An unfiltered view from the top of the pyramid

August 4, 2011 11:35 AM

In an investment manager's view on the top 1% - referring to the richest Americans by wealth and income - we learn that one needs $1.2 million in net worth to barely slip in the door of the top 1%. But that's just a start: the real power and influence in the U.S., the author argues, resides in the top 0.1%. You can guess who you'll find there: bankers and large-cap CEOs. Relevant quotes include...

"Folks in the top 0.1% come from many backgrounds but it's infrequent to meet one whose wealth wasn't acquired through direct or indirect participation in the financial and banking industries."

"Recently, I spoke with a younger client who retired from a major investment bank in her early thirties, net worth around $8 million. ... I asked if her colleagues talked about or understood how much damage was created in the broader economy from their activities. Her answer was that no one talks about it in public but almost all understood and were unbelievably cynical, hoping to exit the system when they became rich enough."

"Most of the serious economic damage the U.S. is struggling with today was done by the top 0.1% and they benefited greatly from it."

posted by mark7570 (115 comments total)

Shocked-face: ENGAGE!
posted by slater at 11:38 AM on August 4, 2011 [5 favorites]

"...no one talks about it in public but almost all understood and were unbelievably cynical, hoping to exit the system when they became rich enough."

Fuck you, getting mine.
posted by brand-gnu at 11:39 AM on August 4, 2011 [4 favorites]

Getting mine fucking you, you mean.
posted by nickmark at 11:40 AM on August 4, 2011 [29 favorites]

If there was a "rich enough," we wouldn't be in half the mess we're in now.
posted by griphus at 11:40 AM on August 4, 2011 [5 favorites]

Pitchforks and torches: the new growth industry!
posted by mondo dentro at 11:41 AM on August 4, 2011 [13 favorites]

I can't speak for the financial industry, but I think many wealthy people tend not to talk openly about wealth because it's gauche. Also, that talking about money with friends who don't have money leads to envy and weirdness with some of your friends, so why not talk about something else.
posted by zippy at 11:45 AM on August 4, 2011

What the HN discussion, of course, missed is the connection between the stock options that make internet/tech millionaires/billionaires and the wholesale "financialization" of the US economy. They "grumble" that this investment adviser sees getting paid in stock as part of the paper economy.

It's nicer to think that these huge stock valuations are somehow the natural choices of a free market rather than a rigged game. But, in the end, it's to everyone's benefit if you work for the rest of your productive life rather than 'retiring' at 25... and then of course, the number of people who get to be Zuckerberg is vanishingly small: it's a rabbit for all you coding greyhounds to chase.
posted by ennui.bz at 11:45 AM on August 4, 2011 [2 favorites]

The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well. Everyone's tax situation is, of course, a little different. On earned income in this group, we can figure somewhere around 25% to 30% of total pre-tax income will go to Federal, State, and Social Security taxes,

I am good with these levels. Just remove EVERY SINGLE DEDUCTION and make is a straight-up flat tax on income.

Of course that kind of money would buy a lot of Citizen's United free speech.
posted by three blind mice at 11:45 AM on August 4, 2011 [2 favorites]

"it's infrequent to meet one whose wealth wasn't acquired through direct or indirect participation in the financial and banking industries."

Yeah well you can suck a big fat dick too, mister "investment manager" sitting over there in the corner carving your own fucking slice while pretending you're not part of the problem.
posted by dersins at 11:46 AM on August 4, 2011 [3 favorites]

Can I ask a serious question? Is there news in any of this? Like what's the point of this other than "Grar kill the rich". Yes the vast majority of the wealth of the top .1% comes from asset appreciation, not earned income.
posted by JPD at 11:47 AM on August 4, 2011 [2 favorites]

Just remove EVERY SINGLE DEDUCTION and make is a straight-up flat tax on income.

The flat tax idea is the best one the rich ever had for lowering their own taxes at your expense.
posted by DU at 11:48 AM on August 4, 2011 [55 favorites]

Well my takaway from this is what I always kinda thought, the lower range of the top 1%, the 250-500k people, are mostly trained professionals, doctors, lawyers and are mostly performing a valuable service. I don't begrudge a neurosurgeon her 400k. They certainly aren't pitchfork worthy. It is kinda unfair when they get lumped in with 7 figure hedge fund guys. Which is why I don't usually comment on the "grar 250K, filthy capatalist pig" debates.
posted by Ad hominem at 11:50 AM on August 4, 2011 [19 favorites]

Can I ask a serious question? Is there news in any of this? Like what's the point of this other than "Grar kill the rich". Yes the vast majority of the wealth of the top .1% comes from asset appreciation, not earned income.

It's "man bites dog" because it's purportedly coming from an investment adviser.... "man bites dog" is always news.

Yes the vast majority of the wealth of the top .1% comes from asset appreciation, not earned income.

It may seem obvious to you, but if it were obvious to everyone the politics in this country would be very different. The message of this essay is that if you work hard doing things that are useful to society, the best you can get is the 99.5% percentile (and arguably that). The converse to that is that the people in the top 5% aren't doing much of anything useful for anyone other than themselves... which would be nothing coming from your streetcorner socialist but... man bites dog.
posted by ennui.bz at 11:50 AM on August 4, 2011 [5 favorites]

Can I ask a serious question? Is there news in any of this?

