Top 1% of Americans own 56% of US stock - Bottom 90% own just 12% of stock (1 Viewer)

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superchuck500

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It's quite a figure and the share held by the top 1% is growing. When you consider the free rein that corporations have to act politically and that those decisions are controlled almost exclusively by the extraordinarily wealthy in a board room where the corporation is legally bound to act in the interest of its shareholders (i.e. the 1%), what does that mean for the bottom 90%? Not in the top 1%? Sucks to be you.

The wealthiest US households are strengthening their grip over corporate America. The richest 1 per cent of Americans now account for more than half the value of equities owned by US households, according to Goldman Sachs. Since 1990, the wealthiest have bought a net $1.2tn in company stakes, while the rest of the population has sold more than $1tn.

Three decades ago, ownership was also lopsided, but the top percentage point of Americans by wealth only controlled 46 per cent of all US equities held by households. By the end of September 2019, that proportion had hit a record 56 per cent, amounting to $21.4tn, according to the investment bank’s calculations. That includes both public stock and ownership stakes in private companies.

“The wealthiest households have been by far the biggest driver of positive household equity demand,” Goldman Sachs analysts, led by Arjun Menon, said in the report.

“Accelerating US economic growth and rising stock prices should continue to support equity purchases by the top 1 per cent.” Recommended LexEquities World economy/stocks: Piketty is right Premium As of September 2019, the bottom 90 per cent owned $4.6tn of equities, or 12 per cent of the total, the analysts noted.


 

donato

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That’s by way of design, yet people still vote GOP. They just ignore the growing inequality wealth gap, presumably because they think they could be in that 1% one day and why would they want to share!?!!
 

coldseat

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I'm always astounded that anybody who isn't part of that 1% on the right, doesn't demand that the Republican leadership of their party address this disproportionate and ridiculous wealth/income disparity. It's like it's not even an issue on the right, but why?

I guess they're more concerned with conservative judges, abortions and guns.
 

JimEverett

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So if you allowed people to use their SS money to invest in equities you could see more than a doubling of that $1.2T that the richest have taken on since 1990. Talk about immediately raising the wealth of tens of millions of people in the bottom half of wealth.
 

RobF

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So if you allowed people to use their SS money to invest in equities you could see more than a doubling of that $1.2T that the richest have taken on since 1990. Talk about immediately raising the wealth of tens of millions of people in the bottom half of wealth.
Seems dubious.

Social security expenses are typically paid from social security revenues because otherwise you have a cohort with no funding. For example, when it's first introduced; how do you provide social security for the already retired and otherwise dependent population, if it's a return on investment, when you have no investment? But if you fund the retired population with the revenue from the currently working population, you can immediately support that population, and continue on that principle.

You would hit the same problem if you switched a transfer scheme to an investment scheme; the currently dependent cohort would have no funding.

So who would get an increase in wealth in real terms would depend on where the funding for that cohort with no investments comes from. Who's paying current social security expenses when there's no revenues because now they're being invested? If the current working population faces double costs to meet the expenses of the current dependent population and to make the investments to fund their own future expenses, how does that amount to an increase in wealth?
 

JimEverett

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Seems dubious.

Social security expenses are typically paid from social security revenues because otherwise you have a cohort with no funding. For example, when it's first introduced; how do you provide social security for the already retired and otherwise dependent population, if it's a return on investment, when you have no investment? But if you fund the retired population with the revenue from the currently working population, you can immediately support that population, and continue on that principle.

You would hit the same problem if you switched a transfer scheme to an investment scheme; the currently dependent cohort would have no funding.

So who would get an increase in wealth in real terms would depend on where the funding for that cohort with no investments comes from. Who's paying current social security expenses when there's no revenues because now they're being invested? If the current working population faces double costs to meet the expenses of the current dependent population and to make the investments to fund their own future expenses, how does that amount to an increase in wealth?
Depends on how you want to do it. Nothing wrong with people 60+ taking their contributions and investing. And so on.
Or you could set it up at some age where people at that age or below can take their existing contribution or just future contributions and invest.
Regardless of how you structure it there would be an increase in wealth correlated to the number of people participating - and if everyone participated it would produce enormous growth of wealth in the bottom half.
 
