Economists say income gap hurts U.S. economy

[Ken-1122]

And you're still wrong.

As I've been trying to explain all along, value may go up or down depending on many different conditions, and value can add to wealth; but that value is illusory, it only becomes real when real dollars are attached, such as when property is sold.

When they say Bill Gates has $80 billion dollars, what do you think that means? Do you think it means he has a bunch of liquid and hard accets (such as stocks) that would be worth $80 billion if sold? Or do you think it means he has $80 Billion worth of US currency in a bank somewhere earning 1.5% interest and getting eaten up by inflation. What do you think it means?

But when we say the rich are getting richer, that isn't simply because their houses are worth more if and when they sell them. It means a much larger share of the limited economic pie goes to them, which also means less goes to everyone else.

Are you under the impression that wealth is not created? In other words, do you believe there is only so much wealth and when the rich get a larger share they can only do so by taking from everyone else? Is this your position or not?

Ken

 

[A2SG]

When they say Bill Gates has $80 billion dollars, what do you think that means? Do you think it means he has a bunch of liquid and hard accets (such as stocks) that would be worth $80 billion if sold? Or do you think it means he has $80 Billion worth of US currency in a bank somewhere earning 1.5% interest and getting eaten up by inflation. What do you think it means?

It means he has assets and holdings that are VALUED at $80 million dollars...but if he tried to sell all his assets and liquidate all of his holdings, he probably won't get anywhere near that much in actual cold hard cash.

Are you under the impression that wealth is not created?

Yes, it is. But it comes from somewhere. It doesn't just appear out of thin air. Companies generate a profit when they sell things or provide a service. That profit doesn't just appear, it comes from the pockets of people who bought the product or service offered.

In other words, do you believe there is only so much wealth and when the rich get a larger share they can only do so by taking from everyone else? Is this your position or not?

Basically, yeah. As I said, the value of certain assets or stocks can go up or down, but that value is only on paper until the asset or stock is sold, at which time someone else pays money for it. Thus the money for it comes from somewhere.

Otherwise, wealth comes from somewhere: people buying a product or service you offer, an investment growing (such as with a company that does well from people buying the product or service it offers) or bank interest (money earned from the bank using that money to loan to other people who pay interest for the privilege), etc.

If you can think of some other way for wealth to grow, especially some way that doesn't involve money coming from someone else, I'd be curious to hear about it.

-- A2SG, any other methods I know of are just variations on the above.....

 

[Viren]

Wealth is being created in the form of a rising GDP, but wages, which are the largest source of demand, aren't keeping up. Hence the need for enormous amounts of debt to create artificial demand. This is the main way income inequality hurts the economy.

 

[catholichomeschooler]

Yes, the economy would be stronger if everyone was wealthy.

 

[Ken-1122]

It means he has assets and holdings that are VALUED at $80 million dollars...but if he tried to sell all his assets and liquidate all of his holdings, he probably won't get anywhere near that much in actual cold hard cash.

So what are you saying? Are you saying Bill Gates isn't the richest guy in the world, that the richest is some guy who has the most US currency in the Bank?

Yes, it is. But it comes from somewhere. It doesn't just appear out of thin air. Companies generate a profit when they sell things or provide a service. That profit doesn't just appear, it comes from the pockets of people who bought the product or service offered.

If that were true, the economy would not grow, because when the money comes out of the pockets of people who bought the products, you would be transfering wealth from the customers to the seller and nothing would generate! Then the seller goes out and buys stuff at the place where his customers work and the process continues with wealth shifting from one person to another without any growth!

If you can think of some other way for wealth to grow, especially some way that doesn't involve money coming from someone else, I'd be curious to hear about it.

I've explained this before, but I will explain it again.:
If I go out and buy a plot of land with trees on it for say.....$50,000.00 then I cut down all the trees and use the trees to build a house, and an apraiser appraises the land to be worth $150,000.00 I have generated $100,000.00 worth of wealth out of thin air (as you call it) even if I don't sell it. In San Francisco where money is minted, they will print up an additional $100,000.00 to make up for the wealth I've generated (and a bunch of money for all the wealth others have generated)
Now let's say I sell the house but I only get $140,000.00 for it. The house is still worth $150,000.00 but I lost $10,000.00 in the transaction and the person who bought the house from me gained the 10 grand in the transaction. At this point he didn't generate any wealth, he just transfered $10,000.00 from my pocket to his!