No, just another note in the endless wank-fest.
posted by solistrato at 11:50 AM on August 4, 2011 [1 favorite]

Seriously. Did you read the article, threeblindmice? The truly wealthy aren't that way because they have high salaries.
posted by dersins at 11:51 AM on August 4, 2011

On earned income in this group, we can figure somewhere around 25% to 30% of total pre-tax income will go to Federal, State, and Social Security taxes

This is not a complaint - the number is actually higher than that. Especially if you live in a high-tax city and state.
posted by JPD at 11:51 AM on August 4, 2011 [2 favorites]

Best idea for a reality show: Top 1% vs. 1%'ers
posted by wcfields at 11:51 AM on August 4, 2011 [18 favorites]

sorry, top .5%... not 5%.
posted by ennui.bz at 11:52 AM on August 4, 2011

Also, that talking about money with friends who don't have money leads to envy and weirdness...

By "envy and weirdness" do you mean "torches and pitchforks?:
posted by Stagger Lee at 11:53 AM on August 4, 2011 [1 favorite]

Like what's the point of this other than "Grar kill the rich"

It's not all "kill the rich," you know. There's also "take their shit". Which is really the good part.
posted by Hoopo at 11:53 AM on August 4, 2011 [22 favorites]

but its sort of inevitable that because of the compounding effect the richest people will always generate the bulk of their income from returns on capital rather than returns on their labor. That's unavoidable. I mean you make the same statement about the top .5% of any countries income distribution. The issue isn't how that money gets made, its how that money gets taxed.
posted by JPD at 11:57 AM on August 4, 2011 [3 favorites]

The truly wealthy aren't that way because they have high salaries.

And yet, didn't we have an article posted here some months ago, in which this same small group of people firmly believed themselves to have risen to their level of wealth due to merit?
posted by LN at 11:58 AM on August 4, 2011 [2 favorites]

To balance the thread, here's a pretty picture of unemployment by state
posted by infini at 11:59 AM on August 4, 2011 [2 favorites]

Available data isn't exact. but a family enters the top 1% or so today with somewhere around $300k to $400k in pre-tax income and over $1.2M in net worth.

I'm having trouble with the idea that $400k pre-tax income only equates to a net worth of $1.2M. That doesn't make much sense.

Where does a family with a significantly lower income but with a net worth over $1.2M fit?
posted by trueluk at 12:00 PM on August 4, 2011

I heard that in the top 0.1% there's four or five guys known as the .0001%ers who have polar bear butlers and shoes made of awesome.

No, for serious.
posted by Bathtub Bobsled at 12:02 PM on August 4, 2011 [2 favorites]

The issue isn't how that money gets made, its how that money gets taxed.

But those two things are intertwined right?

That's unavoidable.

When you frame the problem in absolutes, it becomes unsolvable... and you either become a marxist or a hedge fund manager. But the problem is one of scale: if the top .5% dwarfs the rest of the distribution, the money=power feedback loop distorts the whole system.
posted by ennui.bz at 12:02 PM on August 4, 2011 [4 favorites]

I'm having trouble with the idea that $400k pre-tax income only equates to a net worth of $1.2M. That doesn't make much sense.

It makes perfect sense when you factor mortgages and other debts into net worth.
posted by dersins at 12:04 PM on August 4, 2011

And yet, didn't we have an article posted here some months ago, in which this same small group of people firmly believed themselves to have risen to their level of wealth due to merit?

I rub shoulders with a few incredibly rich people, and if their attitudes are typical, then the rich absolutely see themselves that way.

The problem is not that some people are crazy-rich. Good for them. It's that we've let them into the rule-making process. The same self-serving attitude that made them rich has helped them make the whole damn system self-serving, too .The takeaway for me was the last paragraph:


I could go on and on, but the bottom line is this: A highly complex and largely discrete set of laws and exemptions from laws has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules. I am not optimistic.
posted by Benny Andajetz at 12:05 PM on August 4, 2011 [32 favorites]

and then of course, the number of people who get to be Zuckerberg is vanishingly small: it's a rabbit for all you coding greyhounds to chase.

Yeah, I think it is regarded as a truism that it is impossible to make over 250k as a programmer unless you get equity in some way or do HFT development. So yeah, every developer who wants to make money is going to jump from startum to startup.

I heard that in the top 0.1% there's four or five guys known as the .0001%ers who have polar bear butlers and shoes made of awesome.

Those are the goddamn stock-trading tigers.
posted by Ad hominem at 12:06 PM on August 4, 2011 [8 favorites]

When you frame the problem in absolutes, it becomes unsolvable... and you either become a marxist or a hedge fund manager. But the problem is one of scale: if the top .5% dwarfs the rest of the distribution, the money=power feedback loop distorts the whole system.

no. you misinterpret what I mean. you could argue that the relative wealth of the .05% in a fairer society would be less multiples of the mean than it is in the US, but that .05% would still generate their income from investment returns rather than their labors. Saying that doesn't make you a hedge fund manager.

