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astralis
27 Nov 14,, 04:24
somewhat exaggerated title aside, this is a very good read of how the 1%, and the 0.1%, are similar/different from each other, and from the rest of the population.

An Investment Manager's View - Business Insider (http://www.businessinsider.com/an-investment-managers-view-2013-11)

Investment Manager Explains Why 99.5% Of Americans Can Never Win

GUS LUBIN

Beyond the charts and warnings from economists and investors, perhaps the most disturbing commentary on income inequality in America was written by an investment manager in 2011.

"In my view, the American dream of striking it rich is merely a well-marketed fantasy that keeps the bottom 99.5% hoping for better and prevents social and political instability," the manager wrote in an email to Professor G. William Domhoff of the University of California at Santa Cruz.

The manager, who asked to remain anonymous to protect his relationship with wealthy clients, expresses his frustration with a financial system that is rigged to help the elites at the cost of everyone else.

Domhoff posted the letter to his site, alongside his own commentary from more than 60 years of research on income inequality and the power elite. With his permission, we're publishing the full letter here:

An Investment Manager's View on the Top 1%
I sit in an interesting chair in the financial services industry. Our clients largely fall into the top 1%, have a net worth of $5,000,000 or above, and if working make over $300,000 per year. My observations on the sources of their wealth and concerns come from my professional and social activities within this group.

Work by various economists and tax experts make it indisputable that the top 1% controls a widely disproportionate share of the income and wealth in the United States. When does one enter that top 1%? (I'll use "k" for 1,000 and "M" for 1,000,000 as we usually do when communicating with clients or discussing money; thousands and millions take too much time to say.) Available data isn't exact, but a family enters the top 1% or so today with somewhere around $300k to $400k in pre-tax annual income and over $1.2M in net worth. Compared to the average American family with a pre-tax income in the mid-$50k range and net worth around $120k, this probably seems like a lot of money. But, there are big differences within that top 1%, with the wealth distribution highly skewed towards the top 0.1%.

The Lower Half of the Top 1%
The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well. Everyone's tax situation is, of course, a little different. On earned income in this group, we can figure somewhere around 25% to 30% of total pre-tax income will go to Federal, State, and Social Security taxes, leaving them with around $250k to $300k post tax. This group makes extensive use of 401-k's, SEP-IRA's, Defined Benefit Plans, and other retirement vehicles, which defer taxes until distribution during retirement. Typical would be yearly contributions in the $50k to $100k range, leaving our elite working group with yearly cash flows of $175k to $250k after taxes, or about $15k to $20k per month.

Until recently, most studies just broke out the top 1% as a group. Data on net worth distributions within the top 1% indicate that one enters the top 0.5% with about $1.8M, the top 0.25% with $3.1M, the top 0.10% with $5.5M and the top 0.01% with $24.4M. Wealth distribution is highly skewed towards the top 0.01%, increasing the overall average for this group. The net worth for those in the lower half of the top 1% is usually achieved after decades of education, hard work, saving and investing as a professional or small business person. While an after-tax income of $175k to $250k and net worth in the $1.2M to $1.8M range may seem like a lot of money to most Americans, it doesn't really buy freedom from financial worry or access to the true corridors of power and money. That doesn't become frequent until we reach the top 0.1%.

I've had many discussions in the last few years with clients with "only" $5M or under in assets, those in the 99th to 99.9th percentiles, as to whether they have enough money to retire or stay retired. That may sound strange to the 99% not in this group, but generally accepted "safe" retirement distribution rates for a 30 year period are in the 3-5% range, with 4% as the current industry standard. Assuming that the lower end of the top 1% has, say, $1.2M in investment assets, their retirement income will be about $50k per year plus maybe $30k-$40k from Social Security, so let's say $90k per year pre-tax and $75-$80k post-tax if they wish to plan for 30 years of withdrawals. For those with $1.8M in retirement assets, that rises to around $120-150k pretax per year and around $100k after tax. If someone retires with $5M today, roughly the beginning rung for entry into the top 0.1%, they can reasonably expect an income of $240k pretax and around $190k post tax, including Social Security.

While income and lifestyle are all relative, an after-tax income between $6.6k and $8.3k per month today will hardly buy the fantasy lifestyles that Americans see on TV and would consider "rich". In many areas in California or the East Coast, this positions one squarely in the hard working upper-middle class, and strict budgeting will be essential. An income of $190k post tax or $15.8k per month will certainly buy a nice lifestyle but is far from rich. And, for those folks who made enough to accumulate this much wealth during their working years, the reduction in income and lifestyle during retirement can be stressful. Plus, watching retirement accounts deplete over time isn't fun, not to mention the ever-fluctuating value of these accounts and the desire of many to leave a substantial inheritance. Our poor lower half of the top 1% lives well but has some financial worries.

