The Recovery and the Ultra Wealthy

[Marshac]

A good read from one of my bookmarked econ blogs

http://bigpicture.typepad.com/comments/2005/09/recovery_bypass.html

 

[Nords]

Anyone who writes sentences like "It also is stimulative of discussions regarding the development of income classes in the United States in the late 20th and early 21st Centuries" must be a really good economist. He sounds like a perfect Greenspan protegé.

I keep reading comparisons about how life sucks today compared to the post-WWII era. Yet although the 1950s seemed like a great time to be living in America, those wondrous years came at the expense of the destruction of most of Europe, Asia, & northern Africa. The world lost much of a generation of young workers while attempting to satisfy a huge pent-up consumer demand fueled by both wartime rationing and the baby boom.

Maybe it'd make us all happier to compare today against the 1970s, the Depression, the 1910s, or the 1890s. But for some reason the most favorite comparison is post-WWII-- perhaps because it produces the greatest angst.

Another issue is the comments: "The Ultra-wealthy have always been around -- Rockefeller, Carnegie, Frick, Guggenheim, etc. What's so intriguing to me about this is how the Ultra-Wealthy class has expanded wildly over the past 20 years, thanks to a combination of 3 elements: a) a technological meritocracy; b) a readily available method of cashing out the benefits of that meritocracy via options and the stock market; c) a significant drop in the highest tax brackets" and "I'm guessing that there are more people in the U.S. with a net wealth in excess of 250 million dollars (inflation adjusted) than ever before. Thats truly astonishing." I wonder how astonishing that is if the numbers are adjusted for both inflation and world population. 20 years may be a blip in the lifespan of these ultra-wealthy (whose wealth may be here today, gone tomorrow) and the size of the class may not be much more than a century ago.

But I'm still willing to do my share. If the ultra-wealthy need more members, sign me up!

 

[retire@40]

One problem with wealthy people is that sometimes they don't know how to enjoy their wealth, or they become victims of their own wealth.

I went to see some mansions the other day in Newport, RI.  These were only meant to be "summer cottages" for the ultra-wealthy.  Unfortunately, some of these palaces were used by their owners a summer or two because they were too busy working.  And then they died and these homes turned into museums.

 

[Jarhead*]

Nords: The 1970's weren't that bad for me.

For sure, the economy was in the toilet, and the political climate was volatile, but I was 35 years younger, and my knees were in good shape.

 

[REWahoo]

Nords: The 1970's weren't that bad for me.

For sure, the economy was in the toilet, and the political climate was volatile, but I was 35 years younger, and my knees were in good shape.

Jarhead, I'm very impressed that you can actually remember the 70's...

 

[Nords]

Nords:  The 1970's weren't that bad for me.

For sure, the economy was in the toilet, and the political climate was volatile, but I was 35 years younger, and my knees were in good shape.

Yeah, me too, but I wasn't aware of any of those four things... I just think that too many are too focused on how badly today compares to one isolated moment in time without considering its context.

Shucks, and I thought you were going to tell us more stories about that teacher who needed her, er, home improved. James Taylor and "Hey, Baby, I'm Your Handy Man" indeed.

Hey, waitaminnit, is she the reason you joined the Corps?!?

 

[Mr._johngalt]

Jarhead, I'm very impressed that you can actually remember the 70's...

Some of us remember the 40s, maybe a few even earlier.
Must be the ginkgo I guess.

JG

 

[Mr._johngalt]

Nords:  The 1970's weren't that bad for me.

For sure, the economy was in the toilet, and the political climate was volatile, but I was 35 years younger, and my knees were in good shape.

The 70s may have been my best decade ever (except I was
still working). My career was on a roll and my sexual powers
still near peak. I paid no attention to the economy.
President of my first corp. in 1977, age 32. Came out of the decade with very little net worth, but that was true
for another 10 years.

JG

 

[Jarhead*]

Jarhead, I'm very impressed that you can actually remember the 70's...

REW: Well, sure, I lit up, but like Bill Clinton, I "didn't inhale".

Jarhead

 

[Nords]

Thanks, Jarhead, appreciate it...

 

[Ed_The_Gypsy]

Jarhead,

Let the thread drift a bit more.

Are you confident that conscription will not be reinstated? I am not so sure. As I am working out of the country today, I do not have my finger on the pulse and I can't trust anything in this foreign press on the subject. These clowns don't have a clue about reality in a country with a real army doing a real job.

However, it appears to me that the retention rate in the Army is not good at the moment and the reserves are running out, but the job isn't done yet and exit timetables are controversial.