Returns to labor don't compound, returns to investment do. Simple as that.
posted by JPD at 12:06 PM on August 4, 2011 [1 favorite]

shoes made of awesome

As long as it's not conflict awesome, I suppose that's okay.
posted by Mister Moofoo at 12:10 PM on August 4, 2011 [8 favorites]

But returns to labor do compound, in a less direct sense, in that returns to labor help create a more verdant and robust economic base overall. More and broader demand driving consumption is a good thing for real investment; not necessarily for paper-based investment strategies, as those depend on keeping returns bottled up somewhere in the financial markets rather than cycling them back through the real economy into actual productive activities.
posted by saulgoodman at 12:11 PM on August 4, 2011 [3 favorites]

From the article:

> An income of $190k post tax or $15.8k per month will certainly buy a nice lifestyle but is far from rich.

From Talmud scholar Ben Zoma: if a man is satisfied with his portion, then he is rich.

Conclusion: I am richer than the shit head who wrote this article!
posted by bukvich at 12:13 PM on August 4, 2011 [9 favorites]

You are mis-interpreting what I meant by returns to labor not compounding, and I certainly wasn't making an argument that income generated from investment was superior to income generated from labor.
posted by JPD at 12:14 PM on August 4, 2011

But the problem is one of scale: if the top .5% dwarfs the rest of the distribution, the money=power feedback loop distorts the whole system.

I agree with this. I've always wondered why this sort of system theoretic description of the problem makes people happy who otherwise hate class politics. For me, it is a good technical description of what class warfare is all about. The idea that "marxists" all want the income distribution to be flat is a total red herring. It's all about how steep the explosion of wealth above 1% is: just a small change in the transition curve from near zero slope to near infinite slope (that happens near the top percentile) can create or destroy the middle class.
posted by mondo dentro at 12:14 PM on August 4, 2011 [5 favorites]

saul, that may be true, but JPD seems to be talking about the returns to the owner of the capital or the provider of the labor. The returns to labor you listed go to society at large, not the worker, where the capitalist gets the compounded returns herself along with the societal externalities.
posted by Aizkolari at 12:15 PM on August 4, 2011 [2 favorites]

Fuck killing/eating the rich. Just secede from them.

Secede from the rich.
posted by Eideteker at 12:20 PM on August 4, 2011 [1 favorite]

By "envy and weirdness" do you mean "torches and pitchforks?

Not unless you live in a castle and attempt to reanimate the dead.

No, I think it's the same feeling that keeps, say, developers at tech companies from discussing their salaries with co-workers.
posted by zippy at 12:27 PM on August 4, 2011 [1 favorite]

From The Economist, a nice summary of our wealth distribution:

Jan Pen, a Dutch economist who died last year, came up with a striking way to picture inequality. Imagine people’s height being proportional to their income, so that someone with an average income is of average height. Now imagine that the entire adult population of America is walking past you in a single hour, in ascending order of income.

The first passers-by, the owners of loss-making businesses, are invisible: their heads are below ground. Then come the jobless and the working poor, who are midgets. After half an hour the strollers are still only waist-high, since America’s median income is only half the mean. It takes nearly 45 minutes before normal-sized people appear. But then, in the final minutes, giants thunder by. With six minutes to go they are 12 feet tall. When the 400 highest earners walk by, right at the end, each is more than two miles tall.

posted by benzenedream at 12:27 PM on August 4, 2011 [63 favorites]

But returns to labor do compound, in a less direct sense ... paper-based investment strategies ... depend on keeping returns bottled up somewhere in the financial markets rather than cycling them back through the real economy into actual productive activities.

saulgoodman: Isn't this an application of (or maybe better, a corallary to) "the tragedy of the commons"? Wealth (assets, not just money) that is broadly distributed is not perceived as a good--it's taken for granted, as if it was part of Nature, and not perceived at all. Then it's allowed to dwindle in the face of attacks by those who either have or desire concentrated wealth.

This is happening with our entire middle class. Many of the Tea Partiers (and their fellow travelling "independent" voters) think that the society of post WWII America is some sort of robust attractor for civilization. It isn't. The Sudan or Afghanistan is a much better example of the robust attractor.
posted by mondo dentro at 12:28 PM on August 4, 2011 [1 favorite]

Secede from the rich.

This only makes sense if we use something for money other than what they use for money.
posted by adamdschneider at 12:28 PM on August 4, 2011

I'm having trouble with the idea that $400k pre-tax income only equates to a net worth of $1.2M. That doesn't make much sense.

I'm not too surprised. Significant school debt x 2 + a hefty mortgage + hefty property taxes = slowly growing net worth.
posted by smackfu at 12:30 PM on August 4, 2011

You are mis-interpreting what I meant by returns to labor not compounding,

Well, I take it you meant literally that investment returns are compounded, right? I get that literally the accounting returns on labor don't compound the way investment returns do, if that's the point, but when it comes to the real economic value of investments in labor, it seems to me there are benefits returned to everyone that dwarf the apparent value of those investment returns. But those returns aren't as measurable.

On preview, mondo dentro seems to get what I'm trying to say.

No, I think it's the same feeling that keeps, say, developers at tech companies from discussing their salaries with co-workers.

You have "a feeling" that does that? A lot of companies make that "feeling" a formal policy and a condition of continuing employment.
posted by saulgoodman at 12:30 PM on August 4, 2011

How about gold? HAHAHA JUST KIDDING!
posted by entropicamericana at 12:30 PM on August 4, 2011 [1 favorite]

saul - that's a fine point, but not really germane to a discussion of why the richest segment of society tends to be the capital owners.

we aren't disagreeing so much as talking past one another.
posted by JPD at 12:32 PM on August 4, 2011

talking about money with friends who don't have money leads to envy and weirdness with some of your friends, so why not talk about something else.

