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News & Politics News & Politics

"You cannot multiply wealth by dividing it."

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This is a spin-off from gsprofval's post: 5 Truths You CANNOT Disagaree With

in which 'truth' #4 is:

You cannot multiply wealth by dividing it.

If you have $100 then it makes no difference whether you keep it in a single account, or if instead you divide it, so you have $50 in one account and $50 in a second account.

If we now allow time to pass, and the interest rates on the accounts varies depending on how much is in the account, (for example, if you earn 5% on balances over $80, but only 2% on balances under $80), then it will make a difference.  However, as long as the interest rate is positive (and above the rate of inflation), your wealth will still be multiplying, even if you have divided it.

A better example than dividing it between different bank accounts in the same bank is moving half to a different bank, or putting half into the stock market.   If you do this correctly, you can get a higher return for the same level of risk (or a similar return, but for a lower level of risk).  Dividing wealth is often the sensible prudent thing to do.

On a different level, the same thing happens in families.   You could give all the wealth to the person you think it best at investing, but in the long run using that strategy it only takes one mistake and the entire dynasty's wealth is squandered.  A safer route is to divide the wealth among different family members, letting each increase the part of the pool they are responsible for, as best they can.  Some will fail, and some will do fantastically; and if you don't have a family full of fools, when it comes to divide things out among the next generation, the total wealth of the dynasty will have increased.

We can take this reasoning a step further.  It doesn't make sense, on a national level, to leave 80% of the country's wealth in the hands of only 20% of the population.  You'll get a better rate of return by spreading things out sufficiently for most people to stop living hand-to-mouth, buying things that are cheap rather than things that are efficient.

NOTE 1:

A $10 pair of shoes that lasts 1 year is cheaper than a $20 pair of shoes that last 5 years, but the latter is a more efficient use of money.

NOTE 2:

I made up the 20%:80% figure, because I can't remember the correct numbers off hand.

by on Feb. 8, 2013 at 3:33 PM
Replies (41-50):
stacymomof2
by Bronze Member on Feb. 9, 2013 at 4:56 PM
1 mom liked this

No, I am not missing any point.  What is happening is that the money is moving from the middle class up.  Middle class people are losing money, income is going down and wealth is moving into the hands of the wealthy.  It doesn't have anything to do with the government printing money, or how hard people work, or any other simplistic idea that you are trying to make this conversation about.  The facts:

The middle class wages are going down.  They are making less (although total productivity is rising, and wealth as a whole is increasing.)  Where is the money going?  To the top wealtholders in the country.  

This has nothing to do with government revenue.  This has to do with the concentration of wealth being moved from the majority of people to a small amount of people.  

Quoting susan115:

I think you are missing the point, where is the money coming from?  Who holds the purse strings?  In economics I was taught that the pie expands when money flows, meaning more for those that work hard, but are you saying that there just isn't enough money to go around?  I, honestly, I am sure what you are saying.  The government can't just print money, they have to bring in revenues, right.  That money comes from those that work, correct?  So, when less people work and companies cut back because of taxes are to high less for the workers, less revenues for the government, correct.  So, if half the country takes assistance from the government and the other works, yes there will less of the pie, higher taxes.  When your insurance goes up by 2500.00 you have to take less home.  Which means your standard of living goes down.  It makes perfect sense to me.  Keep the government working for the people, not the other way around.  By  the way, only a history teacher.


Quoting stacymomof2:

Those numbers are not skewed.  She is not referring to dollar amounts, she is referring to a proportion of the whole.  The whole amount has grown, true, but the proportion that is ending up with the middle class is drastically smaller.  With 40% of our country sharing 2% of the available money, how do you suppose there is a chance to move up?  They are barely getting anywhere.  

