So a stock market and/or real estate crash can actually be good to reduce inequality . In fact I think its about the only way to dramatically reduce inequality.
Think about young people trying to buy their 1st home now, its becoming impossible.
In any kind of non-uniform distribution of any good, the top x % will always own a disproportionate (wrt to headcount) amount of it (In economic systems, this mathematical fact is further amplified by other factors such as financial literacy and leverage). What's always missing to me in these types of discussions is what this value should be at, and what the distribution should look like qualitatively (i.e. what should the ideal Lorenz curve look like).
Is there any discussion/research/case study analysis where this is explored? I.e. overall citizen satisfaction/economic productivity and how it relates to wealth distribution?
The title uses the stock stat because it's so unbalanced. But to me the scariest statistic is the other one mentioned in the article: "the top 10% also accounts for 50% of all consumer spending". This seems extremely fragile. Small changes in the behavior of the well-off can have big negative consequences for the entire country.
In the US you need to earn only $178,611 as a HOUSEHOLD to be in the top 10%. That's less than $90K per person.
Comparatively, you need to earn $663,164 to be in the top 1%, and more than $3M to be in the top 0.1%.
I just want to highlight this to remind that the top 10% is by far not made up exclusively of ultra-rich individuals like people on internet like to believe.
I was very surprised by the holiday budget. Less than 2500$ for 80% of the population? Does that mean that no one from these 80% stays in a Hotel or AirBnB for longer than a week with their family? No one travels overseas, or if so, only every 5 years or so? 2000$ is what you can easily spend on plane tickets for a family of 4.
This guys has been saying this for ages
When I was at uni I read Thomas Piketty's "Capital in the 21st Century", and parts of his newer "Capital and Ideology" (although I never quite got through that one).
The big takeaway for me was that wealth inequality never improves without some major catastrophe (war, revolution, plague etc). The proposed model is really intuitive and compelling (tldr; return on capital has historically always been higher than real growth, which guarantees indefinite concentration of wealth until there's a crisis).
Last year's Nobel Economics Prize winners, Acemoglu and Robinson, tell a similar story in "Why Nations Fail", which I am working through at the moment. Although in their case, they seem be suggesting a more causal link between erosion of political and economic institutions and the collapse of empires.
I wish these ideas were more broadly accessible and understood. The real risk of total societal collapse should transcend any partisan fighting about ideal tax rates, government inflation/unemployment targets etc. Everyone has a common interest in there not being a violent upheaval (arguably the rich most of all).
Last I checked the numbers, current wealth inequality seems about as bad as it was before the great depression. And its not enough to just say "well, absolute wealth is more important". As others have pointed out, its not stable to have such huge relative wealth disparities. And that's before you even consider corruption.
The top 10% owns the 66% of everything.
https://www.statista.com/statistics/203961/wealth-distributi...
Top 10% is actually a lot of people!
Wealth equality is not really a goal, it better to ask if the bottom 50% got wealthier in absolute terms, which the author answers in another post:
Given they don't have such a high percentage of total wealth and an even lower percentage of real estate, it seems this is largely due to financial education.
I know a lot of working class people with significant savings (more than I have) but they tend to just put it in a savings account at a bank or perhaps invest in a property to let out.
Many people see the stock market as a casino even though you have far less risk in index funds than you do by renting out property.
Any system that allows humans agency will end up with a Pareto-style distribution in that thing (non-linear). Doesn’t matter if it’s wealth, HN upvotes, Crime, Traffic accidents, Productivity, Tetris scores, academic papers published, etc.
As for the slight drift in US wealth distribution since 1980, it’s wholly explained by the change in age demographics. Since 1980 we’ve gone from a nation of people 30 years old to 40 years old. 10 years is a lot of time when it comes to compounding returns on productive assets (stocks, etc). Due to compounding, wealth held by each age group also gets more Pareto-extreme heading into retirement age.
Adjust that out, and this is mostly a nothing burger. But emotionally people don’t feel that way so nothing I say will change that. Narrative zeitgeist always wins over objective reality.
Average Americans are wealthier than they've ever been. Another chart to drive this home, the percentage of Americans who have a passport since 1989 (Note, this is also influenced by age demographics, but not as dramatically as wealth): https://www.statista.com/statistics/804430/us-citzens-owning...