Generally speaking, people associate with people from about the same socio-economic background. In other words, affluent folks do not hang around with less affluent folks, because their worldview is quite different.
posted by KokuRyu at 12:39 PM on August 4, 2011

I heard that in the top 0.1% there's four or five guys known as the .0001%ers who have polar bear butlers

MR. FROSTINGSWORTH MUST INSIST THAT YOU REFER TO HIM AS A “MAJORDOMO”.
posted by Shepherd at 12:39 PM on August 4, 2011 [11 favorites]

Perhaps the richest segment of society tend to be capital owners in a capitalist economy because that is how capitalist economies are set up, hmm?
posted by eviemath at 12:41 PM on August 4, 2011 [2 favorites]

The flat tax idea

I like a flat tax but at raised at one about, oh, 65 degrees.

Then there's that luxury tax Monopoly has. More than one house is a luxury.

Speaking of housing: new rules: noone gets to buy a 2nd house until everybody that -wants one- has one. Then, 2nd houses can only be purchased by individuals; no flipping (donations are allowed) and no 3rd houses. Finally: if you loan a mortgage, you keep the mortgage until it'd paid off ... if it's such a good risk you should want to own it.

There. Now, where's our FDR?
posted by Twang at 12:42 PM on August 4, 2011

I think you're probably right, JPD. But I do think it's germane to the topic because part of the reason I think we have these problems now is that capital owners, encouraged by the financial services sector, are taking a much narrower view of what constitutes value and of what constitutes a meaningful return on investment these days, by focusing exclusively on accounting returns. There's been a cultural shift among the economic elite in the US and that cultural shift changes the way the economic realities play out.
posted by saulgoodman at 12:43 PM on August 4, 2011 [3 favorites]

Oh, I forgot, on "everybody that -wants one- has one" ... that would actually be achievable if developers were required to build a cottage for every house over 1500 sq. ft. Millions of people can manage in 700 sq. ft. apts, just as they used to manage in 700 sq.ft. cottages that they owned.
posted by Twang at 12:45 PM on August 4, 2011 [1 favorite]

Everyone is equal, it's just that some are more equal than others.
posted by blue_beetle at 12:46 PM on August 4, 2011

Speaking of housing: new rules: noone gets to buy a 2nd house until everybody that -wants one- has one. Then, 2nd houses can only be purchased by individuals; no flipping (donations are allowed) and no 3rd houses.

So, no incentive to get married in this scheme, eh?
posted by smackfu at 12:48 PM on August 4, 2011

solistrato: "Can I ask a serious question? Is there news in any of this?

No, just another note in the endless wank-fest."

QUIET! I'm jerkin' it over here! Besides, if we didn't have these posts, it means we'd have to go out in the streets and do stuff.
posted by symbioid at 12:50 PM on August 4, 2011 [2 favorites]

You have "a feeling" that does that? A lot of companies make that "feeling" a formal policy and a condition of continuing employment.

I can only speak from my experience in tech, but developers at companies I've worked at rarely talk about salaries, whether or not they're at the same company. I don't think these people would care about company policy one way or the other (though I don't think I've ever been at a company where talking about salaries was spelled out in the employment manual - most startups don't have one). I think it's the case that each developer thinks they got a better deal, and fears they got a worse one, than their neighbors, and doesn't want to bring that potential conflict up.
posted by zippy at 12:52 PM on August 4, 2011

In other words, affluent folks do not hang around with less affluent folks, because their worldview is quite different.

Indeed. When your worldview is such that you believe that your affluence is entirely due to your own hard work, intelligence, and determination, rather than luck, circumstance, and class privilege, things start to get uncomfortable and you want to run away.
posted by Jon_Evil at 12:53 PM on August 4, 2011 [1 favorite]

Speaking of housing: new rules: noone gets to buy a 2nd house until everybody that -wants one- has one. Then, 2nd houses can only be purchased by individuals; no flipping (donations are allowed) and no 3rd houses.

Awesome, does that mean we're abolishing renting, too?
posted by lydhre at 12:54 PM on August 4, 2011 [2 favorites]

To me the bizzarest thing about the politics of the uber rich is that they seem to desperately want to dismantle the peaceful, safe, well-infrastructured, free society which has been CRUCIAL to the development of the US economic powerhouse which has made it possible for such a large, successful class of uber rich to exist!

It's like watching an infant throttle its mother even as it suckles at her teat.
posted by Salvor Hardin at 12:56 PM on August 4, 2011 [47 favorites]

There's always money in the torch and pitchfork stand.
posted by loquacious at 12:59 PM on August 4, 2011 [4 favorites]

I could have chosen a better phrase than "these people," here not meaning "the Other" but "the set of people in this class" of which I happen to be a member.
posted by zippy at 1:00 PM on August 4, 2011

I can only speak from my experience in tech, but developers at companies I've worked at rarely talk about salaries, whether or not they're at the same company. I don't think these people would care about company policy one way or the other (though I don't think I've ever been at a company where talking about salaries was spelled out in the employment manual - most startups don't have one).

