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In turn, the next generation sees how their parents blew all the money and doubles up working hard to make their own.
Free market works...
Or, they could just make up statistics that are complete crap.
Reality is, a person born in to the top income quintile has less then a 5% chance of ever falling out of the top two income quintiles in their lifetime. It is a rare and extraordinary feat when a child of wealth, not only is useless in his own right, but is able to completely squander an entire fortune.
Only problem is that, very few rich kids are ever "useless". They account for a majority of seats filled at the Ivy League schools. Medical and Law schools are populated by mostly kids from households that already were above average to begin with.
In ten years, 70% of all insanely rich people were still rich. Only 12.9% moved to some income quintile under the first two. In fact, the richest 1% had 42.6% of the exact same people 10 years later, and the top 10% 82.7% same people.
Now, keep in mind, this is an income table. So, most of those are almost certainly retirees, however. I am guessing maybe 5% of the 12.9% are actually people who squandered money. Which is likely generous. The majority of people in the top income quintile are passive business and asset owners, and it is not likely their income will just stop when they "retire".
On the other hand, if you check out the lowest income quintile, they have almost an identical chance (15.20%) of moving in to one of the top two income quintiles, as a wealthy person has of falling out of the top two. Both are pretty much not going to happen.
In fact, if you check out any income quintile, an overwhelming amount of movement is done to the immediate income quintiles surrounding that particuliar quintile.
You cant make this up. The rich are not giving up their wealth. Its just piling up, and will be shipped off to their kids. That is why the gini index has exploded over the past 30 years. However, we havent remotely seen the worst. In 20 years, without significant intervention, we will have a gini index identical to third world state run capitalisms and banana republics. The children of the wealthy will continue filtering off the wealth from the children of the poor for generations.
I'd also be interested in seeing research into the percentage of Silent Generation wealth that can be attributed to things like generous private-sector pensions - something which no longer really exists.
That particular generation came of age during an economically-unique time when all sorts of labor was in very high demand, leading to corporate bidding wars for employees in the forms of pensions, healthcare plans, salaries, and so on.
That model has mostly been eviscerated over the past few decades. There is no shortage of "general labor." Those days are finished. So the question is - aside from something like inheritance - how do we expect modern generations of younger workers to accumulate capital in the same way that members of the "millionaires next door" generation were able to accumulate capital? Especially now that so many of them start out with loan debts.
It seems either out-of-touch or outright imperious to apply the same expectations.
There are no statistics supporting this fluff. However, there ARE statistics showing that children born in to the top quintile rarely ever fall lower then the next highest quintile in their complete lifetimes.
In fact, the two most important factors affecting a persons income mobility are their initial starting point on the distribution, and marital status. In other words, being born in to wealth, and gold digging someone born in to wealth are the two most effective ways to bounce.
The "free market" does not naturally distribute anything. The wealthy are the owners of capital, and therefore possess the means to continously generate wealth. In addition, the children of the wealthy are far more likely to have a priviledged childhood and be provided the top educational opportunities, which often pushes them in to the top tax brackets independent of their parents wealth.
In reality, there are very few cases of worthless ignorant children blowing fortunes. Normally, if a kid proves to be significantly inept, the parents will set the capital holdings up in competent hands, and the kids live off trust funds.
The Gini index NEVER naturally goes down for any significant time period (although large changes in the stock market can do damage as well as large minimum wage hikes, or tax policy). Significant cultural changes must be made, or a complete political shake up is neccessary.
Although the rich often pay less as a percentage then middle income people.
Thats fine, how about we start with the corporate welfare. The first things we can cut are the no bid defense contracts. Then, we can cut out the farm subsidies for huge corporate farms. Then, we can stop dumping in medicare and medicaid money in to the bloated medical complex.
The only people who went to school 5 years longer then me would be doctors.