Since the majority of those in this group actually earned their money from professions and smaller businesses, they generally don't participate in the benefits big money enjoys. Those in the 99th to 99.5th percentile lack access to power. For example, most physicians today are having their incomes reduced by HMO's, PPO's and cost controls from Medicare and insurance companies; the legal profession is suffering from excess capacity, declining demand and global outsourcing; successful small businesses struggle with increasing regulation and taxation. I speak daily with these relative winners in the economic hierarchy and many express frustration.

Unlike those in the lower half of the top 1%, those in the top half and, particularly, top 0.1%, can often borrow for almost nothing, keep profits and production overseas, hold personal assets in tax havens, ride out down markets and economies, and influence legislation in the U.S. They have access to the very best in accounting firms, tax and other attorneys, numerous consultants, private wealth managers, a network of other wealthy and powerful friends, lucrative business opportunities, and many other benefits. Most of those in the bottom half of the top 1% lack power and global flexibility and are essentially well-compensated workhorses for the top 0.5%, just like the bottom 99%. In my view, the American dream of striking it rich is merely a well-marketed fantasy that keeps the bottom 99.5% hoping for better and prevents social and political instability. The odds of getting into that top 0.5% are very slim and the door is kept firmly shut by those within it.

The Upper Half of the Top 1%
Membership in this elite group is likely to come from being involved in some aspect of the financial services or banking industry, real estate development involved with those industries, or government contracting. Some hard working and clever physicians and attorneys can acquire as much as $15M-$20M before retirement but they are rare. Those in the top 0.5% have incomes over $500k if working and a net worth over $1.8M if retired. The higher we go up into the top 0.5% the more likely it is that their wealth is in some way tied to the investment industry and borrowed money than from personally selling goods or services or labor as do most in the bottom 99.5%. They are much more likely to have built their net worth from stock options and capital gains in stocks and real estate and private business sales, not from income which is taxed at a much higher rate. These opportunities are largely unavailable to the bottom 99.5%.

Recently, I spoke with a younger client who retired from a major investment bank in her early thirties, net worth around $8M. We can estimate that she had to earn somewhere around twice that, or $14M-$16M, in order to keep $8M after taxes and live well along the way, an impressive accomplishment by such an early age. Since I knew she held a critical view of investment banking, I asked if her colleagues talked about or understood how much damage was created in the broader economy from their activities. Her answer was that no one talks about it in public but almost all understood and were unbelievably cynical, hoping to exit the system when they became rich enough.

Folks in the top 0.1% come from many backgrounds but it's infrequent to meet one whose wealth wasn't acquired through direct or indirect participation in the financial and banking industries. One of our clients, net worth in the $60M range, built a small company and was acquired with stock from a multi-national. Stock is often called a "paper" asset. Another client, CEO of a medium-cap tech company, retired with a net worth in the $70M range. The bulk of any CEO's wealth comes from stock, not income, and incomes are also very high. Last year, the average S&P 500 CEO made $9M in all forms of compensation. One client runs a division of a major international investment bank, net worth in the $30M range and most of the profits from his division flow directly or indirectly from the public sector, the taxpayer. Another client with a net worth in the $10M range is the ex-wife of a managing director of a major investment bank, while another was able to amass $12M after taxes by her early thirties from stock options as a high level programmer in a successful IT company. The picture is clear; entry into the top 0.5% and, particularly, the top 0.1% is usually the result of some association with the financial industry and its creations. I find it questionable as to whether the majority in this group actually adds value or simply diverts value from the US economy and business into its pockets and the pockets of the uber-wealthy who hire them. They are, of course, doing nothing illegal.

I think it's important to emphasize one of the dangers of wealth concentration: irresponsibility about the wider economic consequences of their actions by those at the top. Wall Street created the investment products that produced gross economic imbalances and the 2008 credit crisis. It wasn't the hard-working 99.5%. Average people could only destroy themselves financially, not the economic system. There's plenty of blame to go around, but the collapse was primarily due to the failure of complex mortgage derivatives, CDS credit swaps, cheap Fed money, lax regulation, compromised ratings agencies, government involvement in the mortgage market, the end of the Glass-Steagall Act in 1999, and insufficient bank capital. Only Wall Street could put the economy at risk and it had an excellent reason to do so: profit. It made huge profits in the build-up to the credit crisis and huge profits when it sold itself as "too big to fail" and received massive government and Federal Reserve bailouts. Most of the serious economic damage the U.S. is struggling with today was done by the top 0.1% and they benefited greatly from it.

Not surprisingly, Wall Street and the top of corporate America are doing extremely well as of June 2011. For example, in Q1 of 2011, America's top corporations reported 31% profit growth and a 31% reduction in taxes, the latter due to profit outsourcing to low tax rate countries. Somewhere around 40% of the profits in the S&P 500 come from overseas and stay overseas, with about half of these 500 top corporations having their headquarters in tax havens. If the corporations don't repatriate their profits, they pay no U.S. taxes. The year 2010 was a record year for compensation on Wall Street, while corporate CEO compensation rose by over 30%, most Americans struggled. In 2010 a dozen major companies, including GE, Verizon, Boeing, Wells Fargo, and Fed Ex paid US tax rates between -0.7% and -9.2%. Production, employment, profits, and taxes have all been outsourced. Major U.S. corporations are currently lobbying to have another "tax-repatriation" window like that in 2004 where they can bring back corporate profits at a 5.25% tax rate versus the usual 35% US corporate tax rate. Ordinary working citizens with the lowest incomes are taxed at 10%.