Does this make sense to you? If not, explain why

Ken

 

[Ken-1122]

Yes, the economy would be stronger if everyone was wealthy.

Exactly! That is the point I have been trying to make! If everybody were rich, but the income gap between the rich and the super rich were greater than the current gap between the rich and the poor, the economy would still be stronger even though income gap would be greater.

Ken

 

[Viren]

Even the IMF is getting on board.
IMF Warns Inequality Is a Drag on Growth - WSJ.com

 

[A2SG]

So what are you saying? Are you saying Bill Gates isn't the richest guy in the world, that the richest is some guy who has the most US currency in the Bank?

I guess that would depend on how you define the term, really.

If that were true, the economy would not grow, because when the money comes out of the pockets of people who bought the products, you would be transfering wealth from the customers to the seller and nothing would generate! Then the seller goes out and buys stuff at the place where his customers work and the process continues with wealth shifting from one person to another without any growth!

Economic growth means that goods and services have a higher market value. When the economy is strong, that generally translates to higher wages and a robust working class. But, since the economy isn't strong and has shown very little, if any, growth, it has not.

I've explained this before, but I will explain it again.:
If I go out and buy a plot of land with trees on it for say.....$50,000.00 then I cut down all the trees and use the trees to build a house, and an apraiser appraises the land to be worth $150,000.00 I have generated $100,000.00 worth of wealth out of thin air (as you call it) even if I don't sell it.

First, you don't have the money until you sell it, so that wealth is only on paper at the moment. But, let's also not forget, you spent money on your property, hiring people to cut down the trees, landscape the property, build the house, etc. Even if you did it all yourself, you invested your time and spent money on equipment and materials.

With luck, you'll sell the land for more than you put into it (making it a wise investment), but you did not make money out of nothing. And you only make that money when someone else agrees with the increased value and writes a check for it.

In San Francisco where money is minted, they will print up an additional $100,000.00 to make up for the wealth I've generated (and a bunch of money for all the wealth others have generated)

No, they won't.

You won't see an additional nickel for that property until someone writes you a check for it. The mint doesn't create cash for an appraisal.

Now let's say I sell the house but I only get $140,000.00 for it. The house is still worth $150,000.00 but I lost $10,000.00 in the transaction and the person who bought the house from me gained the 10 grand in the transaction. At this point he didn't generate any wealth, he just transfered $10,000.00 from my pocket to his!

Nope. That $10,000 never existed, except on paper and in your own mind and the mind of some appraiser.

Does this make sense to you? If not, explain why

Assessed value doesn't automatically put cash in your pocket. Selling stuff does.

-- A2SG, you might be able to get a loan based on that assessed value, if a bank agrees with the assessment, but you will still have to pay that loan back, with interest.....

 

[catholichomeschooler]

Exactly! That is the point I have been trying to make! If everybody were rich, but the income gap between the rich and the super rich were greater than the current gap between the rich and the poor, the economy would still be stronger even though income gap would be greater.

Ken

It's all a semantics shell game. Just another excuse for the left to expand the power of the state.

 

[Ken-1122]

Even the IMF is getting on board.
IMF Warns Inequality Is a Drag on Growth - WSJ.com

Too bad you have to log in in order to read what they were saying; I will bet it had nothing to do with income inequality, but about the poor having less.

K

 

[Ken-1122]

I guess that would depend on how you define the term, really.

I already told you how the term is defined! You just don't believe me.

Economic growth means that goods and services have a higher market value.

And how exactly do you think goods and services increase in value? I've already explained it to you, but since you disagree, I want to see your version.

First, you don't have the money until you sell it, so that wealth is only on paper at the moment.

It is still wealth!

But, let's also not forget, you spent money on your property, hiring people to cut down the trees, landscape the property, build the house, etc. Even if you did it all yourself, you invested your time and spent money on equipment and materials.

Remember when I defined "create wealth out of thin air" as coming up with an idea and putting it into effect? You are making my point dude!

With luck, you'll sell the land for more than you put into it (making it a wise investment), but you did not make money out of nothing. And you only make that money when someone else agrees with the increased value and writes a check for it.

I'm talking about wealth. Wealth is accumulated before your investment is sold.

No, they won't.

You won't see an additional nickel for that property until someone writes you a check for it. The mint doesn't create cash for an appraisal.