The more interesting statistic is that the 3 richest Americans hold more wealth than the bottom 50% of the US.
So, to not inconvenience these 3 individuals, you wont make a significant impact to the bottom 50% of US citizens.
https://www.forbes.com/sites/noahkirsch/2017/11/09/the-3-ric...
The only thing that should matter is that the poorest segment of society becomes richer over time.
And it has (in inflation-adjusted terms, lower income Americans have become richer over many decades).
What part of "people with access to credit at low rates have an unfair market position" is so hard to understand? The Cantillon effect isn't about an actual money printer; it's about who gets to spend newly issued broad money (ie, bank-issued credit) first. Those who have more assets can extend more leverage, generally at lower rates, than anyone else, meaning that not only do they have more dollars, but that the dollars they spend are actually worth more than the ones the average person gets, because they're spent before they've had the chance to have any inflationary impact upon price.
As long as you have anything less than full reserve banking (and even there, the interest could be an issue if left unchecked -- perhaps why Islam and Christianity both ban its practice), this corruption of sound money will skew the playing field.
Knock knock, Pareto's law.
Top 10 percent of who?
According to this source, 40 percent of US stock is owned by foreigners: https://taxpolicycenter.org/taxvox/who-owns-us-stock-foreign...
For reference since people on HN seem to have a skewed idea of what income you need for each percentile.
Individual
- top quintile - $120k
- top 10% - $165k
Household
- top quintile - $167K
- top 10% - 235K
I'm sure it's true, but is this considering 401k? Where the person has little to do with the individual stonks.
> "Wealth inequality is only getting worse in this country and frankly I’m not sure what stops this train."
Best trick is allowing the top 50% to hate the bottom 50% and naturally visa versa BUT ALSO have a huge portion of the bottom 50% to root and vote for the top.
Genuine question - has this not been the case?
It feels like this has been true just past stock market's inception.
The rest of us are gaining ground! Didn't it used to be 90% of stocks?! We are catching up! Peak optimism :) - granted, from a global economic perspective I am probably in 'the top 10%' depending on how it's calculated - tho am stock-free
Piketty was right. And yet, there are a lot of people who refuse to believe that inequality is getting worse or that it's actually a problem. (Coincidentally, those people are not in the bottom 50%.)
Surely this must be to some degree influenced by the prevalence of ETFs that give small-scale investors access to diversification, at the cost of no direct ownership for the small-scale investor?
That seems pretty reasonable to me. The vast majority of innovations that have consistently raised everyone's standard of living over the last centuries has also come from that 10%.
And how much of that is owners of tech companies that they founded?
The US economy depends on those tech companies: try succeeding in a country that only has old school businesses: I remember the top stocks for France are terrifyingly old. I'm in New Zealand and we hardly have any tech stocks. Xero, RocketLabs? We often sell our successes overseas.
Edit: many of https://en.wikipedia.org/wiki/List_of_wealthiest_Americans_b... are founders. Looking at: https://en.wikipedia.org/wiki/List_of_French_billionaires_by... and too many of the businesses are over a century old, more than a few from the 1800s.
Edit: The irony of rich Americans talking about wealth inequality is harsh. There's billions of people that desperately want the resources that a poor US citizen spends. If you are American and want to talk about the wealthy, look at yourself and ask how your wealth should be taken from you and given to the poor of the world...
The top 10% of tennis players have 80% of ATP points.
- Total Global Wealth: $454 trillion
- Annual Global GDP: $105 trillion
- Cost to Feed Everyone for a Year: $10 trillion
The issue is not a lack of money but rather distribution, logistics, and political will.
Yeah but not my stock
Will there be a time when people depend on the stock market (pension, mortgage) so much that it becomes too big to fail?
> Short of a financial crisis I don’t really see what slows this trend.
Vote left and increase taxes for the rich?
The share of wealth held by the 1% in the US has been constant for a decade, at 30%. You can argue thats a problem, but it has not been getting worse.
