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Question: Is there such a thing as superfluous wealth? 
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Silhouette

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Post Question: Is there such a thing as superfluous wealth?
Is there such a thing as wealth that exists today that has no claim on resources given the current prices of those resources?

For example, we hear a lot about CEO and executive bonuses and how they can range into the hundreds of millions, or how profits can be into the hundreds of millions. But in the end, are those just really large numbers not representing real wealth at today's prices? Should we be outraged if one person gets a 100 million dollar bonus, but then be twice as outraged if it turns out to be 200 million dollars? Does the doubling of the money actually double the usable wealth? Or is it just a higher number?

For example, we can imagine what 200 million dollars can buy today, by the act of that person spending the 200 million, would they bid up prices so that they actually couldn't buy all the items because the price has gone up? If that's the case, what difference would there be if he had 200 million or 300 million? It would just be a higher number and not represent any extra resources.

I hear this as an argument for who should pay for a higher minimum wage, in Walmart for example. The family at the top is very rich, so they should just sacrifice some of their profits to pay for the higher wage of their workers. But is that simple? If the extra money they have doesn't represent real wealth at today's prices, then by them giving it away to the workers and those workers spending it, would they help bid up prices?


Tue Jul 01, 2014 2:28 am
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Illuminati

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Post Re: Question: Is there such a thing as superfluous wealth?
I'm a little confused here so I'll apologise in advance. Firstly I'd say doubling someone's bonus would in fact double their usable wealth/disposable income. Now for the confused part, "the bidding up prices", prices rise when there is a scarcity of whatever is being bought, so I guess if a person spends $200 millions on purchasing apples in a region then the price of apples could rise in that region. However if you're asking if apples would rise in price just because a person had $200 millons to spend (in general), then I'd say probably not.

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Tue Jul 01, 2014 2:49 am
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Silhouette

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Post Re: Question: Is there such a thing as superfluous wealth?
Yeah if the price could rise because of all his extra spending, then wouldn't that extra money (over a certain amount) represent pointless wealth at current prices? if you can spend 100 million without the price going up, then what difference does it make having 200 million, 500 million, one billion? The extra money wouldn't represent extra wealth that can be spent


Tue Jul 01, 2014 4:57 am
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Post Re: Question: Is there such a thing as superfluous wealth?
This sounds like some kind of theoretical economics voodoo that may produce interesting and even useful results if applied to macroeconomy but means fuck-all if you use it on an individual case.

If you have a fuckload of money, and we double that to two fuckloads of money, that is one fuckload extra wealth that you can spend. Whether you spend it or not is up to you, frankly you'd have a hard time spending a billion dollars within a foreseeable timeframe so you'd probably either hoard it for your children and/or extended family to inherit, or you'd end up having to give it away philanthropically (like Warren Buffett or Bill Gates). The former would add very little value to society, the latter would benefit society in one very specific way (no more Polio, or whatever) but entirely at your own whims and probably subject to your own selfish reasons (ie. Bill Gates only supports projects that he believes can be achieved within his lifetime - fair enough, it's his money, but that kind of thing isn't what keeps society running).

On the other hand, if you foreswear that extra fuckload bonus and distribute it among your employees instead, they will a) not have to live off of god damn food stamps meant for the unemployed (looking at you, WalMart), b) be far more happy, less sick, and more loyal to you, thus bringing long-term stability to society and growth to your business, and c) be able to use all that money to sustain the larger economy by buying things from a wide range of sellers and manufacturers (as opposed to just putting a few very large amounts of money into luxury industries by buying giant mansions, jets, and ridiculous cars).

Now, will that cause prices to go up? Maybe. It might also cause prices on many goods to go down, because there are now more people buying, making it worthwhile to scale up production and benefit from economy of scale. It'll also generate more social and economical stability, motivate the creation of more workplaces (more consumers means more customers to serve), and in turn cause wages to go up further. There's probably some kind of equilibrium there somewhere, but macroeconomics are a big black fucking box, and anyone who claims to understand it is lying through their teeth. It's voodoo. Nobody knows what's going on.

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Tue Jul 01, 2014 9:51 am
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Traditional Evil Scientist
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Post Re: Question: Is there such a thing as superfluous wealth?
Further to what Jonas says, the critical issue in most of this (outrage at banker bonus X, walmart wages vs CEO takehome etc) is inequality. The actual numbers don't matter anything like as much as the proportional difference between them. Look up GINI coefficients for a nice summary.

Ideal, hypothetical society scenario should have something along the lines of the lowest paid getting enough to support themselves comfortably, while still not quite enough to enjoy the luxuries of the finer things (to encourage upward mobility) while the richest shouldn't be early vastly more than they could actually SPEND.