C'mon! You know what I'm talking about; they are constantly making more money to account for the wealth constantly being created.

Nope. That $10,000 never existed, except on paper and in your own mind and the mind of some appraiser.

That's like saying Bill Gates $80 billion in Microsoft stock only exists on paper, in his own mind and in the mind of NYSE! I guess by your account the richest man in the world is broke huh?

Assessed value doesn't automatically put cash in your pocket. Selling stuff does.

When is the last time Bill Gates sold something? I'm not talking about cash, I'm talking about wealth.

Ken

 

[Viren]

Too bad you have to log in in order to read what they were saying; I will bet it had nothing to do with income inequality, but about the poor having less.

K

Here's some more info. on the report.
IMF warns income disparities can hurt economies | www.ajc.com

 

[A2SG]

I already told you how the term is defined! You just don't believe me.

It has nothing to do with whether or not I believe you, or however you, personally, define the term....I simply don't spend all that much time worrying about it.

And how exactly do you think goods and services increase in value? I've already explained it to you, but since you disagree, I want to see your version.

Well, you did explain how you believe the Bureau of Engraving and Printing prints money based on assessments of value, which is totally and completely wrong on all counts.

Beyond that, well....goods and services increase in value when people are willing to pay more money for them.

It is still wealth!

Sure. Who said otherwise?

Remember when I defined "create wealth out of thin air" as coming up with an idea and putting it into effect? You are making my point dude!

Not if your point involves the Bureau of Engraving and Printing printing money based on an assessment, it isn't.

I'm talking about wealth. Wealth is accumulated before your investment is sold.

But only on paper. The Bureau of Engraving and Printing won't print money based on an assessment of wealth.

C'mon! You know what I'm talking about; they are constantly making more money to account for the wealth constantly being created.

No, they're not. Not the way you seem to think.

That's like saying Bill Gates $80 billion in Microsoft stock only exists on paper, in his own mind and in the mind of NYSE! I guess by your account the richest man in the world is broke huh?

Depends. He can't buy a cup of coffee at Starbucks with a stock certificate, can he? Though, he could probably take that stock to a bank and get a loan to buy a Starbucks franchise....but he'd have to pay the loan back with real money from his checking account.

Point being, there's a difference between value on paper and actual cash on hand....you shouldn't conflate the two.

When is the last time Bill Gates sold something? I'm not talking about cash, I'm talking about wealth.

No idea.

What difference does that make?

-- A2SG, do you even know what point you're going for here any more?

Edited to add:

It just occurred to me we've been referring to the mint as printing money, and that's wrong. The US Mint creates coins, the Bureau of Engraving and Printing prints money. Also, so I can be completely pedantic, the US Mint actually has FOUR coin-producing mints, Philadelphia, Denver and West Point, in addition to San Francisco. The Bureau of Engraving and Printing has two facilities that print paper money, one in Washington, DC and the other in Fort Worth, TX.

Ain't Google fun?

 

[Ken-1122]

Beyond that, well....goods and services increase in value when people are willing to pay more money for them.

And what happens that causes people to be willing to pay more for them?

No, they're not. Not the way you seem to think.

So why is money constantly being printed?

Point being, there's a difference between value on paper and actual cash on hand....you shouldn't conflate the two.

I'm not confusing the two, I'm just saying wealth is just as valuable as having cash on hand.

-- A2SG, do you even know what point you're going for here any more?

You said wealth is finite, so the only way the rich could make more money is by taking from everyone else. I disagreed.

Ken

 

[catholichomeschooler]

Which is worse, poverty or income inequality?

This report is nothing more than left wing propaganda.

 

[Ken-1122]

Here's some more info. on the report.
IMF warns income disparities can hurt economies | www.ajc.com

The IMF is an international organization; their focus is on all countries, not just the USA. Yes they did say income disparities can hurt economies, but they did not say how this applies to the USA; they hardly mentioned the USA.
As I said before, I don't think the problem is income inequality, the problem is too many poor people. If nobody were poor but income inequality were greater, do you think the IMF would have a problem with that? I don't think so.

Ken

 

[Ken-1122]

Which is worse, poverty or income inequality?

This report is nothing more than left wing propaganda.

Excellent point!

K

 

[A2SG]

And what happens that causes people to be willing to pay more for them?

Many factors. One could be that they're making more money and can afford to.

So why is money constantly being printed?