I have a personal interest in the answer. My boy just turned 18 and I don't think he could get the same deal today as I did by enlisting. (By the way, I was a draft-dodger--I enlisted. )

Your opinion--and that of Nords--would be appreciated.

Cheers,

Ed

 

[Jarhead*]

Jarhead,

Let the thread drift a bit more.

Are you confident that conscription will not be reinstated?  I am not so sure.  As I am working out of the country today, I do not have my finger on the pulse and I can't trust anything in this foreign press on the subject.  These clowns don't have a clue about reality in a country with a real army doing a real job.

However, it appears to me that the retention rate in the Army is not good at the moment and the reserves are running out, but the job isn't done yet and exit timetables are controversial. 

I have a personal interest in the answer.  My boy just turned 18 and I don't think he could get the same deal today as I did by enlisting.  (By the way, I was a draft-dodger--I enlisted.    )

Your opinion--and that of Nords--would be appreciated.

Cheers,

Ed

Ed: I'll let Nords take this one on. He's a recently retired Naval Officer, and I'm sure would have more statistics to back up an opinion.

(My gut feeling is that the draft is dead, but that is only an opinion from an "Old Phart".)

Jarhead

 

[Texas Proud]

Back to the original post... even though the discussion is interesting....

The thing that most people forget when they compare the middle class of today with the middle class of the '50s is that the comparison is very bad...

The house size of the '50s was in the 1500 foot range, now about 2300 ft. The '50s usually ONE car, today maybe three or four...

Had ONE TV, no cable, not cell phone, no computer etc etc.... You took a vacation (maybe) by staying close to home.. today, fly to Europe or Asia or some other location at a high cost hotel... The middle class of yesteryear are the 'poor' of today.

 

[Andre1969]

Plus, how much did an average tv set cost back in the 50's? My grandparents bought a Zenith 25" color console tv with a slate top for something like $700 back in 1972. That's like $3200 today! And it didn't have a remote control, either. Just think of what kind of tv you could get for $700 today, let alone $3200! Heck, a couple months ago I bought a Sharp 32" tv, PLUS a tv stand, for something like $369.00, total!

Now, perhaps in some ways we were better off back then. I think things got paid off more quickly. My grandparents bought the house that Grandmom still lives in back in 1950. I think they had it paid off by 1958. They usually paid cash for their cars and trucks. Nowadays some people NEVER pay off their homes and vehicles...they just keep moving into larger homes or constantly refinancing, and with vehicles they often roll over negative equity into a new one.

Still, in a lot of ways, we as a society are better off today than we were back in the old days. About the only advantage I can think of to the 70's when I was a kid is that you could catch Speed Racer 5 times a week on tv, where now you have to buy the DVD!

 

[brewer12345]

Plus, how much did an average tv set cost back in the 50's?  My grandparents bought a Zenith 25" color console tv with a slate top for something like $700 back in 1972.  That's like $3200 today!    And it didn't have a remote control, either.  Just think of what kind of tv you could get for $700 today, let alone $3200!  Heck, a couple months ago I bought a Sharp 32" tv, PLUS a tv stand, for something like $369.00, total!

Now, perhaps in some ways we were better off back then.  I think things got paid off more quickly.  My grandparents bought the house that Grandmom still lives in back in 1950.  I think they had it paid off by 1958.  They usually paid cash for their cars and trucks.  Nowadays some people NEVER pay off their homes and vehicles...they just keep moving into larger homes or constantly refinancing, and with vehicles they often roll over negative equity into a new one.

Still, in a lot of ways, we as a society are better off today than we were back in the old days.  About the only advantage I can think of to the 70's when I was a kid is that you could catch Speed Racer 5 times a week on tv, where now you have to buy the DVD! 

Setting aside the gender politics this raises, I can think of a major way American families were better off in the 1950s: back then, it was within the reach of a pretty wide swath of middle class families to have a parent at home with the kids. How many couples with kids you think manage it today? DW and I do this, but it is a significant sacrifice that we are only able to make due to my earning ability and some consumption-related sacrifices. We know many couples for whom this is not a possibility.

 

[Martha]

I split out the discussion on the draft and national service into another topic:
http://early-retirement.org/forums/index.php?topic=4192.0

 

[bogart]

I can think of a major way American families were better off in the 1950s:

studies of happiness show that American happiness increased as national income increased, up til about 1957. Since then, national income has increased greatly, while happiness has not budged. Seems like the late 50's weren't so bad . . .

 

[brewer12345]

  studies of happiness show that American happiness increased as national income increased, up til about 1957.  Since then, national income has increased greatly, while happiness has not budged.  Seems like the late 50's weren't so bad . . .