Quoting susan115:


I am sorry to tell you those numbers are skewed.  This started way before Reagan.  In the 1960's.  and no the top 1% maybe taking more, but so has the middle and bottom.  Many americans have made it into the top earners and many people from the bottom have made it into the middle and top.  If you go back further the top 2% have owned the majority of the wealth since the 1400's.  Now, the pie does get bigger when more people create wealth.  Example, is healthcare, healthcare is so much better today than it was in 1978.  Why, science got better, innovations kept improving, people got rich, yes poor people and middleclass, people lived longer and longer better healthcare.  Look at computers, many people became rich with different software designs, and all the technology. Hardwork brought people out of povery.  The vacuum cleaner was designed for the working people, look how it made your life easier, again made for the working, not the rich.  Reagan was a great president who had a vision for the country.  His vision "Government is not the solution"  Obama's statement in 2004 "the constitution does not state what the government can do".  The middle class and poor will do better with politicans who work for them, not themselves.  Lately, all we have are people who are jealous of what others have achieved and not willing to do the work to succeed.  How, did Obama become a millioniare?  He started out poor. 

Quoting mommom2000:

The facts are that this country does have a problem with the redistribution of wealth, and the rich are kicking everyone's ass in that war. It's not stealing to try to revive the middle class, policies can be changed that helps everyone in the economy, not just the top 2%.  It's policies since Reagan and the 80's that have allowed the rich to sky rocket while the middle class to decline. Since 1980 the top 1% have went from having 9% of all the wealth to 20% of all the wealth. The bottom 50% have 1% of the wealth..  When the top 1% keep increasing their share of income,  everyone else loses purchasing power.   In 1950 manufacturing use to account for 29% of GDP and financial services accounted for 11%. Now manufacturing is less then 12%, while finance is 20% higher then manufacturing, health, wholesale and retail combined. The richest 2% own 51% of the wealth. 691 people in the world now hold 51% of the worlds assets. With these staggering numbers policies should be helping the middle class, not the top, they don't need it.  With this economic model they are making out like bandits. Trickle down economics has been a huge success for the wealthy, and a failure for everyone else, yet the conservatives keep buying and selling this myth.  The numbers and facts don't lie, this theory has hurt 90% of the people in this economy.







Farmlady09
by Silver Member on Feb. 9, 2013 at 5:11 PM
2 moms liked this

That's all well and good until you take into account that the entire $100 is 'yours'. If 'you' invest it into two separate accounts, 'you' still make money on the interest. If 'you' only put $50 into an account with 'your' name on it and hand 'me' $50 to put into an account with 'my' name on it, not only are you out the $50 bucks, but you're also out all of the interest 'you' would have made on that $50.

The people who earn money deserve to keep it. They worked for it. It was their idea that provided something 'new' and necessary. Too many people who are poor right now 'want' things that aren't necessary and won't lift a single one of their own fingers to earn enough money for necessities ... but they will use all eight fingers AND their thumbs to grab money that other people earned and blow it on things they 'want'. Others will earn just enough to buy the things the 'want', but expect other people to hand them money for the things they 'need' (such as food) because they don't want to work enough to earn all of it themselves, or because they might only have enough to pay for the things they need and holy peanut butter that's just unfair because they can't just go buy the things they want after the groceries get bought.

If 'you' want to spread your own personal wealth around ~ go for it. Stop making ridiculous arguments about why people who aren't unwilling to earn their way should 'share' their hard earned money. And don't go whimpering about people who were born into wealthy families and claim they didn't earn it. Their family did. That's like saying the neighbor had really pretty china and when they die they should give it to you because you like it ~ instead of giving it to their own children.

What is WRONG with people today that can't grasp the concept of 'not yours'! I know two year olds that understand this, so why are so many adults earnings challenged? If you want something, get off your butt and earn the money to buy it. If it's too much trouble to earn the money yourself, do without! There are a lot of people who really think they are 'special' ~ and they are ... just    like   every   body   else, not not more so. Everybody 'wants' things, but everybody should earn what they want. People who can't work deserve what they 'need', and that should be freely given. 'Spreading the wealth' to give lazy people what they want is a crock.

Clairwil
by Gold Member on Feb. 9, 2013 at 5:31 PM
Quoting Farmlady09:

The people who earn money deserve to keep it. They worked for it. It was their idea that provided something 'new' and necessary.