Interestingly enough, it's apparently illegal, under Federal law, to bar employees from discussing their salaries with one another. And yet, employee manuals in Florida (in my experience) frequently include policies against such disclosures.
posted by saulgoodman at 1:02 PM on August 4, 2011 [2 favorites]

I'm having trouble with the idea that $400k pre-tax income only equates to a net worth of $1.2M. That doesn't make much sense.

$300K or $400K is not that huge amount of money for a family, when you start getting to that income level at your late 30s. Often income gets to that level pretty slowly and at the same time having children, graduate school loans, longer hours for childcare for two income families, etc. increase the cost base quite a bit.

It means pretty mundane middle American life style with minivan and used car, sub $300k house and whole lot of juggling things around to keep schedules and finances afloat.
posted by zeikka at 1:05 PM on August 4, 2011

There are actually several articles on the blog this comes from that are pretty good. I especially enjoyed the one about no conspiracy getting made at the Bohemian Grove. This article on the richest half of a percent? Not that great.
posted by bukvich at 1:05 PM on August 4, 2011 [1 favorite]

zeikka: "$300K or $400K is not that huge amount of money for a family"

I lol'd
posted by mullingitover at 1:09 PM on August 4, 2011 [28 favorites]

Meanwhile: Cable worried about poverty, not Netflix. For all the talk about competitive threats from the likes of Netflix Inc or Apple Inc, it is rising poverty among households that TV executives say is their biggest source of concern.
posted by octothorpe at 1:10 PM on August 4, 2011 [4 favorites]

$300K or $400K is not that huge amount of money for a family

You are mistaken. $300 or $400K is close to 10 times th emedian household income.
posted by Hoopo at 1:10 PM on August 4, 2011 [36 favorites]

Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%.

Sadly, the ordinary citizen (during the real estate boom anyway) was reading "The Secret" and thinking the Law of Attraction (and adjustable rate, subprime mortgages) was the key to the system.
posted by storybored at 1:11 PM on August 4, 2011 [1 favorite]

I'm having trouble with the idea that $400k pre-tax income only equates to a net worth of $1.2M. That doesn't make much sense.

There's little relation between income and net worth past a point.

It's not hard to retire as a millionaire on nice middle class salary ($80k or more, let's say), if you live within your means and save early.

On the other hand, it's not hard to spend the $250k or so post-tax you'd have on a $400k salary. Start with a $10k/month apartment in Manhattan....
posted by wildcrdj at 1:13 PM on August 4, 2011 [2 favorites]

(to be clear, I don't mean to imply that $80k is an average middle class income, thats why I said "a nice salary" --- above average, but nowhere near as rare as $400k)
posted by wildcrdj at 1:13 PM on August 4, 2011

@lydhre Awesome, does that mean we're abolishing renting, too?

Hmm. Two options: rent-to-buy is mandatory (stay there until you reach the fair market price you moved in at - with fair interest - and it's yours). Or: anyone who wants to rent so badly could of course rent any part of -the house they live in. (That's how my great-grandma survived the depression after he had a heart attack.)
posted by Twang at 1:15 PM on August 4, 2011

The difference between the top 1% and the top 0.1% is larger than the difference between the bottom 1% and top 1%. That's how outrageously rich the outrageously rich really are.

Part of this stems from a simple lack of knowledge. Which is why I believe income tax returns should be public record, as they have in most of Scandinavia. Interestingly enough, this was proposed way back in 1916, just three years after the 16th Amendment was passed.

It was defeated, not surprisingly.
posted by Civil_Disobedient at 1:16 PM on August 4, 2011 [13 favorites]

The problem is that inequality has risen dramatically: it wasn't always this way in the U.S., the extremely rich used to take a much smaller proportion of wealth and income and CEO pay used to not be so many zillions times higher than worker pay.

CEO's and finance people just keep taking a larger share and making rules to allow them to keep it than they ever used to do. They have no shame about it, they believe they deserve it and that the poor deserve to be that way, too. They think they are creating wealth, while they are making absolutely nothing of value to anyone: they think the people who do create value like doctors, researchers, teachers, and inventors are beneath them.

The financial crisis, according to them, was the fault of lending too much money to poor people to buy houses they couldn't afford: now the poor need to pay that back.

Nevermind that it was the bankers that created this situation and the bankers that were bailed out and that lending to the poor was a very tiny part of it. These bankers are good, deserving people who shouldn't have to sacrifice because they made a few mistakes. They're too important to be punished for their mistakes, punishment is for the little guys.

And so are taxes.
posted by Maias at 1:18 PM on August 4, 2011 [23 favorites]

They have no shame about it, they believe they deserve it and that the poor deserve to be that way, too.

True about the no shame (the same can be said of politicians) but among those few I've known or met, I wouldn't say that they have a Calvinist just deserts attitude so much as they have an unhealthily aggressive It-Not-Enough-That-I-Win-Others-Must-Lose attitude. The poor don't register enough to be considered deserving or not deserving.

Minor distinction of people who are more than a little unbalanced.

Nevermind that it was the bankers that created this situation

Well, with a hell of lot of help from the criminally loose money policies of the federal reserve. Appointing Alan Greenspan was a mistake. Keeping him on year after year was insane. Realistically, it is asking too much of human nature to expect the bad boys of wall street not to jump on the opportunity.
posted by IndigoJones at 2:07 PM on August 4, 2011

Pitchforks and torches: the new growth industry!

