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Here's how rich people can help fix America

 The stock market is too damn high!

I’m not talking about stocks being overvalued (though that too.) I’m talking about too many rich people, making too much money.

I’m only being slightly facetious.

Here's the thing folks, (as Joe Biden likes to say.) Super-affluent people in this country are accumulating wealth in massively disproportionate amounts—while the rest of us are falling further behind.

I know you’ve heard it before: Wealth inequality is bad, (blah blah blah) and the stock market’s going to the moon while the real economy is struggling (blah blah blah.)

Well you need to hold the blah blah for a second and listen up, because this is getting serious.

Truly.

Here’s a headline that says it all: “U.S. Billionaires Gained $1 Trillion Since The Pandemic Started,” (from $2.9 trillion on March 18 to $3.9 trillion on November 24, to be precise.) This, while millions of Americans lost their jobs and countless others struggle to find food, never mind the 14.2 million stricken by COVID-19 and the 276,000 dead.

Let’s dig into the super-rich a bit more thought, because what’s going on there really has become obscene.


Consider the 650 billionaires in the U.S. A recent study found that 29 of them have seen their wealth double since March. Another nugget: 47 individuals joined the list. This is during a pandemic, mind you! Here’s a spreadsheet with all manner of outrageousness. Like that Elon Musk’s net worth grew by more than $100 billion this year, and Jeff Bezos’ mushroomed by $70 billion and Dan Gilbert of Quicken Loans saw his fortune grow by some 575% to almost $44 billion.

And get this: The top 1% of Americans now hold $34.23 trillion of wealth, while the bottom 50% have $2.08 trillion, according to the Federal Reserve. In other words, the top 1% of the country has 16.5 times more money than the bottom half. Are you kidding me?

Isn’t it always that way, you ask? Actually no, not at all. In Q3 1989, (the furthest back the data goes) the wealthiest 1% had $4.81 trillion, while the lowest 50% had $.76 trillion—or only 6.3 times more. And as we’ve seen that ratio kept getting bigger.

Hey, I’m all for making money. It’s the American way. But this ladies and gentlemen is amoral, unsustainable and insane.

Sat, December 5, 2020, 6:35 PM GMT+5:30·14 min read
NEW YORK, UNITED STATES - 2020/05/26: Facial mask seen on the fence of New York Stock Exchange on first day of reopening of trading floor. (Photo by Lev Radin/Pacific Press/LightRocket via Getty Images)

The stock market is too damn high!

I’m not talking about stocks being overvalued (though that too.) I’m talking about too many rich people, making too much money.

I’m only being slightly facetious.

Here's the thing folks, (as Joe Biden likes to say.) Super-affluent people in this country are accumulating wealth in massively disproportionate amounts—while the rest of us are falling further behind.

I know you’ve heard it before: Wealth inequality is bad, (blah blah blah) and the stock market’s going to the moon while the real economy is struggling (blah blah blah.)

Well you need to hold the blah blah for a second and listen up, because this is getting serious.

Truly.

Here’s a headline that says it all: “U.S. Billionaires Gained $1 Trillion Since The Pandemic Started,” (from $2.9 trillion on March 18 to $3.9 trillion on November 24, to be precise.) This, while millions of Americans lost their jobs and countless others struggle to find food, never mind the 14.2 million stricken by COVID-19 and the 276,000 dead.

Let’s dig into the super rich a bit more though, because what’s going on there really has become obscene.

Consider the 650 billionaires in the U.S. A recent study found that 29 of them have seen their wealth double since March. Another nugget: 47 individuals joined the list. This is during a pandemic, mind you! Here’s a spreadsheet with all manner of outrageousness. Like that Elon Musk’s net worth grew by more than $100 billion this year, and Jeff Bezos’ mushroomed by $70 billion and Dan Gilbert of Quicken Loans saw his fortune grow by some 575% to almost $44 billion.

And get this: The top 1% of Americans now hold $34.23 trillion of wealth, while the bottom 50% have $2.08 trillion, according to the Federal Reserve. In other words, the top 1% of the country has 16.5 times more money than the bottom half. Are you kidding me?