I could go on and on, but the bottom line is this: A highly complex set of laws and exemptions from laws and taxes has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules. I am not optimistic.

Addendum from the investment manager (not Domhoff), added January 2012
A few blogs and emails have disagreed with the views presented in this article. I'll address two of them here:

A New York Times article (Economix, 1/17/12) agrees that the threshold for being in the top 1 per cent in household income is about $380k but states that, based on Fed data, the 1% threshold for net worth is $8.4M. The figure I use is around $1.5M and comes from the IRS. The Fed uses a simple formula based on assets and liabilities at a broad level of analysis with little detail. Using Fed data, about 8% of US households have a net worth exceeding $1M and the median net worth of the top 10% of US families is $1.569M. The IRS uses the estate multiplier technique to calculate the data, a more complex measure based on tax returns, capitalization of earnings power, and other factors. The estate multiplier technique has been around for decades, is more widely used, and in the opinion of many, is the more accurate number. Where the true threshold is located is impossible to determine with accuracy, but my observations in managing money support the lower number or something close to it.

One reader opined that my analysis regarding the bottom half and top half of the top 1% is incorrect and that many business people can amass $20M. Based on my experience with at least a thousand high net worth folks over the last couple of decades, I disagree. The folks in the top 0.5% and particularly the top 0.1% are in my experience very likely to have been the recipients of largesse in the investment industry or banking industry, and this includes those at the top of corporations where compensation is tied to options and stock or those who have careers near the top of the banking and investment industry. There are exceptions, of course.

Let's make the assumption that someone who has an income in the top 1% would reasonably be expected to retire in the top 1%. Everybody's tax situation is a little different, depending upon the state they live in and the deductions they can make. Someone making $380k gross will likely pay about a third of that in Federal and State taxes, leaving about $250k after taxes. Generally, someone making $380k will want to live fairly well, certainly not at the level of the average dual working couple with an income around $55k. Let's say they spend $150k/year, hardly a high end budget in most of the US. That leaves about $100k per year to invest. It is unlikely that even with investment success they are going to amass $10M or $20M by the end of their careers. This fits my observations working with many physicians in many different specialties, and it is generally getting harder to make money in medicine than in the past. Older physicians are retiring today with around $3M to $8M, with just a few above that. Younger physicians are making between $200k and $400k annually with a few specialties above that and their typical annual investment contributions run between $50k and $100k.

The bottom line here is that I think it is very difficult to create a net worth in excess of $10M from income alone. Yes, sports stars, entertainers, and some business people do -- but they are rare. Those with a higher net worth tend to acquire most of their net worth from capital gains, not income that has been saved and invested. Large capital gains tend to come when private businesses are acquired by private or public companies with stock or when executives are paid directly by options or stock. Wall Street and the banking industry are frequently involved, either directly or indirectly.

tbm3fan
03 Dec 14,, 23:26
No surprise to me. About a year ago I had a fellow in my exam chair, who I have known awhile, and we were killing some time waiting on dilation. He packages securities and takes them to Wall Street as a investment portfolio. Necessitates that he go out to dinner with those above 0.5% for marketing. He came right out and told me that Wall Street is skewed so that only they can win and even he, with inside knowledge, can't win. Pretty much the same coin, but maybe flip side, with the article above and capital gains as a way to wealth.

citanon
04 Dec 14,, 01:47
A nice summary of some well known facts with one big misdirection at the heart of the thesis:


"In my view, the American dream of striking it rich"

Really? I thought the American dream is to work hard earn a good living and get a happy life for you and your family. Last I checked that required about $75,000 a year (http://www.inc.com/news/articles/2010/09/study-says-$75,000-can-buy-happiness.html)for the average American, not $10M.

If the dream is to be richer than %99.5 of your fellow Americans, then by definition, 99.5% of people won't achieve it. :slap:

If the dream is to be happy, then it seems most of us are within striking distance, at least financially:

GDP per capita for the US is about $50K. (http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita) Not bad, don't you think as that includes the old and the retired.

Some people (cough liberals cough) love to talk about the top X% or the 0.X% as it apparently stands now (:biggrin:) because they better at class warfare than coming up with solutions that move more and more American families to $75K per earner and think it's hopeless anyways because Americans are stupid (http://www.washingtontimes.com/news/2014/nov/10/obamacare-architect-we-passed-law-due-to-stupidity/) (:tongue:).

Let's see what's really driving our widening inequality: The economy is in a tough transition, regulations are overblown, banking policy is unleashing a torrent of money but regulations make it hard to invest in productive activity. Guess what, under those circumstances money will flow into equities and inflate valuations. Management seeking to justify valuations without good ways to increase productive activity will instead seek "efficiency". The richest fraction then get richer and employees with less in demand skill have their livelihoods jeopardized.