Its probably worth remembering that this sort of thing likely exhinits some quirks. For example, I bet minorities are a lot better off happiness wise in the modern era. You thinkthe happiness researchers were asking people who were not white how they felt in 1957? I doubt it.

 

[deserat]

Nords,

Your comment regarding Americans gaining at the expense of the Europeans, Asians and Africans after WWII struck me - actually, after having lived in Europe just lately and seeing their lifestyle as well as pictures of what it looked like after WWII, I'd say they were doing just fine - I'd also say that they think the way they do and make the material choices the way they do because of the way they've set up their governmentsas well as due to their history--remember the Germans (a famous Prussion King/General - can't remember the name offhand) were the first to offer the cradle-to-grave approach to social services (in the late 1700's early 1800's ostensibly to anyone living at 65 in times when most didn't) -he did it to unite previously warring German fiefdoms behind a Prussian cause.  The Prussians suffered eventually or got assimilated, however, the idea of the government safety net stayed on and has been expanded throughout Europe.

A big aspect which allows the Europeans to offer that safety net to their citizens is the fact that most of their security is paid for by NATO, of which the US is one of the largest if not the largest contributor.  If a country doesn't have to pay much for defense and 'peace' is imposed for 50+ years, those resources that would have otherwise gone to war and/or defense equipment and personnel can be spent on the populace in the form of benefits.  I always remember my history teacher saying "butter or guns."  The reason the EU economically is as big as it is is because they've had the peaceful time to build the economic infrastructures.

As for Africa - that's a whole other story - it is so sad to me that a continent with so many resources has so many problems--they really need to better understand governance there.  Asia, I'm not as familiar with.

The United States has chosen to allocate it's resources differently and the people have different ideas on how that should be done as compared to the other continents you are referring to.  That reflects in our 'economic divide' as is so often cited.  

Just to drift even more, I listened to a book on tape by Will and Ariel Durant called "The Lessons of History."  One of their conclusions was that ownership of material wealth and resources over the years and in societies acted like a heart.  There were systoles and diastoles---and the amplitudes of those could either be dramatic or slight.  Historically, if too much of the material wealth and resources ended up in too few hands, there would be a revolt and the resources would be re-distributed.  Then the cycle would repeat.  He believed that those people who were good at amassing resources would still be good at it and that in order to maintain a fairly peaceful society (revolts tend to destroy them), the government should institute some type of re-distribution plan.  Interesting idea and analogy.

Enough said.

Bridget

 

[bogart]

Its probably worth remembering that this sort of thing likely exhinits some quirks.  For example, I bet minorities are a lot better off happiness wise in the modern era.  You thinkthe happiness researchers were asking people who were not white how they felt in 1957?  I doubt it.

Brewer -- you may well be correct. We have indeed made a lot of good and long-overdue progress re civil rights since the 50's. There are probably other quirks, too -- happiness is a fairly difficult thing to quantify. Recent book by Richard Layard is an interesting read on this subject . . .

 

[moghopper]

I would not go live in the 50s. Not even if you paid me. Those who do, well, there are actuarial tables to take care of that.

I would argue that many could be single career families if they were willing to live "50s style". Most wouldn't want to, even if that were presented to them. I have continually volunteered myself to stay home, but DW isn't buying it. :

The house size of the '50s was in the 1500 foot range, now about 2300 ft. The '50s usually ONE car, today maybe three or four...

You're generous!

http://www.infoplease.com/askeds/5-15-01askeds.html
1400 Square Feet in 1970
2200 Square Feet in 2005

Also, Mother Jones, but you'd figure they're worried about "excess"
http://www.motherjones.com/news/exhibit/2005/03/exhibit.html
"Since 1950, the average new house has increased by 1,247 sq. ft. Meanwhile, the average household has shrunk by 1 person."

http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf
1973 Avg:1660 Median:1525
2004 Avg:2349 Median:2140

Houses are larger, fewer people are living in them, they're better insulated...

 

[bogart]

Houses are larger, fewer people are living in them, they're better insulated...

This kind of stuff doesn't correlate with happiness or a good life.

 

[moghopper]

This kind of stuff doesn't correlate with happiness or a good life.

Good, because I wasn't talking about happiness or a good life.

NEXT?

 

[bogart]

I'm curious -- what, then, is your point?

 

[moghopper]

I'm curious -- what, then, is your point?

My response was to reply #13, by "Texas Proud". I'm essentially agreeing with his point, which is summarized by his last sentence: "The middle class of yesteryear are the 'poor' of today." It is difficult to compare eras, but I say that those who are fond of yesteryear have forgotten all the advances in the standard of living.