*Fills giant warehouse with pitchforks and torches, corners futures market*
posted by Devils Rancher at 2:08 PM on August 4, 2011 [2 favorites]

Metafilter: I am not optimistic
posted by Renoroc at 2:17 PM on August 4, 2011

I can't believe no one has yet used the phrase "the politics of envy".
posted by smithsmith at 2:20 PM on August 4, 2011

I can't believe no one has yet used the phrase "the politics of envy".

This is no more about the politics of envy than, say, the Declaration of Independence was.
posted by mondo dentro at 2:24 PM on August 4, 2011 [4 favorites]

The gulf in wealth between the top 1% and the top .1% may be vast, but that doesn't mean that many in the top 1% aren't fully invested in the success of the system.

The top 1% play an important rule in insulating the top .1% from criticism. For example, most people at the top of the corporate structure in say, a huge media company are solidly in the top 1%, but are nowhere near the top .1% However, unlike virtually everyone else on earth (the other 99%), the top .1% feels as though it might be reachable. Indeed, the CEO with his stock options and exorbitant salary was once 'only' in the top 1%. Let's not pretend that the top .1% have somehow rigged this system all on their own, they've had plenty of help.
posted by chaz at 2:28 PM on August 4, 2011 [2 favorites]

Appointing Alan Greenspan was a mistake. Keeping him on year after year was insane.

To be fair I don't recall his last re-appointment being the most pressing insane thing Bush did at any given point.
posted by Hoopo at 2:29 PM on August 4, 2011

I think we should develop a new monetary system and lock out these bloodthirsty parasites.
posted by clockzero at 2:52 PM on August 4, 2011

So basically we're at the end of a game of Monopoly, but we can't toss the board over in disgust and go and eat some leftover ham from Christmas day?
posted by panaceanot at 3:03 PM on August 4, 2011 [8 favorites]

It's been almost three hours and no one has posted a link to their just-completed animated film of benzenedream's description of the Dutch 'summary' of US wealth picture -- (march of the underground impoverished minions to super giantic rich beings).

I'm hoping the delay is because you are waiting for Herzog to agree to narrate.
posted by Surfurrus at 3:05 PM on August 4, 2011 [3 favorites]

"The answer is that an extreme concentration of wealth at the center of our market economy has led to a form of central planning."
John Robb
posted by dragonsi55 at 3:05 PM on August 4, 2011 [5 favorites]

Re: "it's infrequent to meet one whose wealth wasn't acquired through direct or indirect participation in the financial and banking industries.":

Am I to understand that the predictably large number of .01ers whose initial wealth (read: Monopoly money) is inherited, and who may have never worked or even "worked" in the financial or banking industries are not counted separately? (Think Sam Walton's progeny/heirs/etc.)

If anything, these chosen ones ameliorate their portfolios and bottom lines because the finanacial and banking industries work for them (when they're not eating out of their palms). And if they're conservative they just keep it all in T-Bills. Not everyone wants to wring the most out of every investment, believe it or not.

Are the born rich, whose money goes off to banks and investment houses to mate and produce scads of reproductive offspring who are conveniently shuttled among off-shore untaxable entities and parried between creative instruments, are these folks (a word I've come to hate, thank you Mr. Persident), are they lumped in with twenty-five-year olds who won the Goldman, Sachs internship lottery and retire with 8M? Because I think the true, born to the manor rich deserve, and I mean deserve special designation and separation in this sifting through of who's who in the picking apart of the mades and the mades-not.

And I think the "financial industry" is an oxymoron, to boot.
posted by emhutchinson at 3:07 PM on August 4, 2011

In other words, affluent folks do not hang around with less affluent folks, because their worldview is quite different.

In day to day life, that's actually not too bad since most of us never run into those people. But you know what really sucks about the "trickle down" of Wall Street culture? The lower level assholes who haven't made it to the big time (and probably never will since there's only so much room at the top) who are "forced" to live amongst us plebes.

Anecdata - I played in many different rec sports leagues in New York over last twenty years. I'd have to say at least 3/4 of the difficult people I encountered were young finance industry assholes who just scored their first low six figure salaries. And contrary to the popular stereotypes, I found most of the lawyers I played with to be reasonable people. The finance industry in New York just seems to attract assholes from all around the country, in addition to the locally cultivated ones. And when I say difficult people, I don't just mean people I personally didn't like, these were the guys (and on occasion girls) who everyone on the team despised. We don't manufacture much in NYC anymore, however we're still good at taking turd-like personalities, polishing them up, then exporting them to either the suburbs or other states to hatch their brood.
posted by Calloused_Foot at 3:44 PM on August 4, 2011 [3 favorites]

"it's infrequent to meet one whose wealth wasn't acquired through direct or indirect participation in the financial and banking industries."

Are we counting entrepreneurs that have taken loans from banks?
posted by gyc at 3:58 PM on August 4, 2011

To be fair I don't recall his last re-appointment being the most pressing insane thing Bush did at any given point.

It will take some time to be certain, possibly longer than I, at least, will be alive, but arguably it is up there.

