Is Capitalism Broken?

My first car was a used 1974 Volkswagen Karmann Ghia coupe.

I kept if for four years and sold it for my than I paid. It was in high demand since the '74 model was the last year the car was produced.

Capitalism worked!

 

Those are a lot of words but so far as Google can tell me, "Marginal Poverty" means nothing. And so far as I can understand your responses, nothing you've written about it addresses anything I've said. Since "Marginal Poverty" is about the only thing you've had to say so far, I can only assume you see it is a particularly significant cause of poverty and precarious labor. While wholeheartedly disagreeing, I implore you to state your case, openly blame the insatiable poor for their sorry state and get it all over with. Such an argument would be nauseatingly appropriate after all of Ace's Car Capitalism wisdom.

 

Laundering money is a regulatory means of shifting responsibility for criminal behavior. My preference would be to reduce real crime and allocating resources in a manner that will accomplish the reduction.
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How about the message of doing your homework - investing in what you know - actually doing the calculations. Some of you remind me of folks who spend up to big money for an MBA but don't have any common sense in business.

A common task a newly hired employee with his/her fresh MBA would get is to run the numbers on the corporate fleet and see if you can save us some money. It goes like this:

MBA Guy - we can save money by purchasing used cars.
Dude with common sense - Have you run the numbers?
MBA Guy - No, it is a rule of thumb. Everybody knows that depreciation in the..
Dude with Common Sense - Go back and run the fucking numbers.
MBA Guy - Here is a chart showing depreciation percentages - so you can see...
Dude with Common Sense - What about the other costs?
MBA Guy - What other cost?
Dude with Common Sense - Fuel, Repair, Maint., Insurance, Cost of Capital, transaction cost, etc. etc.
MBA Guy - well I've never actually owned a car
Dude with Common Sense - WTF? How did you get around?
MBA Guy - My mom took care of all that stuff.
Dude with Common Sense - Your uncle is on the Board and I can't fire you, so I think I will recommend you for a promotion, you can work with my buddy Baraka, you guys will get along just fine.
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The video is based a a specious argument. At the core is the argument that wages don;t keep up with economic growth. Anyone who runs a payroll knows that wages are but a portion of employee compensation or employee costs. Until these kinds of arguments are made using employee costs and total employee compensation as a basis those who depend on the data will be mislead. For example a business owner in California that experiences a doubling in workers compensation insurance premiums has that as a real cost that benefits employees and the money is not available for wages.

 

I would like someone to actually reconcile the numbers. At the 1:03 mark in the video he shows a chart and says real median wage growth has been virtually stagnant over the past 30 years but that real economic growth has doubled. The implication is that all that growth has been concentrated into the hands of the top - we don't need a mixed series of percentages, we can actually do the math and reconcile the difference. Has this income gone to a select number of people? I have my doubts. One thing to consider is the simple wage pattern people typically experience during their life times. The top income earners thirty years ago are not the same top income earners we have today - there is churn. In the past 10 years I have been in both the top 1% and the bottom 1% in terms of income. Then he mixes in wealth - which is a different animal all together. I think he has selectively picked some data points to promote his ideology - nothing in the video suggests an objective search for truth.

Good question. Why don't you know the answer?

Again, this is consistent with the depreciation question relative to new v. used cars. One variable does not give the complete picture. Some want to compare wages, I would want to compare living standards. Even at the low income range, people get things like earned income tax credits, rent subsidies, free college education, free medical care - while others pay for these things. So what is the real difference in living standards between one family earning $100,000 in income from wages and another earning less than the poverty wage? The family earning less than poverty can possibly have a better standard of living than the family earning $100,000.

If I took the time to run the numbers the conclusion would speak for itself. I point out some obvious problems in weak arguments - doesn't make it the responsibility of those promoting the argument to respond to those obvious problems?

 

There is a wealth disparity. There are various ways to measure wealth. If person A $100,000 saved in an account for his son's college education and person B son obtains aid worth $100,000 for his son's education. How would you calculate the wealth disparity? If person A graduates with $100,000 in debt from loans and person B graduates with no debt based on grants/aid and over the time period person A pays off the loan how do you account for the income disparity. If person A earns $100,000 more during the time period, is the disparity actually $100,000? Can you agree that a superficial analysis can lead to the wrong conclusion?

Your response is inadequate. The typical life time wage pattern is that most people reach their peak earning years (athletes, entertainers illustrate some obvious exceptions) in their 50's. Wages drop in a person's 60's with retirements and medical issues. Assuming a decade of peak earning, comparing a thirty year income period - one would easily draw incorrect conclusions unless one followed the individual over the thirty year period.

I know my father materially earned more than his father and there was a point in time when his income surpassed his father's. I earned materially more than my father and there was a point in time when I surpassed him. My son will materially earn more than me, and there will be a point in time when he does this. At some point to measure my son's wages to my father's wages is pure folly. for example my father bought a home for about $40,000 and is still in it - My son may need to spend $200,000 for a similar house - so if my son wages are 5x my father's wages what does that really tell you?

No they are not. Wealth and income are independent of each other. Large income is not needed to accumulate wealth. Large income does lead to wealth. High wealth does not mean there is large income. Etc.

Is trickle-up the condition when there are large numbers of consumers that leads to wealth creation? If true in history is there a pattern that is consistent with this, can you give an example?

 

A flash mob broke out at the general session of our conference today as the pre-speaker entertainment...orchestrated by youth delegates and younger staff ( not me) . It was approved in advance. I said WTF!

National League of Cities's post on Vine

Biden speaks at lunch tomorrow.....there will not be a flash mob but maybe we'll hear about the growing income inequality, particularly in big cities.
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This was supposed to be a pointless announcement...stopped at one too many receptions before coming home.

