   #121
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That money comes from venture capital, if you're talking about the next big thing in technology.

I don't think VC funds are directly open to people because they probably have a high minimum and/or you need to know people.
...

So you are making my point for me (although I'm not declaring that it is a valid point, I'm just saying it is worth considering).

The 1 % 'ers can invest in a VC/hedge fund because they 'have the high minimums and know people'. But if we split that money up across a much larger population, far fewer (no one?) can meet those requirements.

We might lose out in terms of innovation. Then we will be outsourcing the low end and the high end jobs.

I dunno, maybe there is a place for a really rich 1% - you get things like the Gates Foundation, libraries, etc. Maybe having money in the hands of people who know how to create it and grow it isn't such a bad thing overall?Just a thought.

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Old 06-10-2014, 07:09 PM   #122
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1% may be investing in VC but they probably have way more invested elsewhere, probably in more conservative investments.

But we'd been talking about a hypothetical additional $1000 to either spend or invest, for people with middle-class and lower disposable incomes.

I would not be investing that $1000 directly in VC. Nor would the people making a lot less than me. They might splurge on other things or pay off longstanding bills.

I don't know how much VC is responsible for innovation though. Their game is to invest in a startup most likely to get a big IPO. So what have been the biggest IPOs in the last decade or two?

Facebook, Visa, Netscape, Twitter, LinkedIn, etc. Certainly many of these have become multibillion dollar businesses employing thousands of employees. But are they innovative or contribute to making the world better?

Maybe, maybe not. Twitter helped facilitate revolutions in Egypt and elsewhere but is mostly a time-wasting bit of entertainment.

Maybe Amazon? Well they changed the ways we shop, probably killed a lot of retail businesses.

Google probably got VC money. Well they brought advertising to the web in a big way, helped commercialize the Internet. Again, ambiguous if that was a good thing.
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Old 06-10-2014, 08:07 PM   #123
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The article opens with this introduction:
Four out of 5 U.S. adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream.
Near-poverty? That's me, back when I was in school. Yes, for part of my life like the article says. I struggled, yes, but I enjoyed that time of my life too.
I think if you Google terms like wealth inequality, return to gilded age, poverty in America, who were the winners and losers in the last recovery and disappearing middle class, you will find and abundance of articles and statistics on the issue, similar to the findings from Merrill Lynch / Bank of America analysts' review of Piketty's book. The issue isn't whether or not you agree with some of the wording in a single article - the issue is the real life problem and the metrics used to document it by economists and think tanks world wide.
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Old 06-10-2014, 08:38 PM   #124
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Not dead money but not as efficient as if it would be spent, since 70% of the GDP is from consumption.

If I got an extra $1000 from the IRS, I wouldn't spend $1000 more than what I was already spending. I wouldn't necessarily buy a new camera or other expensive gear because I can afford to buy those things at any time.

But someone who has half or even less in disposable income is more likely to spend the windfall.

Now my saving that $1000 or buying more Wellsley does put the money to work. But there is no shortage of money going into financial assets these days. What is needed is more to contribute to aggregate demand.
Anyone remember the "Yacht Tax"? Yeah, we're gonna hit those rich folks in the pocket, alrighty!

Who got hurt? The hourly people who were building those boats all got laid off bc the rich stopped buying!

That was a really good idea....

Now the rich are building boats and mansions...construction, electricians, pavers, real estate agents, caterers, florists, etc etc all get jobs.
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Old 06-10-2014, 08:55 PM   #125
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Folks get angry because the rich have too much money to spend. Others are sore because they spend too little. Geez.

They ain't burying it. It is either being spent on things (good for the economy) or being invested in businesses (good for the economy).
It really isn't about the economy. It's all about envy. Numerous studies show that a majority of people would rather have less themselves, if they nevertheless had more than their neighbors, than have more with neighbors who had even more.
It reminds me of the grade school game king of the mountain, where one boy stands on higher ground and tries to repel all challengers.

Ha
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Old 06-10-2014, 08:58 PM   #126
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Anyone remember the "Yacht Tax"? Yeah, we're gonna hit those rich folks in the pocket, alrighty!