So what's the liberal prescription? Increase taxes? The problems leading to our current situation will remain. The extra money will disappear into the morass of government, and even as the rich try to offshore their money, we will start to find out exactly how "substantial" those trillions of dollars the Fed conjured out of thin air and injected into the markets are when moved to government coffers.

What we need to do as a country is come together and solve the fundamentals, not more of this 1% or 0.5% or 0.1% folly.

astralis
04 Dec 14,, 02:43
citanon,


Last I checked that required about $75,000 a year for the average American, not $10M.

well, i agree with you that the "american dream" doesn't really equal to $10M (of course, even $75k/yr is 50% more than what the average american makes).

i think a better definition is, do my kids have a better standard of living than i do. and right now, that definition would be true in the long-term technology sense rather than economic sense, because of the massive cost inflation in what we would consider middle-class standards of housing, education, and healthcare vis-a-vis wage stagnation. i don't know about "within striking distance" seeing as how the median income has stagnated for 20+ years.


Some people (cough liberals cough) love to talk about the top X% or the 0.X% as it apparently stands now () because they better at class warfare

frankly given the growth of the 1%, and even more so the 0.1% in the last 20 years, if there's any class warfare involved it's pretty clear who won ;)

i mean, even -liberals- have largely conceded this fight. as i've pointed out before, -richard nixon- was economically to the left of every single democrat today. i suppose bernie sanders, the socialist, might be more left.


Let's see what's really driving our widening inequality: the economy is in a tough transition, regulations are overblown, banking policy is unleashing a torrent of money but regulations make it hard to invest in productive activity.

eh, if that were true, why has inequality grown across both republican and democratic administrations? why did it -accelerate- under the Reagan Administration?

frankly inequality at its basis is driven by the massive growth in the labor pool, caused by both the way modern technology creates a far less labor-centric economy, and by the end of the cold war/globalization.

capital is now much more valued than labor as a result, and thus it is no surprise that the 1% have reaped most of the growth from the vast improvements in economic/labor efficiency in the last 30 years. this would have already been true without them wielding/influencing political power.


even as the rich try to offshore their money, we will start to find out exactly how "substantial" those trillions of dollars the Fed conjured out of thin air and injected into the markets are when moved to government coffers.

still waiting for that massive inflation spike. how many years have inflation hawks been screaming about this now?


What we need to do as a country is come together and solve the fundamentals, not more of this 1% or 0.5% or 0.1% folly.

the most important issue facing the US is really political in nature (gerrymandering, for instance). the rest would follow, as that would force moderation. that's actually another way of saying how the country would come together, because otherwise it most certainly wouldn't.

on the other hand i don't think that even "coming together" would solve all of our economic problems, simply because there would be so many politically unpalatable things-- at least in my version of "were i king for a day".

for instance, a much more free immigration policy would attract millions of immigrants, thereby solving US demographic issues. i gather that would not be very popular. massive reform of health insurance; elimination of employer-based insurance as everyone transfers to a far more efficient single-payer system. thus ending the much hated Obamacare in one swell foop...along with the US healthcare insurance industry.

elimination of all agricultural tariffs, complete free trade. a form of graduated sales tax, and eliminate the income tax (and the hated IRS).

eliminate most of our welfare agencies, and instead implement a guaranteed minimum income.

a huge national infrastructure investment bank run on a combination of public-private funds instead of Congressional pork.

hell, throw in mandatory PhDs-medical/law degree equivalents for teachers.

etc etc.

and as you see, all of them would be politically toxic to the core-- to both sides!-- despite the end result being a FAR more streamlined but efficient bureaucracy.

seeing as how that's not going to happen, it's more important to see how and why the current political-economic system works the way it does. note how the article doesn't just talk about the political benefits of being in the 0.1%, it also talks about the inherent benefits that the 0.1% garner just from the economic system alone, given the way financial instruments can be set up to protect/increase wealth in a way that very, very few in the rest of the salary-earning population could match.

zraver
04 Dec 14,, 03:29
No surprise to me. About a year ago I had a fellow in my exam chair, who I have known awhile, and we were killing some time waiting on dilation. He packages securities and takes them to Wall Street as a investment portfolio. Necessitates that he go out to dinner with those above 0.5% for marketing. He came right out and told me that Wall Street is skewed so that only they can win and even he, with inside knowledge, can't win. Pretty much the same coin, but maybe flip side, with the article above and capital gains as a way to wealth.


have you looked at high frequency trading on dedicated fiber optic networks?

Basically you place an order for X stock at Y price but they get a chance to buy it first making your actual price Y+ their profit as they sell it to you. Unless you have your own dedicated fiber optic network you are always buying at Y+ or selling at -Y.