But works as a break from ace logic too.

 

Four year tuition at Duke about $130,000. Undergrad, plus MBA at Stanford about $100,000, tuition alone. Stanford four year tuition/fees/room and board about $95,000. Average medical school graduate has about $150,000 of debt. $100,000 is a nice round number to me. The list of schools that cost less today that will reach these points will get materially longer for children in grade school today. Tuition is one cost, there are others. Is this your focus? Is this what you get out of my post on this subject?

A typo - wow. You got me on that. You would almost think someone would be confused.

No defense needed. If you think income and wealth are connected it is not for me to change your view - I know they are not. I personally know some very wealthy people that never had high incomes. I am aware of people who control or are original partners/employees of multimillion dollar companies that never had high income until after they accumulated their wealth. The need for that to be said on this forum says something.

 

I must of misunderstood your question. As I understand it now, what you want to know is where would the aid for the cost of attending four or more years of college to obtain a degree come from? Aid comes from various sources. Aid can be in the form of scholarships, grants, work/study, tuition waivers and loans.

Income and wealth are independent of each other.

As I understand it, you want to know how wealth can be accumulated without income. An asset that increases in value increases the wealth of an individual, no income need be derived as the asset increases in value.

As I understand this question you want further elaboration on the issue of wealth accumulation as an independent variable of income. the value of an asset is subject to market supply and demand. Some assets have an intrinsic value where the holder can derive benefit outside of market supply and demand forces. to illustrate the two types of assets, one example would be the value of a rare comic book - its value could be $0 or it could be thousands of dollars based on market demand. Another example would be a cow that produces milk. The cow would have a market value but it also would have value to the owner of producing milk assuming the owner derives benefit from milk. In this case a person with a milk producing cow may not need to enter the market to purchase milk while the person without such a cow may need to enter the market to purchase milk. Hence the cow has an intrinsic value to the owner of the cow. A value that could be measured in two ways. In the long-run that cow can produce more cows and in time the owner of the one cow can have a herd - amassing much wealth in the value of the cows, depending on market conditions, without deriving income. It is kind of magical. that is why I love capitalism.

As I understand this statement you are confused regarding my views on wealth accumulation. I think some people focus on income and others focus on assets (or capital). Capitalist by nature focus on capital, managing it, accumulating it, benefiting from it. It is a difference between an income statement v. a balance sheet mentality. Until a broader view point can be achieved, this will be confusing.

Now, I don't care what your statement means or what you are looking for. I am going off on a tangent.

The issue of is capitalism broken and similar topics places a focus on the wrong core issue. Capitalism is perfectly fine for those who make the choice to engage in capitalism, people who understand the rules and can live with the consequences. It is not fine for those who either do not want to engage in capitalism or those who lack the ability. The real issue is how do we, protect and account for those people in a capitalist system? That is a truely baffling question in my mind.

I make an analogy - some people place a high value on financial reward and accumulation. Some are good at it. those that place a high value on financial reward and accumulation will in time have more of it than others and if they are also good at it - they will be in a elite category in this regard. Some people place a high value on laughter. Some are good at it. Those that place a high value on laughter will in time have more laughter than others and if they are also good at it - they will be in a elite category. Just as I would not try to restrict laughter, try to control it, redistribute it, etc. - nor would I do it with financial rewards. I would only regulate, tax, redistribute to the degree that it addresses real social costs. Otherwise I would let the markets be free.

 

There is aid available based on financial need. There is aid available based on merit. There is aid available based on some unique characteristic. In the US the starting point for students is completing the FAFSA form. I am sure there are people around here that have more information on the process than I do, I graduated in 1982 and my son is a sophomore in HS. and has not started the process. I can tell you this - when my son was born my goal was to save ($100,000 was my goal) so that he would not have to work or worry about his education. I started working when I was 12 and started saving for college when I was 16, I worked while in college and paid all of my expenses. I have issues with people who can work and save to pay but don't.

You can cite me!

Depends, for example:

Jennifer Love Hewitt Jokes About Insuring Her Breasts : People.com

I am thinking, yes. Her assets are worth at least $2.5 million. And Yes, I think her assets are a gift from God or Unicorns if you don't believe in God

Perhaps the cow wondered onto your land and you fence it in. Dude, where are you going with this? What if I find a 50 caret diamond on the ground. What if I write computer code that becomes Facebook. What if my grandfather gives me some land? What if to infinity????

No, it is confusing to you because you are making it so. I am curious would you rather receive $1 million in income or have a $1 million increase in your net worth?

Also, how do you define income? I typically look at in terms of the IRS's definition. I don't know how you folks in Canada define the concept. I have had years of negative income and positive growth in my net worth. But, I measure this kinda stuff.

I am going to change my outlook around here. From now on think of me as an eccentric old uncle. I have done some stuff, I have been some places, most of the time you don't know what the hell I am talking about - but on occasion you simply pick up an extremely valuable piece of information from one of my little anecdotes or stories.

My bottom line is do your homework and actually run the numbers.

I am reminded of one career decision I made. I was offered a promotion that involved a relocation to California. They offered me a 10% raise along with moving expenses. I talked to my future boss and said the move is actually going to cost me money because the raise would not cover the additional living expenses. He came back with the line - short term sacrifice for long term gain. I said that I actually ran the numbers under a number of scenarios projecting to retirement age and that under the reasonable projections I would financially be better off not taking the offer involving relocation. I said here is a number that works for me. He said he would need to check into it, came back the next day and said it was a done deal. There is more to look at than just income! Do your homework! Actually run the numbers!