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superchuck500

superchuck500

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Depends on how you want to do it. Nothing wrong with people 60+ taking their contributions and investing. And so on.
Or you could set it up at some age where people at that age or below can take their existing contribution or just future contributions and invest.
Regardless of how you structure it there would be an increase in wealth correlated to the number of people participating - and if everyone participated it would produce enormous growth of wealth in the bottom half.
Structurally, the SS system isn't set up to work like that - it's effectively a Ponzi scheme. If new contributions were committed to asset ownership, they're not longer fungible.

Interesting idea (with some fascinating potential impacts on equity pricing/market-multiples) but just not feasible without a complete overhaul of how SS works.
 

coldseat

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Depends on how you want to do it. Nothing wrong with people 60+ taking their contributions and investing. And so on.
Or you could set it up at some age where people at that age or below can take their existing contribution or just future contributions and invest.
Regardless of how you structure it there would be an increase in wealth correlated to the number of people participating - and if everyone participated it would produce enormous growth of wealth in the bottom half.
It seems like it may have a potential to increase money/wealth, but it's not really clear on who that will benefit from that or when. First, that's not going to help working individuals or families in any substantial way, as you have to wait until you're retirement age to access that wealth. Second, since it's social security, that it isn't wealth that is passed down through inheritance to future generations, so it doesn't really change the future prospects of families who are stuck a cycle of poverty. Third, it does nothing to address the current income divide that is constantly growing. Fourth, we're not talking about increasing payouts, so would it even help the bottom 50%?

Maybe it makes retirement age better for the bottom 50%, idk. Positive impacts would seem to be severely limited for the bottom 50%, but I'd have to see how it's structured to have better idea of what you're talking about.
 

JimEverett

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Structurally, the SS system isn't set up to work like that - it's effectively a Ponzi scheme. If new contributions were committed to asset ownership, they're not longer fungible.

Interesting idea (with some fascinating potential impacts on equity pricing/market-multiples) but just not feasible without a complete overhaul of how SS works.
I wouldn't be able to provide details - but there seems to be some general consensus that at some point the SS system will be bankrupt. Which I am guessing means SS payments will effectively be coming out of the general fund.
With that in mind along with some sorts of "penalties" for, say, people under the age of 45 (maybe a declining scale of penalties) if they take out their contributions it seems like you could get past the funding concerns.
 
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superchuck500

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I wouldn't be able to provide details - but there seems to be some general consensus that at some point the SS system will be bankrupt. Which I am guessing means SS payments will effectively be coming out of the general fund.
With that in mind along with some sorts of "penalties" for, say, people under the age of 45 (maybe a declining scale of penalties) if they take out their contributions it seems like you could get past the funding concerns.
What I'm saying is that if a 40 year old worker wants her SS contribution to be allocated to shares in Apple, the funds have to be converted to shares in Apple and held there in order for the value to appreciate (to add wealth in your premise). Are you saying that to accommodate this, we should just go ahead and move all SS payments to the general fund now? I suppose that could work . . . but again, that would be a substantial modification to the current system.

But your point about eventuality is well-taken.
 

JimEverett

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What I'm saying is that if a 40 year old worker wants her SS contribution to be allocated to shares in Apple, the funds have to be converted to shares in Apple and held there in order for the value to appreciate (to add wealth in your premise). Are you saying that to accommodate this, we should just go ahead and move all SS payments to the general fund now? I suppose that could work . . . but again, that would be a substantial modification to the current system.