What we have quite commonly today (hello, USA) is a situation where beyond a certain point, money simply generates money. If you get above that threshold, you more or less can do fuck-all and still see your wealth grow, year upon year. Rich get richer, poor get poorer.
People on food stamps (and there are a LOT of them) see what amounts to "5 times their expected lifetime earnings" being awarded to a random banker (of which there are few) as a yearly bonus, for failing....and you get general unrest and unhappiness.

Because there are a fuckton of poor people, and few ultra rich, the general 'fix' people suggest to try and reduce this proportional inequality is to lower the ludicrous payouts to the rich, because that's a lot easier than increasing the wages of ALL THE POOR (despite the fact that the latter would be more beneficial to society as a whole). Joe McBillionaire isn't going to notice his bonus being 100million rather than 200million as far as his spending power goes, because that's so far into meaningless territory it doesn't matter. He'd notice if all the other dudes on his wealth level got the 200million, though (because we don't compare wealth in absolute terms with our peers, we do so in relative terms, because we're stupid fucking animals), but since there aren't that many of them it's usually more feasible to do a full-spectrum bonus cap than it is to actually work out how to pay poor people more.


As for "wealth that exists today that has no claim on resources given the current prices of those resources", that sentence is so horrible it should be shot, but aside from that fact, you have to understand that very very little wealth today actually exists in any real sense. Case in point, at the height of the financial breakdown, the entire planet was around 50 trillion in debt (of which 17 trillion is the US alone). It probably still is. Who is this money owed to? Nobody. Everybody. Does the money exist? No. Has it ever existed? No. Can this debt be paid off? No. Does it need to be paid off? No. If we all continue ignoring this problem completely, it will effectively...not be a problem. It's that ridiculous.

Whcih brings us to actual wealth. How much money do you own? And how much do you actually have in a physical form? I have just enough money in savings to put down a deposit on a house, but in actual cash? About 25 quid. And that cash is only an abstraction of wealth ANYWAY.
99% of wealth is not present in the form of currency or goods, it's just numbers in a computer (go go fiat currency). This is even more exaggerated for the ultra rich, where you might say "they have a net wealth of 2 billion dollars", but in reality none of that is in the form of "giant stacks of cash ready to be spent". It's shares and investments in companies, stocks and bonds that are ticking over generating wealth (numbers in computers), etc. If you stuck them down and said "give me 1 billion dollars or I'll shoot you" they couldn't. Very little of that capital is liquid.

And again, not only is the capital not liquid, it doesn't even exist outside of numbers in a computer. If they DID pull out all the stops to liquidate all their assets, chances are they would find they couldn't, because there just isn't enough liquid capital to realise that wealth. As long as it stays as numbers in computers, everything is fine and we can safely ignore the fact that the wealth it supposedly represents doesn't actually exist in the real world. This is why runs on banks are so destructive. Banks can hold billions of dollars in customer wealth...on computers, but that money doesn't actually exist anywhere physical. If all those customers tried to actually withdraw all their money, the bank would be forced into a position of admitting it doesn't have the money, FINANCIAL SYSTEM AS WE KNOW IT COLLAPSES (again). It's the emperor's new clothes writ large. As long as nobody actually tries to expose the gaping flaws in our financial system, EVERYTHING IS FINE.


Tue Jul 01, 2014 10:34 am
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Post Re: Question: Is there such a thing as superfluous wealth?
DDL wrote:
And again, not only is the capital not liquid, it doesn't even exist outside of numbers in a computer. If they DID pull out all the stops to liquidate all their assets, chances are they would find they couldn't, because there just isn't enough liquid capital to realise that wealth. As long as it stays as numbers in computers, everything is fine and we can safely ignore the fact that the wealth it supposedly represents doesn't actually exist in the real world. This is why runs on banks are so destructive. Banks can hold billions of dollars in customer wealth...on computers, but that money doesn't actually exist anywhere physical. If all those customers tried to actually withdraw all their money, the bank would be forced into a position of admitting it doesn't have the money, FINANCIAL SYSTEM AS WE KNOW IT COLLAPSES (again). It's the emperor's new clothes writ large. As long as nobody actually tries to expose the gaping flaws in our financial system, EVERYTHING IS FINE.

This is clearly not a very stable system. As soon as something goes wrong, it's all going to collapse. Arguably this is already going on since the world economy still hasn't properly recovered from the last crisis.

To answer the original question: Yes.

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Tue Jul 01, 2014 3:13 pm
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