Mostly to replace old paper bills that need to be destroyed. The Federal Reserve has other methods to maintain the monetary supply, but none of them involve printing cash based on an assessment of property value by a real estate agent. That doesn't happen.

I'm not confusing the two, I'm just saying wealth is just as valuable as having cash on hand.

It has value, but it's not AS valuable. Cash on hand can be used to buy stuff, wealth on paper (such as an increase in value for property or an asset like art or something) might be used as collateral for a loan, but it can't be readily used to buy stuff like cash can be.

You said wealth is finite, so the only way the rich could make more money is by taking from everyone else. I disagreed.

And you're wrong.

Assessed value isn't real (ie tangible) until someone agrees to pay that amount, and hands over a check. So while an increase in value of an asset may be added to one's wealth, it's still nothing more than words on paper until it is sold for actual, cold hard cash.

-- A2SG, in other words, taken from someone else (granted, willingly)....

 

[Ken-1122]

Many factors. One could be that they're making more money and can afford to.

Really? Do you really think a person will be willing to pay $2 for something they could get for $1 simply because they are making more money today than yesterday? Going by that logic, prices would be going down because (as you pointed out) people are making less!

Mostly to replace old paper bills that need to be destroyed. The Federal Reserve has other methods to maintain the monetary supply, but none of them involve printing cash based on an assessment of property value by a real estate agent. That doesn't happen.

Real estate agent? You've obviously misunderstood what I said.

It has value, but it's not AS valuable. Cash on hand can be used to buy stuff, wealth on paper (such as an increase in value for property or an asset like art or something) might be used as collateral for a loan, but it can't be readily used to buy stuff like cash can be.

I never said it could be used the same as money, I said the value is the same. A stock share that is valued at $100 has the same value as a $100 bill. Do you agree?

Assessed value isn't real (ie tangible) until someone agrees to pay that amount, and hands over a check. So while an increase in value of an asset may be added to one's wealth, it's still nothing more than words on paper until it is sold for actual, cold hard cash.

-- A2SG, in other words, taken from someone else (granted, willingly)....

If that were true, when people but a house for less than it's appraised value, the house would decrease in value; but that is not the case. As you know when you buy a house for less than what it is worth, the value of the house remains the same but the person who bought has imediate "equity" in the house they purchased.

Ken

 

[A2SG]

Really? Do you really think a person will be willing to pay $2 for something they could get for $1 simply because they are making more money today than yesterday? Going by that logic, prices would be going down because (as you pointed out) people are making less!

Um, consumers don't simply choose to pay more for something, that isn't how it works. Put simply, if a good or service is deemed more valuable, the seller will try to charge more; if the consumer is willing to pay more for it (possibly because they consider it worth it, and if they're making more in wages they can afford to), they will. If not, the seller will either have to reduce price, find another market, or go out of business.

Welcome to Capitalism 101!

Real estate agent? You've obviously misunderstood what I said.

You posited a developed property with a home built on it. Real estate agents assess value for a property when they advise the seller on what price to list the property at and sell it.

Otherwise, the value assessment is made to determine how much money you pay in property tax. But you were talking about selling that property, not paying taxes on it, so I figured a real estate agent would need to be involved.

I never said it could be used the same as money, I said the value is the same. A stock share that is valued at $100 has the same value as a $100 bill. Do you agree?

Nope.

Both have value, but in different ways. A $100 bill is legal tender. A stock certificate is not.

Which means that the $100 bill has the set value of one hundred dollars, exactly. At all times. The stock can be sold at a certain price at a certain time: $100 today but tomorrow....maybe not. It's value fluctuates, sometimes by a huge degree.

If that were true, when people but a house for less than it's appraised value, the house would decrease in value; but that is not the case.

Depends on how you define "value." If you're selling it, the house is worth exactly what someone is willing to pay for it, not one nickle more or less. A different measurement of value determines how much is to be paid in property taxes, or how much can be used as collateral for a loan.

As you know when you buy a house for less than what it is worth, the value of the house remains the same but the person who bought has imediate "equity" in the house they purchased.

Which means they pay property tax based on that assessment of value (or can get a loan based on that amount by using the house as collateral). But if they want to sell the property, that won't necessarily be the amount they get for it. That will be determined by how much a buyer is willing to pay...it might be more, it might be less.

-- A2SG, value is a complicated term, and can mean different things to different people in different contexts....