Pretty much like our current financial system then. You can send ages moving your money from one investment to another. The rich already pay professionals for that and genrally come out on top. Just sticking your money in a normal account and it effectively diminishes over the years.
That's an antique notion that died in the '80s? Once the rules changed, the rich started skimming from every transaction (money tranfers, dividends, security exchanges, and on and on) until they have almost all the money. The rest of us serve at their pleasure.
That's not how it was supposed to work. You were supposed to succeed from being part of the generation of wealth. Not just sitting and skimming while everybody else works. And then passing it on to your heirs.
I wish it worked as you describe. That's where we need to get back to.
This is one of the questions whose answer is not immediately obvious if you think only one step. If you generalize this in a society, riches will accumulate further over subsequent generations because it is easier to make money if you have money. Even if you are. It that skilled, your financial advisors will just turn your money into more money.
As a result, the split between poor and rich will widen and widen. Until at some point, where the situation will implode or be unfavorable in some significant way. Hence, to have a stable system, the limitless accumulation of wealth should be reduced.
There should be inheritance, of course, and half of few million is still lot. However, this requires some progressively adapting tax percentages, based on the amount of inherited wealth.
There are easy ways to get around this. This isn't actually practical to implement. You could just buy and sell stocks within a second.
> We also can’t have the dirty proles save their way to a higher social class.
I don't know what you mean by this. Rich people spend their money at a slower rate than poor people so the rich would be disproportionately impacted by this. Someone living paycheck to paycheck isn't going to have much money that can expire to begin with.
Not to put too fine a point on it, but the current system depends on keeping a cadre of people on the financial hairy edge so that they can be coerced into doing the actual work. If everyone were a millionaire, the result would not be a bunch of happy, financially independent people, it would be rampant inflation while the newly expanded money supply went chasing after what remained of a rapidly shrinking pool of accumulated goods, and then, when those were gone, we'd end up right back where we started, just with a few extra zeros on all the price tags.
That is a much better comment than your previous one.
I would counter that right now, money is ridiculously cheap. Interest rates are breathtakingly low. There are enormous amounts of money running around begging to be borrowed. As such, if this system you posit was accurate, then the very wealthy would be seeing the smallest returns on their money for decades, as they effectively competed to be the lender/investor to the people creating wealth.
But that's not what we're seeing.
It's also not what we see with investing in the stock market; that provides nothing to a company beyond the first time a stock is sold (barring a secondary argument that there is value in demonstrating that people are trading shares in the company which makes everyone feel good about the company and there's a value in that), but the rich are seeing some fantastic returns on their money in the stock market, extracting a nice steady stream of dividends and capital value increases, without having given a penny to the company named on the stock.
As an aside and speaking purely from my own experiences, I draw more each year from the stock market than my country's median salary, and I'm generating no wealth whatsoever for that (although I expect some would argue that by not selling all my shares, I'm providing value and that's what I'm being rewarded for). I could retire and get by for the rest of my life, entirely on the backs of others. The rich do the same to a breathtaking degree.
The rich people will be less rich in that situation. They are in a similar situation now with the current inflation, but growth of money has to be tied to economic growth or otherwise the rich will feel screwed.
I'm not saying it's good, but you cannot screw the rich. The current situation is a compromise and a very sensible at that I might add, despite all the noise from tin-foil hatters.
There are also other, practical consideration which will make what you are proposing impossible to put in practice for a prolong period of time.
Could we create a system where inflation would hit harder on the one that had the most money? That way, rich people would be enticed to move their money, and invest in risky plays. Some of them would grow very rich, others would lose a lot of money, but, on the end, they would end up reducing their income...
I'm almost certain there there may be flaws in this though but:
Isn't there a limited monetary supply at any given time? So the richer I get, the less rich other people become. Even after I pay rents and salaries and everything else, if I'm richer than I was before, then there is less wealth available for everyone else.
no, the wealthy keep their capital in assets with above average returns. the rest of us get to pay for that with below average returns, fees, and inflation.
i fully agree with you here. that's what i intended to address in the last paragraph. if this isn't done right then it will not have the desired effect.
i am not even trying to begin speculating how to achieve the desired effects.
i don't understand near enough about economy to have any idea how to actually do this. all i am talking about is that whenever there is a significant surplus of money, then it is not private individuals who should be in the position to decide how to spend that money.
the latter is the situation we have now. there are individuals and companies that have acquired an enormous surplus of money, and they get to decide how to spend it. that needs to change, one way or another.
there is also another dimension i'd like to add: this needs to happen globally. the idea that someone moves their wealth from one country to another needs to disappear because the laws about this should be the same everywhere. as long as there are countries where unlimited accumulation of money is still possible, then limiting extreme wealth anywhere else is not really going to be successful either.
in other words we are not going to be able to really address this problem until we have a global agreement that this is a goal we want to achieve.
Diminishing returns sounds like a good idea on paper, because then the richer you get, the more you contribute. But remember that the people who are experiencing the diminishing returns aren't going to like it (besides Warren Buffett) and will probably fight against it.
It's a bit of a conundrum. The richer you get, the more power you have (via money). We want to tap into that wealth/power for the greater good. Those affected might disagree and can wield said power to prevent you from doing so. You might be able to legally force them to using the power of democracy, but this could cause all sorts of other problems (the rich fleeing to other countries, etc.)
Really bad idea. That would encourage people to consume wealth over 5 to 10 million during their lifetimes, i.e. destroy real wealth, instead of investing it in productive enterprises, i.e. building real wealth.
You want a situation where wealthy people build a lot more wealth than they consume. The last thing you want is for them to consume their wealth, making themselves better off but the society overall much, much poorer.
Imagine all of the wealth in the world was redistributed so that everyone had exactly the same amount of money.
Those in poverty and the foolish would spend their money on expensive consumer items and long vacations that produce no income later, falling back into poverty because they can't/wont work.
The moderately intelligent would continue to manage money reasonably well and would spend their money conservatively until various circumstances whittled down what they had until they had to go back to work to stay afloat.
The rich (those evil bastards) would be clever and would save their money, work hard although they already had pleanty of money, invest it well, take risks, employ others and acquire money from the other two groups.
In a matter of 5 to 10 years, the poor, middle class and rich will shuffle themselves back to their respective places. And you will have to redistribute wealth again so that things will "be fair".
That's why the saying is silly. Of course if you redistribute all the money, it will eventually all go back to the people who own the tools that collect people's money. That's all that separates the rich from the rest of us. It's not some mystical "know-how" that they have and we lack. It's simply ownership of wealth-concentrating physical or intellectual property.
If this is the solution, then the rich will never stop getting richer. 10% ROI on a 100k investment has a significantly greater marginal utility than 10% on a 5k investment.
Agreed; I figure the necessary missing piece is government dampening this effect. Some way or another, to balance it out you need to “leak” capital faster & faster as you accumulate it. The size of the leak would be tuned to allow you to continue to grow your wealth if you are still rapidly creating new wealth, but if you just sit on a kings ransom in safe investments, it would leak away & attenuate.
Trouble being, this most likely takes the form of steeply rising taxes, which are ever-unpopular, and needs careful design. I also suspect just about everybody aspires to “make it” and then stop striving; this is somewhat antithetical to that (although the leak would be tiny at regular-people levels of wealth)
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