People who earn it deserve to keep all the money that they don't decide to spend.

Most people make the decision that it is worthwhile spending some of their money on food, for example.  They don't expect to receive the food for nothing.  A few are farmers who grow all their own food, so see no need to pay others for food, and that's fine too.

Another thing that many people decide to pay money in order to belong to are social clubs or churches.   Some demand a flat fee per year.   Some demand a tithe, a set fraction of the person's income.   Some demand more than just money.  (The skull and bones is reputed to demand blood.  *grins*).   But that's fine.  If people want to belong to a group, then they are free to pay the membership or else leave the territory claimed and controlled by the group.  (If you think otherwise, try crashing an exclusive night club without paying the fee, and see how many times you butt bounces on the pavement when the bouncer throws you out.)

And, finally, there's a special really exclusive club with a big territory and lots of benefits, that many people seem willing to pay the ongoing membership of.  It is called "the United States of America", the members are called "citizens", and part of the ongoing dues is paying your taxes (another part of the dues may include being called for the draft).

Clairwil
by Gold Member on Feb. 9, 2013 at 5:45 PM
Quoting Farmlady09:

Too many people who are poor right now 'want' things that aren't necessary and won't lift a single one of their own fingers to earn enough money for necessities ... but they will use all eight fingers AND their thumbs to grab money that other people earned and blow it on things they 'want'. Others will earn just enough to buy the things the 'want', but expect other people to hand them money for the things they 'need' (such as food) because they don't want to work enough to earn all of it themselves, or because they might only have enough to pay for the things they need and holy peanut butter that's just unfair because they can't just go buy the things they want after the groceries get bought.

I think a lot of problems in America stem from having a media willing to pander to people - that will portray for them the distorted view of the world which confirms to them that they are justified in doing what they want, because that's what the viewers will pay for, will turn into.


Clairwil
by Gold Member on Feb. 9, 2013 at 5:54 PM
2 moms liked this
Quoting Farmlady09:

And don't go whimpering about people who were born into wealthy families and claim they didn't earn it. Their family did. That's like saying the neighbor had really pretty china and when they die they should give it to you because you like it ~ instead of giving it to their own children.

Someone who receives a $5,000,000 trust fund upon turning 18 didn't earn it.   I'm not sure you could even say that they 'deserve' it.

Their parents earned that $5,000,000 and, to a certain extent, it is good to allow those parents to give it to whomever the parents want to give it to.    And, just as any other transaction which transfers money between people, it should be taxed.

Clairwil
by Gold Member on Feb. 9, 2013 at 6:05 PM
Quoting Farmlady09:

Everybody 'wants' things, but everybody should earn what they want. People who can't work deserve what they 'need', and that should be freely given. 'Spreading the wealth' to give lazy people what they want is a crock.

What do you think children need?  What level of health care and education does it make sense for a society to mandate that all its children should receive?

Does America succeed at that?


Farmlady09
by Silver Member on Feb. 9, 2013 at 6:22 PM

 You just typed a lot of words that didn't address the point ~ which is that people who earn money shouldn't HAVE to share it ~ divide it ~ or GIVE it to people who don't earn money.

The part you got right is that they have a right to spend it on anything they choose, and that they have the right to choose to just save it, or part of it.


Quoting Clairwil:

Quoting Farmlady09:

The people who earn money deserve to keep it. They worked for it. It was their idea that provided something 'new' and necessary.

People who earn it deserve to keep all the money that they don't decide to spend.

Most people make the decision that it is worthwhile spending some of their money on food, for example.  They don't expect to receive the food for nothing.  A few are farmers who grow all their own food, so see no need to pay others for food, and that's fine too.