Isn’t it always that way, you ask? Actually no, not at all. In Q3 1989, (the furthest back the data goes) the wealthiest 1% had $4.81 trillion, while the lowest 50% had $.76 trillion—or only 6.3 times more. And as we’ve seen that ratio kept getting bigger.

Hey, I’m all for making money. It’s the American way. But this ladies and gentlemen is amoral, unsustainable and insane.

Blue Origin founder Jeff Bezos speaks after receiving the 2019 International Astronautical Federation (IAF) Excellence in Industry Award during the 70th International Astronautical Congress at the Walter E. Washington Convention Center in Washington, DC on October 22, 2019. (Photo by MANDEL NGAN / AFP) (Photo by MANDEL NGAN/AFP via Getty Images)More

So, what can we do? Here are three questions to help frame an answer:

How can we get more people to share in wealth creation, i.e. to invest in the stock market for example?

What can the government do to address inequality? (Yes taxes, but what else?)

And finally, what can wealthy people do besides sitting on their hands and wait for higher taxes?

“The pandemic has exposed tremendous inequities in the United States by income, race, and geography,” says Darrell M. West, a senior fellow at the Brookings Institution and author of “Billionaires: Reflections on the Upper Crust.” “So if we really want to get the economy growing, we have to have inclusive policies that help everybody, regardless of income.”

Let me take on this notion of getting more people to invest in the stock market first. Currently, only 52.6% of American families have an investment in the market (and that includes 401(k)s). This point has been top of mind for former presidential candidate Andrew Yang who posted a short video on TikTok that went viral. He also spoke to Yahoo Finance about this:

“We're in the midst of the most extreme winner-take-all economy in the history of the world,” Yang says. “And it is getting a lot more extreme now, which is mind-boggling. The top 20% of Americans own 92% of stock market wealth. If you are the average American feeling left behind, it's not in your head, it's just in the numbers.”

Yang notes that we simply need to get more money into the hands of Americans, which he would accomplish through implementing a universal basic income program (UBI), where every citizen would receive a fixed amount of cash each month. (You can read all about this at Humanity Forward, the nonprofit Yang founded.)

Yang also proposes education efforts: “We should be teaching financial literacy at the high school level for all Americans. Many firms would love this. I mean, I talked to banks and accounting firms that want to do this.”

“There’s a real lack of financial knowledge and information, and it’s unevenly distributed across the country,” says Barbara A. Friedberg, a veteran investment portfolio manager and financial consultant. “Those people born into wealth have been informed about the benefits of investing in the public markets.The majority of the country knows nothing about it except seeing a clip of the S&P 500 on their feed and to them, that’s like reading a statement in Greek.”

This gap falls along racial lines as well. “Black and brown people — the data is clear — we inherit much less than the few of us who have inheritances,” says John Rogers, founder and CEO of Ariel Capital Management, the nation’s largest minority-run mutual fund firm. “They haven’t been passed down generation to generation; we don't spend a lot of time learning about it. Equally important or more importantly, because of historical discrimination in this country, we don’t have aunts, uncles, grandparents, and parents in a position to teach us about the stock market as we grow up to get comfortable with the logic of compound interest and investing in stocks over the long run as not a risky thing.”

The problem of growing wealth inequality isn’t lost on President-elect Biden. Once COVID-19 is in the rearview mirror, this could well become the defining issue of the Biden presidency. After all, wealth inequality is at the core of our now divided up nation. And this gets to my second question: What can the government do to address inequality?

In fact there has been an acknowledgment by some economists that historical methods of simply cutting interest rates to boost the economy, for instance, are now insufficient as that disproportionately benefits wealthy citizens, and not Americans most in need.

“The Fed is doing the best it can but its tool ultimately is a very blunt one,” says Eswar Prasad, an economist at Cornell University. “Even though credit appears a lot cheaper, in difficult economic times access to that credit becomes even more severely limited to those parts of the population and businesses that need it the most.”

The thinking is that new practices and tools are needed to address this shortcoming. Re-enter Janet Yellen—former Fed chair and Biden’s pick to be Treasury Secretary—who after being tapped by Biden, opened up a Twitter account and put this out as her very first Tweet.

Source - https://finance.yahoo.com/news/heres-how-rich-people-can-help-fix-america-130505600.html


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