Flash Boys - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Flash_Boys)

kato
04 Dec 14,, 06:31
So what's the liberal prescription? Increase taxes?

https://www.youtube.com/watch?v=h45WnW0ASFY


and as you see, all of them would be politically toxic to the core-- to both sides!-- despite the end result being a FAR more streamlined but efficient bureaucracy.
Depends on perspective. What that proposal basically is is mixing up the extremes from both ends. Wouldn't work of course. There's places that have all of that; Switzerland in particular comes to mind*. You can see the result of such measures in those countries.

Capitalism would simply raise price levels to where the guaranteed minimum income is just the new welfare level; the move from income to sales tax only serves to redistribute effective income to the rich who place statistically more into savings; mandatory PhDs for certain professions breeds a new elitism, and brings those who can't shoulder this investment to a lower level; the free immigration policy would serve as merely a means of getting cheap labour; the single-payer national insurance would soon only cover a certain spectrum, with the real health industry moving into top-up insurance schemes; the national infrastructure investment bank would simply become the new pork barrel where you place your lobbying agents.

*- the national infrastructure investment bank is a more German than Swiss (http://en.wikipedia.org/wiki/KfW) idea though.

astralis
04 Dec 14,, 14:40
kato,


Switzerland in particular comes to mind

the which is not exactly a hell-hole...:biggrin:


Capitalism would simply raise price levels to where the guaranteed minimum income is just the new welfare level;

there might be SOME inflation involved but not significant amounts; the effect would be to take all the disparate welfare streams and force it down to a few. it'd also dramatically reduce the number of serving agencies, freeing up more money.


the move from income to sales tax only serves to redistribute effective income to the rich who place statistically more into savings;

many ways around it; a progressive sales tax or alternatively a progressive consumption tax.


mandatory PhDs for certain professions breeds a new elitism, and brings those who can't shoulder this investment to a lower level;

don't mind- teaching should not be a work program. i would like to model an education program after the scandinavians, at any rate.


the free immigration policy would serve as merely a means of getting cheap labour;

not just people low on the economic totem pole but people higher up. the current US system is an excruciatingly inefficient mess, driving away people who came here for education.


the single-payer national insurance would soon only cover a certain spectrum, with the real health industry moving into top-up insurance schemes;

single payer health care, not insurance. if people want they can certainly pay for extras-- the rich in every country already do, from private clinics to in some cases personalized drugs and DNA testing.


the national infrastructure investment bank would simply become the new pork barrel where you place your lobbying agents.


again, harder to do if they come from the bureaucracy vice a politician.

===

in any case, i completely recognize what i wrote is an utopia, in every meaning of the word. i'm sure there is SOMETHING that would make my system economically untenable, despite my words above. :)

however, what i am getting at is that the way the global economy is set up, along with current technological trends, vastly favors the wealthy. it's not an accident that global inequality has been increasing, not just in the US.

this is bad not just in terms of fairness but just in simple economic efficiency: there's a greater limit on what the rich can spend (they, too, only have 24 hours in a day), along with the liquidity of the global finance market, means regulations that work on a national level can be avoided...or influenced away.

kato
04 Dec 14,, 18:23
the which is not exactly a hell-hole...:biggrin:
From a European or an American perspective? :whome:


there might be SOME inflation involved but not significant amounts;
In Switzerland both average and median income is 60% higher than in Germany. Living costs match this disparity almost exactly. In fact, with the same level of education and job, you're quite often worse off in Switzerland. Especially as an immigrant.


the effect would be to take all the disparate welfare streams and force it down to a few. it'd also dramatically reduce the number of serving agencies, freeing up more money.
We actually did that in 2005, combining about four different welfare streams (of various levels, and for various purposes) under a single moniker and with a single ruleset. Half a year later the government who pushed it through resigned.


many ways around it; a progressive sales tax or alternatively a progressive consumption tax.
How do you calculate a progressive consumption tax without an instrument even mightier than the IRS?


the current US system is an excruciatingly inefficient mess, driving away people who came here for education.
Compared to other countries the US higher education system actually has a rather high retention rate of graduates.


single payer health care, not insurance.
That'd lead to something like the British NHS, which isn't exactly considered a role model... which, okay, might look different from the US angle where the primary concern nowadays is the exceedingly high cost of treatment.


again, harder to do if they come from the bureaucracy vice a politician.
A national investment bank would always have a political angle. Usually because in the end it would become a subset of the finance or economics branch of the government. If it didn't - at the start - then it would soon gain one as both sides begin fighting over its control.


however, what i am getting at is that the way the global economy is set up, along with current technological trends, vastly favors the wealthy.
Any capitalist economy favours the wealthy - it creates a world after its own image. That's never been different, and is effectively the core tenet of capitalism itself. There's someone who wrote something about it 170 years ago. Much of it is still true, despite that man even underestimating the adaptability of the bourgeoisie.

astralis
04 Dec 14,, 19:53
kato,


How do you calculate a progressive consumption tax without an instrument even mightier than the IRS?