Another thing that many people decide to pay money in order to belong to are social clubs or churches.   Some demand a flat fee per year.   Some demand a tithe, a set fraction of the person's income.   Some demand more than just money.  (The skull and bones is reputed to demand blood.  *grins*).   But that's fine.  If people want to belong to a group, then they are free to pay the membership or else leave the territory claimed and controlled by the group.  (If you think otherwise, try crashing an exclusive night club without paying the fee, and see how many times you butt bounces on the pavement when the bouncer throws you out.)

And, finally, there's a special really exclusive club with a big territory and lots of benefits, that many people seem willing to pay the ongoing membership of.  It is called "the United States of America", the members are called "citizens", and part of the ongoing dues is paying your taxes (another part of the dues may include being called for the draft).


 

Farmlady09
by Silver Member on Feb. 9, 2013 at 6:24 PM

 This is one of the reasons I don't have a tv.

The fact that the US is now a nation of consumers rather than producers is the reason so many people are poor. No one wants to dirty up their own hands earning money .... but they sure want money to spend on more 'things'.


Quoting Clairwil:

Quoting Farmlady09:

Too many people who are poor right now 'want' things that aren't necessary and won't lift a single one of their own fingers to earn enough money for necessities ... but they will use all eight fingers AND their thumbs to grab money that other people earned and blow it on things they 'want'. Others will earn just enough to buy the things the 'want', but expect other people to hand them money for the things they 'need' (such as food) because they don't want to work enough to earn all of it themselves, or because they might only have enough to pay for the things they need and holy peanut butter that's just unfair because they can't just go buy the things they want after the groceries get bought.

I think a lot of problems in America stem from having a media willing to pander to people - that will portray for them the distorted view of the world which confirms to them that they are justified in doing what they want, because that's what the viewers will pay for, will turn into.

 


 

autodidact
by Silver Member on Feb. 9, 2013 at 6:25 PM


and I'm trying to figure out why you think our taxes are high compared to the rates paid then. 

Quoting pvtjokerus:

 I already did.  I am just trying to figure out why you think it applied back then when it doesn't appy now with our higher taxes.


Quoting autodidact:


What don't you tell me why you think It doesn't apply?

Quoting pvtjokerus:

 Ok.  Why do you think that they do not apply to today?  What was the difference?  Because today it doesn't apply.


Quoting autodidact:


No I'm saying that when I posted refers to a period of time when taxes were actually high

Quoting pvtjokerus:

 So you are saying that this does not apply to now?


Quoting autodidact:

no, this refers to the 50's when the taxes were actually high.


Quoting pvtjokerus:

 I completely disagree with this.  Taxes have been climbing higher and higher for the middle class and small business and these people are hunkering down and not spending their monies like before.  Look at the holiday sales.  They were down.  Look at economic growth now.  It is down.


Quoting autodidact:

Expanding a business and hiring more people is a tax write off. No business owner uses an after tax write off to expand a business, but uses it to buy a boat, second house, send the kids to college, play in the stock market, or buy real estate, that inflates prices for everyone else. But when taxes were high businesses invested in themselves and used their money productively in the economy, hiring more people. Investing in their business increased the worth of that business when sold at a low capital gains rate.

http://www.thomhartmann.com/users/dan4liberty/blog/2012/08/californias-golden-age-high-taxes-and-greatest-growth




















Farmlady09
by Silver Member on Feb. 9, 2013 at 6:26 PM
2 moms liked this

 That money was already taxed several times already ~ and should NOT be taxed again just because the person who earned it died. That's a crock. Uncle Sammy needs to stop being so greedy and learn all about budgeting and living within his means just like every other American.


Quoting Clairwil:

Quoting Farmlady09:

And don't go whimpering about people who were born into wealthy families and claim they didn't earn it. Their family did. That's like saying the neighbor had really pretty china and when they die they should give it to you because you like it ~ instead of giving it to their own children.

Someone who receives a $5,000,000 trust fund upon turning 18 didn't earn it.   I'm not sure you could even say that they 'deserve' it.

Their parents earned that $5,000,000 and, to a certain extent, it is good to allow those parents to give it to whomever the parents want to give it to.    And, just as any other transaction which transfers money between people, it should be taxed.


 

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