But your point about eventuality is well-taken.
Obviously, I think, I am just throwing this out there. Its not like I have been working at the CATO Institute for a few years developing this.:)
But I agree - it would be a fundamental change to the SS system. I think it needs it. Not necessarily what I am advocating but something that does a better job of increasing wealth.
It would be hard to do, because I think SS has been a great system. It has worked wonderfully for what it was designed to do, but people would be much more wealthy and have much more income after retirement if we made it a mandatory private retirement account - where you are allowed to invest in qualified funds or treasuries (current system?).
I could see regulating it where as you go closer to the retirement age so much money had to be out of equities as a hedge to a market downturn as a person begins to draw on the account. But I imagine at some point that wouldn't even be necessary given the history of how the market performs.
 

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The wealth inequality is due to tax policy not SSI providing a poor rate of return.

There is an income cap on SSI taxes that benefits the wealthy. Capital gains taxes at lower rates than income taxes benefit the wealthy. Corporate tax rates that are lower than income tax rates benefit the wealthy.

If we want to increase stock ownership among the bottom 90%, then we need to increase disposable income without taking away another safety net.
 

JimEverett

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The wealth inequality is due to tax policy not SSI providing a poor rate of return.

There is an income cap on SSI taxes that benefits the wealthy. Capital gains taxes at lower rates than income taxes benefit the wealthy. Corporate tax rates that are lower than income tax rates benefit the wealthy.

If we want to increase stock ownership among the bottom 90%, then we need to increase disposable income without taking away another safety net.
I am just curious why you say wealth inequality is due to tax policy.

The bottom 45% of income earners pay no federal income tax. I guess I don't understand how tax policy could help increase the wealth of these earners.
 

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I haven't read this, but how do Pensions and company 401k plans fit into this percentage?

Or are they talking about IRA's, and other private ownership?

Because my family is currently in that top 10%. It doesn't take much to get up there...

1581444648754.png
 

Beach Friends

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Personal finance / wealth building course should be mandatory each year, including at the university level.

Realistic statistics about the difference in the success of people who finish school, get a job, then get married and then have children as opposed to those who don't follow that path should be shown. Students need to be taught the time value of money. Great time to teach people that is while they are young.

The path to financial security, if not wealth, is available to most. They need to know that.
 

coldseat

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Personal finance / wealth building course should be mandatory each year, including at the university level.

Realistic statistics about the difference in the success of people who finish school, get a job, then get married and then have children as opposed to those who don't follow that path should be shown. Students need to be taught the time value of money. Great time to teach people that is while they are young.

The path to financial security, if not wealth, is available to most. They need to know that.
What is that path today?
 

wardorican

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I am just curious why you say wealth inequality is due to tax policy.

The bottom 45% of income earners pay no federal income tax. I guess I don't understand how tax policy could help increase the wealth of these earners.
Wages are stagnant or only compound with minimal interest. No taxes on that aren't a bit factor limiting growth.

Large capital investments have a larger gain from compound 'interest' and the gains in the market definitely out pace the 1-3% wage growth per year. Lower tax rates on that income (15% vs 30-40%) allow more of that capital and capital gains to continue the compound interest affect and out pace that very linear 1-3% growth.

This doesn't even factor in jobs being eliminated.

It's almost a linear graph vs exponetial. But technically, the low wage growth is also exponential, just a much smaller exponent.

For example, 50k per year, 20% tax rate, 3% inflation, 30 years. wages about double in 30 years.

1581445521943.png


Now let's use a 50k investment making 10% annual gains, 15% tax rate (per capital gains table), 3% inflation. End balance after 30 years is around $570k. about 5 times larger growth.

1581445641611.png


What if I double the tax rate to 30%? Ending balance after 30 is around $371k.

1581445730457.png


So, tax rates can slow down the growth, to reduce the divergence of wealth, however, absent the risk, the nature of higher returns is what makes this problem exacerbated.


For the last bit, just for fun, changing the tax rate from the first example from 20% to 15%, after 30 years, you only get a $5k difference. So, low annual gains makes the issue somewhat moot. Higher gains, make it a big difference.

Higher gains encourages investment, not tax breaks.
 

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