The progressive consumption tax: A win-win solution for reducing American economic inequality. (http://www.slate.com/articles/business/moneybox/2011/12/the_progressive_consumption_tax_a_win_win_solution _for_reducing_american_economic_inequality_.html)


Compared to other countries the US higher education system actually has a rather high retention rate of graduates.

US colleges are doing quite well, actually, in no small part due to the flood of money and the strength of our immigrant population in S&T.

elementary-high school education has not done well for some time. there's been some improvements but they're localized given our system of local control.


That'd lead to something like the British NHS, which isn't exactly considered a role model... which, okay, might look different from the US angle where the primary concern nowadays is the exceedingly high cost of treatment.

eh, UK isn't too bad. not the best, but not bad. certainly better than the former US system. i'm hoping the current US system, which is similar to switzerland, will begin to approach switzerland's quality/cost ratio, which is close to what the UK has now.

for the world-beaters, i'd like to see our system be equivalent to that of France or Japan's.


Any capitalist economy favours the wealthy - it creates a world after its own image. That's never been different, and is effectively the core tenet of capitalism itself. There's someone who wrote something about it 170 years ago. Much of it is still true, despite that man even underestimating the adaptability of the bourgeoisie.

i don't MIND a system that favors the wealthy-- that's capitalism in a nutshell.

what i do mind is where there's a collapse of all countervailing trends to further concentration of wealth. the last time this happened, yes, about 170 years ago....there was a remarkable explosion of labor/capitalist violence.

even adam smith recognized this as poor economics; as he said:


But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin.

kato
04 Dec 14,, 20:51
The progressive consumption tax: A win-win solution for reducing American economic inequality. (http://www.slate.com/articles/business/moneybox/2011/12/the_progressive_consumption_tax_a_win_win_solution _for_reducing_american_economic_inequality_.html)
That wouldn't get rid of the IRS ;)


elementary-high school education has not done well for some time. there's been some improvements but they're localized given our system of local control.
Our state-control system - which mandates the equivalent of a Master's degree for teachers btw - isn't faring much better actually at that level.


switzerland's quality/cost ratio, which is close to what the UK has now.
Quality/cost ratio is always just a ratio. The Swiss have a 60% higher per-capita cost on health expenditure than the British (in PPP). To say they have the same quality/cost ratio would mean that the British health system is simply abysmally bad.


even adam smith recognized this as poor economics; as he said:
I was aiming closer to home, for good old Karl. ;)

In this regard:

The modern labourer, on the contrary, instead of rising with the process of industry, sinks deeper and deeper below the conditions of existence of his own class. He becomes a pauper, and pauperism develops more rapidly than population and wealth. And here it becomes evident, that the bourgeoisie is unfit any longer to be the ruling class in society, and to impose its conditions of existence upon society as an over-riding law. It is unfit to rule because it is incompetent to assure an existence to its slave within his slavery, because it cannot help letting him sink into such a state, that it has to feed him, instead of being fed by him. Society can no longer live under this bourgeoisie, in other words, its existence is no longer compatible with society.

GVChamp
05 Dec 14,, 16:28
Conversation is good. But this article is pointless. Big question: why is he writing this article? What's the context? What's he trying to prove?
Context: "We are the 99%!"
Response: "Most of the 1% isn't that bad!"
Who the fuck cares? There isn't enough money in the top 1% to fix our budget problems. There isn't even enough money in the top 5%. Those doctors/etc in the bottom half of the top 1% are still going to have to pay more taxes, no matter how you cut it, and dancing around that does no one any favors.
Playing "hot potato" with populist outrage does not fix our problems. It only makes things worse as we each spend 15 minutes in limelight for our obligatory public humiliation.

astralis
05 Dec 14,, 16:41
GVChamp,

i'm not sure that the point of the article is that "most of the 1% isn't that bad". as the author puts it:


A highly complex set of laws and exemptions from laws and taxes has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules

he even notes that this is true even if you are a highly skilled salaried professional in the top 1%-- you are still unlikely (vice vanishingly unlikely for the other 99%) to ever amass the wealth to be in the 0.1%, or the power, or the influence. there is a big disconnect between work, abilities, and pay-off.

and he's not writing this in terms of "fixing our budget problems", nor as some limelight for public humiliation. the main danger he outlines is:


I think it's important to emphasize one of the dangers of wealth concentration: irresponsibility about the wider economic consequences of their actions by those at the top.

and again, this seems quite true to me. we're only NOW recovering, employment wise, from the devastating effects of the Great Recession, and that was with an unprecedented 10 months of extremely good hiring.

meanwhile Wall Street recovered quite a long time ago.

GVChamp
05 Dec 14,, 22:09
If that's not his point, why does he spend half his column explaning why the "bottom half" of the 1% are actually hard-workers and don't have access to the halls of power? Why even introduce the concept of the "1%" at all? Why not the top 2%, or the top 5% or...
To me this looks like a piece to score political points. I don't really disagree with him, but there's a reason he's using those points as rhetorical anchors and that reason is called "Occupy Wall Street."