But why single out Bush, by whom I assume you mean Bush two? Greenspan's tenure spanned Republican and Democrat administrations. Had Reagan or Bush one or Clinton or dumped the fellow earlier, things might well have turned out rather less bad.
posted by IndigoJones at 3:58 PM on August 4, 2011

no. you misinterpret what I mean. you could argue that the relative wealth of the .05% in a fairer society would be less multiples of the mean than it is in the US, but that .05% would still generate their income from investment returns rather than their labors. Saying that doesn't make you a hedge fund manager.

Returns to labor don't compound, returns to investment do. Simple as that.

that's a bit of a straw man. interest should be a risk premium i.e. real returns can be negative. in a perfect free market i think the real return should average to zero...

but, if you can rig the market so that the real return for a segment of industry is compounding perpetually than that industry eventually eats the whole economy... exponential growth will do that. if you believe this is the natural order of things you are either a marxist, if you think this growth will eventually become a 'catastrophe' or a hedge fund manager if you think, 'fuck you, i'm going to get mine before the collapse."

i think you will always have people living off of compounding interest just like you will always have people who are too lazy to work, but the question is whether the coupon clippers are rig the system so that their losses are minimal (tax or otherwise) or whether everyone is too lazy to work (or has too large an incentive not to work)
posted by ennui.bz at 4:17 PM on August 4, 2011 [1 favorite]

All the megalomaniac conqueror types that used to seek military and political power and create authoritarian societies that wreak havoc for everyone else don't go in for politics anymore. The glory, anymore, is simply in being rich.

The next Hitlers and Stalins won't be invading your country with armies and bombs, they will be trying to sell you something.
posted by TheRedArmy at 4:27 PM on August 4, 2011 [3 favorites]

Twang: "Speaking of housing: new rules: noone gets to buy a 2nd house until everybody that -wants one- has one. Then, 2nd houses can only be purchased by individuals; no flipping (donations are allowed) and no 3rd houses. Finally: if you loan a mortgage, you keep the mortgage until it'd paid off ... if it's such a good risk you should want to own it."

You think you're a socialist, but you're actually a sociopath.
posted by falameufilho at 4:51 PM on August 4, 2011 [3 favorites]

I picture it as a few jerks crowding into one last helicopter that takes off from the roof just as the filthy rabble gain access. And the jerks flip the bird to the baying hordes and the hordes feel sad that they're not on the helicopter.
posted by stinkycheese at 4:56 PM on August 4, 2011 [2 favorites]

But why single out Bush, by whom I assume you mean Bush two? Greenspan's tenure spanned Republican and Democrat administrations. Had Reagan or Bush one or Clinton or dumped the fellow earlier, things might well have turned out rather less bad.

I used Bush II because he was the last president to appoint Greenspan in the lead-up to this mess. As I recall during the Clinton years he was considered a super genius wizard guru champion who was responsible for the good times, too.
posted by Hoopo at 4:59 PM on August 4, 2011

"The share of total income going to the richest 1 percent of Americans peaked in both 1928 and in 2007, at over 23 percent."

Aftershock: the next economy and America's future By Robert B. Reich
posted by cseibert at 5:16 PM on August 4, 2011

From The Economist, a nice summary of our wealth distribution:

Jan Pen, a Dutch economist who died last year, came up with a striking way to picture inequality. Imagine people’s height being proportional to their income, so that someone with an average income is of average height. Now imagine that the entire adult population of America is walking past you in a single hour, in ascending order of income......

This article goes into greater detail on this analogy as well as income inequality. It's written by Clive Crook, who is IMO, one of the best columnists over at the Financial Times. A few good points from the article:

Over thirty-five years, the rise in wages and salaries in the wide middle of the income distribution was 11 percent. The rise in wages and salaries at the top of the income distribution was 617 percent.

Many commentators attribute rising American inequality to growth in profits at the expense of salaries and wages. That’s wrong: labor’s share of national income does not seem to be trending up or down. What has changed is how much of labor’s share goes to top earners.

Corporate-governance reforms that would help shareholders keep CEOs in check might do some good. If I’m skeptical, it’s partly because shareholders already have some (admittedly limited) powers, and they usually let things slide. That might change if CEO pay continues to rise.

I've long believed that we can start to bring on real change through stronger corporate governance and shareholder activism. He's right that shareholders have traditionally let things slide, but I think we are starting to see a change in this. Whether that's because these inequalities are starting to affect more and more people, including shareholders; or whether what is happening is starting to weigh on people's consciences, I don't know but I hope it's a movement that continues to grow. To all your shareholders out there, please remember to make your voice heard at shareholder meetings and vote on any proposals that come your way.

It's not everything, but it's a start.
posted by triggerfinger at 6:13 PM on August 4, 2011 [2 favorites]

Speaking of Robert Reich, here's a 2-minute video he made explaining the U.S. economic problems (hitting many of the same points as the piece linked at top).
posted by mark7570 at 6:40 PM on August 4, 2011 [1 favorite]

The next Hitlers and Stalins won't be invading your country with armies and bombs, they will be trying to sell you something.

Considering the track record of the former, I'd settle happily for more salespeople.
posted by storybored at 6:51 PM on August 4, 2011 [2 favorites]

It makes perfect sense when you factor mortgages and other debts into net worth.

