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Monday, November 4, 2013

How The Super-Rich truly hurt the Everyday Real Economy

Today we're going to pick on Warren Buffett a little bit..

We know.. we're such blue meanies and all that.. Why don't we pick on someone our own age and wealth strata..

But for today's post, we choose Buffett not out of personal venom but he's simply the most famous Billionaire in America presently outside of Bill Gates and we genuinely Hate that man.

And pretty much all the points we make today will be mathematical and practical logic based.  The calculator will do the arguing for us...
In order for any economy to grow or flourish, you need there to be a consistent activity of people selling and others buying which allows new product and ultimately new buyers, etc..

Think of it like a fan.

If the blades circulate very slowly, you're not going to feel any coolness.  There must be a certain speed or traction for that fan to blow cool air your way and the motion must be consistent for any effect to take place.

That's really how an economy works.. any nation, state, city, county..
Anne sells apples.. Bill buys the apples then Anne buys more quantity from vendor Carl to sell to others..

No 'Bill' buying the apples, then there's no Anne and thus no Carl.

So what happens when wealth is held in large numbers by very few people...  How does it affect the whole ebb-flow of capitalism and consumption?

Here's where Warren Buffett as symbol and reality comes in..

Buffett has a net worth of $54 billion which looks like $54,000,000,000.
Now one could argue that he circulates wealth by the continual buying/merging or selling of companies and the large number of employees on his payrolls but for this exercise we're talking the individual not the entity..

Now let us say we also gave $54 billion to 540,000 Americans via $100,000 checks to each person...

Let's start with automobiles.

How many vehicles can one super-wealthy person buy?
Even if Buffett was lets say an avid automobile collector, he would probably purchase no more than 4-6 cars a year and we sincerely doubt he'd be buying normal everyday use vehicles like Hyundais or Hondas...

How many vehicles do you think 540,000 people each given a check for $100k would buy?

Let us pretend only a measly 1% of that total took that money and used a portion to buy a new car, that is still 5,400 people i.e. 5,400 new or used vehicles purchased...

And we all know that more than 1% would go treat themselves to a new car
So the tally so far: Buffett - 4 to 6 cars annually at most;  Populace - 5,400 new or pre-owned cars minimum

Which helps car dealerships stay in business and allows them to pay their employees and do charitable deeds in their local communities more?

Next..  homes...

Let us say Buffett loves having lots and lots of homes..  Unless he has a Nicolas Cage-like mental illness and owns more homes for personal use than months in a year, it is realistic to assume Buffett may buy 1-2 expensive homes in a year..
And we really doubt a multi-Billionaire is taking out a 30 year mortgage at his local bank...

Now we come to the populace each with $100k..  

We will once again low-ball assume that 1% would use that money or a portion of, as a down payment on a new home..

That's 5,400 new homes sold..    5,400 people now borrowing from banks which normally we vent relentlessly on but in this instance, it connects to the continual money flow of an economy...
People having livelihoods based on the number of people purchasing homes and applying for mortgages..  real estate agents, mortgage lenders, appraisers, inspectors, construction and repair related occupations..  etc...

And each home needing to be furnished..

No business can survive without quantity.. either repeat customers or a steady stream of new ones.. And you need populaces who possess wealth and have the means to pay for their purchases to keep their businesses alive

How many of these people have jobs if this nation was basically two wealth states.. the Buffett state and the struggling poor??
This is the direction we've been heading in since 1971 but the last 5-10 years, it has really steadily accelerated and only now are people just beginning to see the devastating consequences of Billionaire 'Buffetts'  and broke everyone else..

Next- business...

Buffett owns a lot of businesses and corporations and that's very nice...

Let's say a mere 5% of the populace who received the $100k want to start their own business and achieve their dream of individual entrepreneurship..
5% of 540k is 27,000 people...

If each person opens a bricks and mortar business providing products and services and including themselves, employees a mere 5 individuals...

That is 135,000 people now working...

Does Buffett have 135k employees on his payroll??   Doubt it...
What about taxes..   Buffett once bragged or complained (we're not sure which) that he pays less annual taxes than his secretary...

Those 540,000 people dividing up that $54B sure would be paying their fair share which allows for police and fire, teachers, waste pickup, street improvement and a thousand other positive things governments do with tax dollars..

Yes governments waste money on bad things to but life is not either/or..

Anyways, you see the point we're making..
How many restaurants can one person eat at in a year?   How many gallons of milk or boxes of cereal?  How many HDTVs or gardening supplies or a trillion other things can one super-wealthy person consume versus the masses with money to spend??

This is not an argument in support of Communism, Socialism, Marxism or any other 19th century stale 'Ism'...

Its actually an argument in support of 18th century to present-day Capitalism..

When great amounts of wealth are in the hands of a select few, not only does it give those people great amounts of power and political influence to shape policy to their behalf while treating the populace like children or chattel...
The wealth disparity often slows down the real everyday economy and prevents the normal ebb and flow of distribution, acquisition and consumption..

Really this entire global economy would have collapsed upon itself 30 years ago in a dust heap if not for the advent and expansion of personal credit cards allowing the poor to feel rich and to purchase without often the fiscal means to repay...

And of course the Buffetts of the world got wealthier over this..

If there was no outlet to do so, the power brokers who truly run things never would have devised the concept or had Congress in the early 1980s change the laws to make this banking practice national and uniform in policy..
We know we will never convince most to genuinely hate and despise the super-wealthy...   Too much indoctrination we're going up against..  over 2,100 K-12 school days..

And don't get us started on the parents pushing their kids to be like Buffett or Trump as the path to Happiness..

But it is their wealth acquisition and confiscation which is making the nation and world at large a poorer, more desperate place to live..
Using the allegory of wealth to food,  the egotistical demonstrate their dominion over the little people by setting up 'charities' and other fake philanthropic endeavors to feed people while maintaining control of the food supply...

The Buffetts of the world..

The truly greed-less and selfless simply teach those people to acquire the food for themselves from which independence and self-respect grows..

Funny how so many admire and rationalize those who make our lives a lesser quality than it should be