Cactus
06 Dec 14,, 22:42
Seems like the "investment manager" has a serious case of client-ities.


he even notes that this is true even if you are a highly skilled salaried professional in the top 1% -- you are still unlikely (vice vanishingly unlikely for the other 99%) to ever amass the wealth to be in the 0.1%, or the power, or the influence. there is a big disconnect between work, abilities, and pay-off.

Mmm... should the "highly skilled salaried professionals" even be in the top 1%, let alone the top 0.5%? The last time most of them took a major financial risk was probably when they took out a student-loan; their work-products are usually non-scalable; they wall themselves up professionally with ever-higher barriers of entry... how - no, why - do they expect to be in the top 0.1%? Who ever built a great empire hidden behind a fortress?

The United States is a free-market, capitalistic society -- it should be trying to repopulate the top 5% with more entrepreneurs and risk-takers; not worrying about the wealth prospects of the very people who form the richest 0.1%'s supporting cast of "very best in accounting firms, tax and other attorneys, numerous consultants, private wealth managers", the middle-management who run their companies, and the physicians who take care of their healths.

astralis
07 Dec 14,, 05:37
Cactus,

One of the major points he is making is that the wealthiest 0.1% are making money relatively risk free from capital gains. They're -not- taking major financial risks (at least not on a personal level, although the financial industry as a whole did, and does)- primarily because they don't need to and secondarily because there's significant protections for them. Especially for the folks inheriting the wealth, they need to be neither particularly intelligent, nor hard working, nor risk taking, to generate enormous sums.

The other point he is making is that most salaried professionals simply cannot amass the amount of money needed to boost themselves into living on capital gains, despite being at least familiar with the methods by which the 0.1% make their money. Note that he addresses small businessmen into this category as well- the real risk takers, not just the salaried professionals putting their savings into the stock market for the increased return.

Cactus
07 Dec 14,, 17:23
Familiarity with the methods of making money doesn't translate into actually putting it into practice on a daily basis. It doesn't say anything about how good they are at taking on and managing risk, how scalable is their work output, how they will adapt to competition and disruptions... the important factors which go into rewarding someone with outsized returns. Small businessmen are a transient species in this discussion -- either they will continue to take greater risks and scale up (and thus become big businessmen, or go bankrupt), or they will stabilize and become no different from the salaried professionals. My point is that the author is suffering from clientitis: Within the framework of our free-market system, the highly-skilled salaried professionals shouldn't even be in the top 5% solely on the basis of their hard-work and abilities. The top 5% should be filled with successful entrepreneurs -- men and women brave enough to tear down artificial protections, and hungry enough to take down the wealthiest 0.5% who didn't inherit the intelligence and work-ethics with their money.

astralis
07 Dec 14,, 20:01
Cactus,

I fail to see why entry into the top 5% should solely be limited to entrepreneurs. Yes, reward is a function of risk, but to get into the top 5% one 'only' needs around 190k, which is pretty much what senior upper-middle management can expect to get, or a rather prosperous doctor.

If your argument is, rather, that to be wealthy (say at the 1% level) one must have the trifecta of intelligence, hard work, and propensity to take risk, that's probably a more agreeable argument.

But note that at the 0.5% level and above, the 'reward is a function of risk' idea breaks down. That's why finance folks make up such a significant number of this population, not the entrepreneurs that you are talking about. At that level, mere compounding > risk taking as a method of amassing wealth.

GVChamp
08 Dec 14,, 22:28
Yep, best possible business is rent-seeking, and that includes huge chunks of finance. Say what you will about the Robber Barons, but at least they built crap.
I do agree with Cactus, though. Being a well-paid professional should not get you into the top 1%. And this goes back into what I was saying: the Investment Manager is trying to say that a lot of the top 1% are Doctors. And the Angry Mob likes doctors, so they lay off the 1%.
From my econ perspective, though, if we have a lot of doctors in the top 1%, it means medicine is not a competitive field and doctors are earning way too much money. All through restricting competition.
I think discussions about income inequality and plutocracy are important discussions to have, but if we are starting from "a lot of the top 1% are doctors and we should leave them alone," we're already screwed.

Might as well join the mob. WHERE'S MY PITCHFORK!

VCheng
19 Jan 15,, 17:07
Yep, best possible business is rent-seeking, and that includes huge chunks of finance. Say what you will about the Robber Barons, but at least they built crap.
I do agree with Cactus, though. Being a well-paid professional should not get you into the top 1%. And this goes back into what I was saying: the Investment Manager is trying to say that a lot of the top 1% are Doctors. And the Angry Mob likes doctors, so they lay off the 1%.
From my econ perspective, though, if we have a lot of doctors in the top 1%, it means medicine is not a competitive field and doctors are earning way too much money. All through restricting competition.
I think discussions about income inequality and plutocracy are important discussions to have, but if we are starting from "a lot of the top 1% are doctors and we should leave them alone," we're already screwed.

Might as well join the mob. WHERE'S MY PITCHFORK!