Unless your mortgage is underwater, it does not change your net worth. If you borrow $1 million and buy a $1 million house, your net worth is unchanged because your house is an asset that contributes to your net worth. That is the meaning of the word "net." It means adding assets and subtracting liabilities.
posted by JackFlash at 9:28 PM on August 4, 2011

Yeah, that's pretty much exactly what I said. In other words, just because you live in a 2 million dollar house doesn't mean you have a 2-million-dollar net worth.
posted by dersins at 9:33 PM on August 4, 2011

One client runs a division of a major international investment bank, net worth in the $30M range and most of the profits from his division flow directly or indirectly from the public sector, the taxpayer.

I hate you.
posted by XhaustedProphet at 10:51 PM on August 4, 2011

As I recall during the Clinton years he was considered a super genius wizard guru champion who was responsible for the good times, too.

Not universally, not by a long shot. Jim Rogers and James Grant bemoaned his actions all through those years. Bad policy is bad policy no matter when it is being practiced and no matter what the short term "benefits". You can make anything look good with cheap money for awhile, but it will end in tears. Welcome to the vale.

BTW, it was under Clinton that we lost Glass Steagel, so let's not go looking to that presidency for brilliant economic stewardship.
posted by IndigoJones at 6:04 AM on August 5, 2011 [1 favorite]

The issue isn't how that money gets made, its how that money gets taxed.

This.

If we started taxing wealth instead of income things would be a lot fairer. Having a long term capital gains tax max of 15% is outrageous.
posted by small_ruminant at 12:26 PM on August 5, 2011

If we started taxing wealth instead of income things would be a lot fairer. Having a long term capital gains tax max of 15% is outrageous.

So the saver gets penalized for saving, while the consumer who spends all his money is given a free pass?

Uhh.. No.
posted by eas98 at 1:03 PM on August 5, 2011

Yes. If you're making money on money, you should get taxed more than if you're making money by actually producing something or doing something.
posted by small_ruminant at 1:20 PM on August 5, 2011 [2 favorites]

It's perfectly possible to have a progressive wealth tax so that mom-and-pop, apple-pie 'savers' (as opposed to, say, the born rich, or the rich through exploitation; who I think we can agree are saving fuck all but themselves the trouble of being productive members of society) would be below the threshold.

All savers aren't equal, and it isn't really a good argument that a tax that might prevent the excesses of one segment of them isn't feasible because if it was applied with absolutely no though or distinction whatsoever it would also punish the larger segment for following their sensible and canny common sense.

I'm all for encouraging small investors: unlike the big ones they don't have money to blow on the throw of the wheel and might put into into real things -- rather than the asset inflationary ponzi schemes the lords and ladies are so fond of.
posted by titus-g at 3:01 PM on August 5, 2011

So the saver gets penalized for saving, while the consumer who spends all his money is given a free pass?

Aren't capital gains taxed only when you cash out? Like, you save $1M and gain $20k on that in a year. You don't get taxed on that $20k unless you take it out of the investment. Otherwise, you'd end up having to fork over cash on something that, potentially, you can't even access because its on a fixed term. Or if it's a stock, one year it goes up 200% but then falls to %10 of what you paid, does the government owe you money?

iirc, at least a few years ago in Canada, only half of capital gains are taxed; and that half is treated a "normal" income. Say, you make $60k salary and you cash out $20k in stock options, you're income tax is for $70 (the first 18k or so is free, the second tier is whatever percent, the next tier up is at a higher percentage, &c). If you're unemployed and cash out $20k in stock, your effective income is $10k, well below the 18k level so you don't pay tax on any of that.
posted by porpoise at 3:48 PM on August 5, 2011

yes - you only take cap gains when you take the capital gain, not when the asset appreciates.
posted by JPD at 4:08 PM on August 5, 2011

Also, if you're in a low enough bracket, I believe the capital gains rate is only 10%.
posted by small_ruminant at 4:45 PM on August 5, 2011

Opps. It's actually 0%.
posted by small_ruminant at 4:46 PM on August 5, 2011

Which I believe is wrong. You can be a billionaire and yet be in a 10% income tax bracket and therefore pay NO capital gains taxes.
posted by small_ruminant at 4:48 PM on August 5, 2011

Though what you can pull out at 0% is limited.

Ok, leaving the thread now.
posted by small_ruminant at 4:50 PM on August 5, 2011

This is called getting compensated for risking a total ruin. For the ones who are complaining, why don't you go trying founding a fucking company. Of course the richest get paid in stock.
posted by VeGiTo at 12:11 AM on August 6, 2011

What makes you think all those billionaires are self-made/entrepreneurs? From TFA:

The Upper Half of the Top 1%: Membership in this elite group is likely to come from being involved in some aspect of the financial services or banking industry, real estate development involved with those industries, or government contracting.

posted by GrammarMoses at 10:37 AM on August 6, 2011

is likely to come from

Pretty vague, that. For reference, here's the Forbes richest Americans list. The toppermost of the poppermost does seem to lean towards entrepreneurs (or their children).

Not to say that Wall Street doesn't need some serious paddlin' and cleanin' up, and that all the entrepreneurial money is totally green and uncorrupt, but even so....
posted by IndigoJones at 12:55 PM on August 7, 2011

Why are the big banks getting off scot-free?
posted by homunculus at 12:42 PM on August 8, 2011

Great News: The Recession for the Gilded Class Has Ended
posted by homunculus at 1:12 PM on August 8, 2011