Who got hurt? The hourly people who were building those boats all got laid off bc the rich stopped buying!

That was a really good idea....

Now the rich are building boats and mansions...construction, electricians, pavers, real estate agents, caterers, florists, etc etc all get jobs.
When business people have money, they create growth. When government gets that money, they dole it out for consumption, and of course the paramount job of government, to buy votes
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Old 06-10-2014, 09:01 PM   #127
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Right, because keeping taxes low for the "job creators" have worked out so well.


Yacht tax doesn't affect that many people. Once yachts have been bought how often do they keep buying yachts, even if they can afford it?

The luxury goods companies are part of small industries compared to mass goods companies, both in dollars brought in and people employed.

If you want to increase overall employment you try to get more Fords and Chevies sold, not Maybachs.
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Old 06-10-2014, 09:26 PM   #128
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The pathways of venture capital have become so much more distorted than back in my youth. Then it was easy to understand the logic of so called trickle down economics even if it was bullshit which I often thought it was.

Now with a world economy much more of that US generated capital is invested in countries with cheap labor rates and lax environmental protection laws. Sure it makes low cost, often low quality goods available to consumers at an attractive price point. It does not however help with our deteriorating infrastructure, improve education, create high paying jobs, protect patents or consider the next generation. The level of collateral damage caused by the combination of increasing income inequality and outsourcing of much of our industrial capacity fuels our national deficit while simultaneously benefitting that 0.1% throughout the world.
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Old 06-10-2014, 10:01 PM   #129
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...

Now with a world economy much more of that US generated capital is invested in countries with cheap labor rates

... while simultaneously benefiting that 0.1% throughout the world.
Did you include the people in the less developed countries that now have a higher paying (and probably safer) job in that 0.1%?

That's the problem that I've stated repeatedly with the 'inequality' numbers. They are withing a country, not world-wide.

I agree there should be some decent world-wide environmental and worker labor/safety standards. This is happening to a degree, but needs to be expanded.

-ERD50
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Old 06-11-2014, 05:55 AM   #130
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Right, because keeping taxes low for the "job creators" have worked out so well.


Yacht tax doesn't affect that many people. Once yachts have been bought how often do they keep buying yachts, even if they can afford it?

The luxury goods companies are part of small industries compared to mass goods companies, both in dollars brought in and people employed.

If you want to increase overall employment you try to get more Fords and Chevies sold, not Maybachs.
There was a reason they repealed the yacht tax: it affected a LOT of people.

It affected a whole swath of the economy's hourly workers: yacht yard employees, dock people, fuel people, restaurant people, transportation, catering, housekeeping, engine repair, spare parts, maintenance, captains, deck people, airlines, hotels... on and on.

Yes, yes, it is a small percentage but there is more to running a big boat than just filling it with fuel; a big one can pump almost $1M a year into a local econonmy.

And, yes: those hourly people go out and buy Chevy's and Fords, eat at restaurants, buy houses.
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Old 06-11-2014, 07:22 AM   #131
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So, the rich get richer. But do the poor get poorer?

I surfed the Web, and saw several statistics from OECD showing that the median income in the US is not bad at all, and in fact is higher than that of most Western European countries. Note that OECD adjusts for the costs of living in different countries using PPP (Purchasing Power Parity). With PPP, one will see that the highly-paid Swiss worker is better off than the US counterpart but not by a factor of almost 2. And the American has better purchasing power than his counterparts in other Western countries with high cost of living. That should be no surprise to people who travel abroad.

But the above is for income. For wealth, there's a different data set. And it shows that the average US family indeed holds less wealth than many European families. The fact that in this aspect the US even trails Italy, an economic basket case, was perplexing to economists. One Web site suggests that the cause is the propensity of the American to spend. No matter how much you make, if you do not save you are not going to accumulate wealth.
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Old 06-11-2014, 07:45 AM   #132
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Anyone who has ever seen poor knows that what we see in the US is only less rich, not poor. I've seen toddlers with kwashiorkor, but you will never se this in the US unless some crazy parents have locked the kid in a cage.

