Friday, September 26, 2014

The rich and the hoarders

Image shared on Facebook by a Quaker friend:

V***: Indeed greed is an illness or an addiction.

D***: Rich people, and those on the cover of Forbes magazine do NOT hoard cash. B. Lester has no clue what he is talking about. In fact, most rich folks have very, very little cash - and they make money through leverage - that is, by taking on large amounts of debt. Debt is good! It allows rich people to grow richer by using other people's money.

Mr. Lester needs to free his mind and think.

Steven Bhardwaj: Interesting comment D***. True, private wealth management funds, like any investment fund, tend to use illiquid investments as they are more profitable to everyone concerned. I agree that private individuals decreasing the velocity of money by holding cash doesn't create large economic externalities. As to debt, I won't assign a value judgment, as its value to society depends on the quality of the investment the debt is used for.

More to the point are the dysfunctional institutions [institutional practices] used to amass the assets of many rich individuals, and the societal dysfunctions they create on the way there. There is a balance between the strength of the rule of law which creates property rights to define a fair market, and the strength of individual capitalists who bend and warp the laws to personal advantage. As the capitalists become strong enough relative to the law, the law becomes less of a tent to keep rain out of the public marketplace, and more like a maze of sheep handling chutes to manage the population and enforce rich privilege.

Corporate lobbying is isomorphic to smaller-scale corruption. Intellectual capture of financial regulators, military officals, and other industries' public servants by corporate interests is endemic beyond cliche.

For every Salman Khan there is a dozen or a hundred Sam Zemurray's. And, for every Madoff scandal, a dozen more white-collar criminals keep their impunity. [Regulatory policies are inherently stochastic - so regulation cannot effectively mitigate the governance effects of gross inequality.]

Guns can't kill people without people killing people. Riches can't cheat people without people cheating people. But when the guns are too deadly and prevalent, and the riches too unequal and [poorly] unregulated, then you sure know what's coming.

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