Warren Buffett pays less because 99.9% of his income is passive income (in the form of dividends and interest). These two forms of income are taxed at extremely low rates. I'm talking about a person that WORKS for his income. Somebody that goes to work for 10+ hrs a day and brings home a 6-7 figure salary. That person is taxed to near 50% (once you include federal, state, social security, etc tax) and this person usually has little to write off unless they are a business owner but a Dr. or Lawyer wouldn't have those kind of write-offs. You're right, Warren Buffett should be paying more on his income than the poor but that's because of how the passive income tax laws are written (which will be changed under Obama, so it won't be an issue for you anymore). I was referring to the income tax.
Also, in the book "the Millionaire Next Door," they conducted the largest study every conducted on millionaires to back those statistics, so the stats DO exist. Most of the self-made millionaires in this country only went to a state college (if they graduated college at all) and worked and saved and only make about $90,000/yr from their job. But due to their hard work they send their kids to private schools and the best colleges, so the kids grow up living the high life (not realizing the sacrificed their parents took to get to where they are) and they squander the wealth. Of course those offspring never suffer but the grandkids of the self-made millionaire will have to start from scratch and work hard like their grandparents did because their parents were too busy living the high life and spending their inheritance. This books statistics actually back my first hand experience so I know that it isn't just numbers but actually happens.
1. Your article has nothing to do with generation X and Y
2. When talking about billionaires though, there are 6 billionaires under 40, all of them inherited either their entire fortune or massive capital assets outside of the Google founders, Sergey Brin and Larry Page, and John Arnold, who was a commodities trading whiz and parlayed that in to a hedge fund. Out of the ten youngest billionaires, not a single one came from a working class background.
3. Speaking of generation X and Y, why dont you take a look at the companies that are controlled by many of those people on the billionaires list.....you will see that their children are infested in leadership positions, and will likely inherit controlling interests, like Carlos Slims kids.
Also, in the book "the Millionaire Next Door," they conducted the largest study every conducted on millionaires to back those statistics, so the stats DO exist. Most of the self-made millionaires in this country only went to a state college (if they graduated college at all) and worked and saved and only make about $90,000/yr from their job.
I would not doubt this. The Silent Generation and very early boomers grew up in a much easier time. One did not need a doctoral degree to flip burgers, as we are headed now. Most all of the jobs that now require a bachelors degree, and will require advanced degrees within a couple decades, were performed just fine with a high school education 40-50 years ago. There were very few huge monopolies or oligopolies, fewer laws protecting businesses, a strong manufacturing base, and plenty of room to create any number of endeavors.
What has happened to the USA is much bigger then "money cycles". The USA has approached mature capitalism. That is the point in which the wealthy have separated themselves so far from the pack that they merge with the government, and create the oligarchic plutocracy we now all know and love. Generation X and Y have the priviledge of being the first mules to endure the cess pool. If the families of generation X and Y were not wealthy themselves, younger generation X, generation Y kids, and the generation beginning in 2001, likely face a very bleak outlook where they will likely never move beyond the second income quintile, even with advanced education. They will also likely face crushing unemployment their whole entire lives, as people without any formal education, which will still be the majority, will have a hard time finding any job at all. The oligarchic plutocracy will bend the laws enough to allow the low wage service and support jobs the serfs are battling over, to be farmed in or out to people who will accept living at a dirt poor economic level. Competition to mow the lawns of the capitalist pig will be ruthless and cutthroat.
By the way, the statistics you keep quoting that I think are bull are the percentages of people that inherit money and squander it. That simply is not true. At best that number is probably around 5-10%, not 67%.
Quote:
Originally Posted by hskrfan2187
But due to their hard work they send their kids to private schools and the best colleges, so the kids grow up living the high life (not realizing the sacrificed their parents took to get to where they are) and they squander the wealth.
This is a load of crap. On average, children of the wealthy have higher standardized intellegence, better connections, higher education levels and a better grasp of money then the average kid. Even if a rich kid had limited ability to manage their own money, family connections would allow him to never have to worry about that.