And hunger? If poor people in the US are going hungry, why aren't they skinny like poor people in poor countries?

Ha
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Old 06-11-2014, 08:15 AM   #133
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The medical profession has been telling us skinny or rather skinnier than we are right now is healthy. We want skinny!

So, perhaps some hunger is good. But isn't hunger what dieters always complain about? It's not easy to go hungry I'll tell you. Luckily, my appetite recently has not been as strong as it used to be. I hope that will help me keep my current BMI of 23.5.
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Old 06-11-2014, 08:29 AM   #134
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Anyone who has ever seen poor knows that what we see in the US is less rich, not poor. I've seen toddlers with kwashiorkor, but you will never se this in the US unless some crazy parents have locked the kid in a cage.

And hunger? If poor people in the US are going hungry, why aren't they skinny like poor people in poor countries?

Ha
There is no poverty in America. The poor has the everyday material comforts that everyone else has - tv, cable, refrigerator, in door cooking and plumbing, warm homes, adequate healthcare, etc. In addition all their basic needs are met. To appreciate how lucky the so called poor in America is, one has to only spend one minute in a developing country. It's why immigrants from those places are breaking the door down to come here.
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Old 06-11-2014, 09:47 AM   #135
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At what point does personal wealth become dynastic wealth?
10 Million
50 Million
100 Million
500 Million
1 Billion
10 Billion
More?
Further... Is dynastic wealth right or wrong?
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Old 06-11-2014, 09:56 AM   #136
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Cheapest foods are high-calorie, high-fat, processed and sugar-rich.

BMI by socioeconomic brackets would probably decline towards the top.
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Old 06-11-2014, 09:59 AM   #137
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Further... Is dynastic wealth right or wrong?
To paraphrase Buffet: I don't believe it is good for society if you choose your next olympic team from the offspring of last edition's winners.
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Old 06-11-2014, 10:09 AM   #138
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At what point does personal wealth become dynastic wealth?
10 Million
50 Million
100 Million
500 Million
1 Billion
10 Billion
More?
Further... Is dynastic wealth right or wrong?
By dynastic wealth, do you mean generational (Waltons, Kennedys, Rockefellers, Roosevelts)? Or do you mean a specific amount?

I met a guy who felt that "nobody should have more than a million dollars...once you get above that amount the government can use it more than you"
If its wrong, what happens to the money after it goes above a certain amount?

Then there are the "you didn't earn it, you inherited it" people, as if you're somehow less of a person.
Again, if it's wrong to inherit above a certain amount, who gets the money...and why?

In either case, I think both camps are 1) out of line 2) off base 3) a little crazy 4) jealous/envious 5) dangerous.
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Old 06-11-2014, 10:13 AM   #139
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I don't know how much VC is responsible for innovation though. Their game is to invest in a startup most likely to get a big IPO.
While I fully agree many VC funds produce rather crappy outcomes in terms of adding value to society the last few years, there are some good examples:
  • Tesla is one. Actually the IPO is what kept it afloat.
  • Google. It was the best search engine out there by far, and they created some things which help us all greatly: Google maps, Gmail are just two examples. Agree with the crappy business model in search, but you sometimes have to work with what you have
  • Linkedin is actually a midly positive one in my opinion. Much easier to find contacts, good people, network etc .. not to mention keep my contact list up to date
It's not like the Intel's and such of yesteryear, but very likely in those days you had much crappy IPOs coming out of the VC pipeline too.

And many are not IPO'd yet or are aimed at B2B. Check out Khosla Ventures, there are some serious things happening there.

I think the truth is that many great VC backed business get bought by others before they IPO or remain in VC hands. Why get rid of a great thing?
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Old 06-11-2014, 10:14 AM   #140
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To paraphrase Buffet: I don't believe it is good for society if you choose your next olympic team from the offspring of last edition's winners.
You don't arrive at generational wealth by letting the "offspring" run the show (they usually can't run a one car funeral). You get other people to do that and send the checks out to beaches in Greece and ski resorts in the Alps.
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