Is that much, relatively? How much of everything does the top 10% own?
this is the least-bad state of things. consider the financial literacy (or notable lack thereof) of the average person. consider how much worse active investing would be, particularly in light of the bubble-y market regime recently prevailing where simple rules are thrown out the window, a regime somewhat exacerbated by retail hype. and consider the massively market-distorting effects of passive indexing when scaled to its current level, let alone beyond.
it's also pointless to mention this out when, if you examine returns to public versus private markets from e.g. IPOs in the past twenty years, they are so radically lower than the twenty before. that trend is by no means abating. let's not get offended that more average joes aren't playing exit liquidity to some VC/PE guy. this is somewhat to be expected given the level of hell the government has made it to be publicly listed, the response of growing private markets, and the SEC's asinine refusal to allow anyone but rich people access to those privates.
Well, i don't see what is wrong with it. Apart that common people don't invest even a bit. This is what happens always with everything. Some people find joy in accumulating stock and others in drinking beer every evening.
Sincere question about communism:
Let's say hypothetically that the distribution of stock ownership was more even across the population, and variance was largely (but not completely) due to length of time in the workforce. And further, that the stock owned by workers is a large enough block that they effectively have controlling shares at many companies. Maybe I'm talking about a different universe, but please imagine it for a moment.
Would that hypothetical world be kind of like communism in the sense that the workers own the means of production? If not, why not?
The people in the 10% changes wildly over time, on average people about to retire have way more than people about to start their first job.
As a person born in the middle class, I am quite sad to see it's extinction in realtime. Not sure what is the solution to this.
This is kinda misleading as to just how bad inequality is (ie, at record level and rising, with global irreversible consequences starting to hit us).
To see how bad wealth inequality in the US is, look at this graph [0] from 2023 and see if you feel any different.
0 - https://www.visualcapitalist.com/wealth-distribution-in-amer...
Yup, Joseph M. Juran noticed that in the 1940-ies and called that Pareto principle.
see also Peter Turchin's 'wealth pump' https://impact-investor.com/book-review-end-times-by-peter-t...
My fellow Americans. This is my take on the situation, my opinion:
Right now, the Oligarchs (yes, we have them) are in the process of dismantling the public sector. During this process they have access to all the know-how and data. (That is a form of public-IP theft in broad daylight, btw.)
Then, when quite predictably the shit hits the fan -- as we all know many of these components of the public estate are critical services -- these same oligarchs will create private companies and "our government" will contract out these very same services to the private sector.
And yes, having thrown both baby and the bathwater into the jobless market, they also are building up the uber rolodex of competent ex-civil servants. Many, naturally, will end up working for the very same oligarchs that fired them.
It is an error in my opinion to utilize a partisan lens when considering what is happening to our nation. Trump, Elon, Thiel, and their youth shock troops are floatsome that are riding a wave that is cresting now, but the wave was set in motion during 90s when barriers erected to prevent concentration of Media and Finance in few hands were taken down by the governer from Cocaine Central. The red-blue circus is just that in my opinion.
Liberalism has failed.
Perhaps to save it Just give a few trillion to the people in msci world stock locked for ten years or so to teach them.
Is the top half of the comments on this forum for entrepreneurs really discussing the communist revolution revisited?
Well, it's sad to read an article where the author agrees with me 8-/
It's only going to get worse.
The biggest reason it can't be stopped is because 1/2 of the bottom 90% of the population is screaming to get rid of social security, because... it's socialism!
Never mind that they have $0 saved for retirement. When you combine a sociopathic wealth class, and a multi-decade education deprived working class, it's a win-win for ever increasing wealth inequality.
For many in the top 10%, this is considered a good thing...
If you take away the wealth of the top 20 %, then who will take over the income that comes from the VAT? Exactly, the poor! /s
The problem can be solved with transition to communism. No one will own anything and there will be no wealth.
Ah but consider if the rich own 87% and the poor 13% and pension funds 40% and foreigners 17% then there is 157% to go around! Or maybe it's 87% of the rich directly own equities? Or maybe this is a wind up for clicks and gibberish. (I am also commenting ignorantly).
Financial education - spending less, saving up, and investing - is common sense but maybe needs to be taught in school. Or maybe the new sovereign wealth fund will indirectly reduce this inequality without needing every individual to take action. Not sure what other options there are.
I think about this from time to time and I suppose everything is cyclical in the end. Most of us would have been some peasant in the feudal age and when it gets really bad it always ends in a revolution of some sort. It's just on a global scale and timeframe now.
As more of the population feels the effects of inequality they won't appeased by just fancy toys and shiny things, they will want change by force. My only solace is I'll probably be long dead by the time that happens.