Quote:
Originally Posted by hskrfan2187
Of course those offspring never suffer but the grandkids of the self-made millionaire will have to start from scratch and work hard like their grandparents did because their parents were too busy living the high life and spending their inheritance. This books statistics actually back my first hand experience so I know that it isn't just numbers but actually happens.
I doubt the Millionaire Next Door has any statistics backing up your claims that the boomers and generation Xers squandered inherited fortunes at a clip of 67%.
The few really rich people I know obtained their initial wealth through a convenient inheritance of a few million dollars. Being reasonably intelligent people they reinvested the wealth and have become even wealthier. Their kids will start out with good educations and a lot of money to invest. Lucky them.
Maybe we could increase the number of wealthy people by taxing 100% of the inheritances over 5 million dollars and distribute the wealth to the really poor as money to be invested for their fortune. With a 5 million inheritance most level headed people could amass a considerable fortune.
Greg, are you joking or serious about the 100% tax on $5M+ inheritance?
It's not fair at all for the government to take all every cent of someone's money over a certain amount, whether that amount be $50K, $500K, $5M, or $500M. Did bureaucrats in Washington do anything to earn that money? No. If the intent of the parents was that their children inherit their estate at the time of death, that's how it should stay. While I never received a $5M inheritance, I'm not going to try to take from those who did.
Second, it would never work. If one were to know that they were going to be taxed at a 100% rate on their estate over x dollars, why would they leave it, for the government's taking in the first place? If the money was just going to vanish anyway, the estate holder would donate it all to charity or spend it on luxuries and vacations far before just leaving it for the taking.
[quote=hskrfan2187;14048811]You need not worry about the people that have already accumulated wealth, but worry about yourself and your kids, because now the government is making it much harder to succeed./quote]
This is really the most critical part of your post that people just don't seem to "get". People should be more concerned about what is going on in their own lives and stop obsessing over whether or not the the wealthy are suffering as well.
Of course the wealthy are "worried" ... they are always worried about their money.
I would not doubt this. The Silent Generation and very early boomers grew up in a much easier time. One did not need a doctoral degree to flip burgers, as we are headed now. Most all of the jobs that now require a bachelors degree, and will require advanced degrees within a couple decades, were performed just fine with a high school education 40-50 years ago. There were very few huge monopolies or oligopolies, fewer laws protecting businesses, a strong manufacturing base, and plenty of room to create any number of endeavors.
What has happened to the USA is much bigger then "money cycles". The USA has approached mature capitalism. That is the point in which the wealthy have separated themselves so far from the pack that they merge with the government, and create the oligarchic plutocracy we now all know and love. Generation X and Y have the priviledge of being the first mules to endure the cess pool. If the families of generation X and Y were not wealthy themselves, younger generation X, generation Y kids, and the generation beginning in 2001, likely face a very bleak outlook where they will likely never move beyond the second income quintile, even with advanced education. They will also likely face crushing unemployment their whole entire lives, as people without any formal education, which will still be the majority, will have a hard time finding any job at all. The oligarchic plutocracy will bend the laws enough to allow the low wage service and support jobs the serfs are battling over, to be farmed in or out to people who will accept living at a dirt poor economic level. Competition to mow the lawns of the capitalist pig will be ruthless and cutthroat.
By the way, the statistics you keep quoting that I think are bull are the percentages of people that inherit money and squander it. That simply is not true. At best that number is probably around 5-10%, not 67%.
This is a load of crap. On average, children of the wealthy have higher standardized intellegence, better connections, higher education levels and a better grasp of money then the average kid. Even if a rich kid had limited ability to manage their own money, family connections would allow him to never have to worry about that.
I doubt the Millionaire Next Door has any statistics backing up your claims that the boomers and generation Xers squandered inherited fortunes at a clip of 67%.
No company is merging with the government because they got too big. The largest retailer in the world is only priced near a 200billion dollars, yet the government spends TRILLIONS/year. It's not that companies have gotten so big (as a percentage basis) it's that due to inflation and larger populations these companies are now worth more...but as a percentage base they still take up the same amount of room in the economy its just now they have more clients (larger population) and they are worth more (partly due to more clients but also due to inflation..i.e. $1 today was only worth $.05 when we initiated the federal reserved in 1913).
You mentioned that so many of these jobs now require further education when they were performed just fine (in the past) with just a high school diploma. This IS VERY TRUE, and it's the largest reason the government needs to get out of the free market. The government had this idea that they wanted "education for everybody," (and Obama expanded on that idea by sneaking in the student loan bill with healthcare). The government GUARANTEES student loans. Do you know what that means? It means that now anybody, with no capital, no assets, can walk into a bank and get a student loan to get an education because the bank doesn't care if they can't pay them back due to the gov't backing the loan...sounds great right? Here's the problem, now you have a huge jump in people going to college to get bachelors degrees (this is the #1 reason that tuition prices have outpaced inflation, it's too bad Obama doesn't understand this concept because he never would have wanted that student loan bill passed if he did). As soon as demand outpaces supply you get increased prices, and that's exactly what has happened (and it will happen to an even greater extent thanks to Obamas "if you don't have it paid after 25 years its free" student loan plan). So now we have all these people getting bachelors degrees but there aren't enough jobs for them...so what do we do? Make it harder to get jobs that were, in the past, done by those with a high school diploma. Now you must have a bachelors degree to get that job.
It's amazing to me that nobody else can see this. The free market can't cause prices to outpace inflation and wage increases, because then nobody would pay. If demand drops, prices fall...that's basic economics. So when people complain about tuition prices going up so fast you HAVE to realize that the demand is forcing it up (again basic economics). But if its so expensive how is there demand for it? Easy money in the form of gov't guaranteed student loans. If the gov't didn't guarantee them, the banks wouldn't lend money to a kid that wants to get his "music" major or "business administration" major...because they won't pay him enough to repay the loan. The banks WOULD loan money to those planning on going to med school, law school, engineering, etc because the job salary will be enough to pay back the loan. But because the bank doesn't have to worry about the loan being repaid they will loan to any student that wants a loan. If the government got out of the free market, enrollment would be way down in colleges and over time the tuition prices would dramatically drop to entice more people to come to college (again basic economics). At that point why would you even need a student loan? You could work full-time, go to school 1/2 to 3/4 time and pay your way through school without a loan...but thanks to these gov't guaranteed loans, that the banks lend out, unless your parents are rich every kid must now get a loan.
Now, on to this statement: "This is a load of crap. On average, children of the wealthy have higher standardized intellegence, better connections, higher education levels and a better grasp of money then the average kid. Even if a rich kid had limited ability to manage their own money, family connections would allow him to never have to worry about that." You are right about the first part but wrong about the second part. Where do you come up with these assumptions? I actually derive mine through opening my eyes and research statistics, where do you get these from? The average child of a millionaire is more likely to grow up and be a Dr., Lawyer, etc (but news flash, the average millionaire in this country doesn't have one of these flashy jobs). These people tend to MAKE a lot at their job but have little to no wealth because their salary goes to pay for their fancy car, vacations, fancy house, vacation house, etc. Again, the statistics show it, and if you open your eyes to the world around you it would become extremely obvious to you.
You are right about one thing, I'm sure its very unlikely that a child of a millionaire (or grand child) would ever fall below the poverty line...most likely they just fall back into the middle class. I can agree with you on that, but this idea that somehow because they were born into money that they just stay in the top 5% of the population forever is ridiculous. Especially the grand children of those self-made millionaires.
You see the self-made millionaire in this country didn't like to spend money they liked to work hard and save/invest their money. The children of these self-made millionaires like to spend the money their parents EARNED (and if they have enough earned money the grand-children grow up this same way). That way of living doesn't BUILD wealth it SQUANDERS it. Eventually the money runs out.
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