None of the analysis on doctors in these upper ranges included the impacts of the length of training (shorter earning life) and the cost of medical school (huge loans to repay at high interest). Further, many specialties and urban areas are saturated. There is already predicted to be a huge shortage of physicians in the US in the coming decades.

How do you propose to ensure adequate healthcare coverage in this scenario? Reducing income will likely make matters worse, not better.

GVChamp
19 Jan 15,, 20:58
None of the analysis on doctors in these upper ranges included the impacts of the length of training (shorter earning life) and the cost of medical school (huge loans to repay at high interest). Further, many specialties and urban areas are saturated. There is already predicted to be a huge shortage of physicians in the US in the coming decades.

How do you propose to ensure adequate healthcare coverage in this scenario? Reducing income will likely make matters worse, not better.

The point on training and loans is fair, but anecdotally, most doctors I know enjoy rather high standards of living. They're not exactly ekeing out a marginal lifestyle. And we see a lot of bright people heading into the field every year.

Granted, they probably SHOULD earn more, because they are the nation's bright(er) minds, but they aren't earning a bit more than the Average American. They are earning multiples more than the average American, even adjusted on an hourly basis.

What do you believe is causing the coming shortage of physicians?

gunnut
20 Jan 15,, 01:15
Hey I know....let's tax the top 1% and reinvest that money into the "working class."

astralis
20 Jan 15,, 17:10
gunnut,

actually, i think a consumption tax on people making over a certain amount (say, 1.5x-2x US median income) would be a great idea. wouldn't be anywhere close to a cure-all but would be a good start.

frankly i have to say that the severity of the Great Recession really shook my faith in Third Way ideals in terms of economics. there's more and more economic evidence that wealth concentration at the levels we have now is economically inefficient, to the point where rising tides do not raise all boats. a focus on education and opportunity is simply not enough any more-- college attendance levels and correspondingly worker productivity have gone up significantly but median income hasn't moved in the last fifteen-twenty years, why?

by the way, even though it was a sarcastic comment, i'd say instead of investing in the "working class" (which these days means your minimum-wage earner, the type who earns 15-25K a year), it's a good idea to instead invest in the middle class (35-65K a year). percentage-wise, even the poor have increased their earnings more than the middle class, although of course both pale in comparison to the upper class.

which makes sense, as technology and a vastly expanded global labor pool hugely favors capital over labor.

tantalus
20 Jan 15,, 18:09
Surely one of the main issues is identifying a fair level of tax that should be paid, and then ensuring that it is paid, 2 separate questions, that should be applied to the uber-wealthy and the large corporations. The wealthy are influential in law making, lobbying and can afford to pay experts to find loopholes in complex tax systems, this can result in a level of tax being paid that is not equitable, I find it difficult to see the controversial nature of this, as opposed to a policy of higher taxes.

I hear of a great deal of political debate on higher taxes for the rich out of the US, should the matter not be framed as higher taxes, but instead as ensuring that individuals and companies pay the current taxes.

I vaguely understand the notion of diminishing returns with wealth concentration, but tackling that sounds like a much more difficult ideological issue to handle, and one that might not even have any desirable practical solution other than merely tolerating it as a difficult byproduct, I have no idea.

GVChamp
20 Jan 15,, 23:04
What do you have in mind besides Third Way Economics? The Era before Third Way and Thatcher-Reagan was the Era of Bretton Woods, huge capital controls and financial repression, and mass-scale price fixing...as in the government literally banned price and wage increases in an effort to control inflation.

These were some radically dumb policies and I don't want to go back to them. Even if you prefer a more managerial capitalist style, say, having more unions, with union execs on the board, it's radically different from the Winter of Discontent and having the government directly and permanently owning General Motors.

astralis
21 Jan 15,, 03:01
GVChamp,


The Era before Third Way and Thatcher-Reagan was the Era of Bretton Woods, huge capital controls and financial repression, and mass-scale price fixing...as in the government literally banned price and wage increases in an effort to control inflation.

well, i don't think we're exactly on the verge of hyperinflation...;)

i'm still believe in the utility of a lot of Third Way beliefs, but am coming to believe that by itself it is not sufficient. the Third Way worked quite well for the era it started in: the late '80s to the '90s. its embrace of globalization and free trade, for instance, is still a good thing.

but now that the level of globalization is far beyond what we had in the '90s, it's also time to take reckoning that a focus on education and technology alone (which in Third Way theory would allow people to transcend the old arguments) is insufficient.

to put some numbers to what i alluded to above: in the last twenty years, for instance, the percentage of americans with a college degree went from roughly 20% to 35-40% today. yet real median income has remained flat at around 50K.

and considering that there's a -premium- for graduating from college, IE bachelor degree holders make considerably more than the median, that means poor people are getting poorer faster than educated people are getting wealthy, if you get my drift.

GVChamp
21 Jan 15,, 15:35
Well I won't deny that Third Way is insufficient: all ideas fail eventually. It's not like Third Way fails as badly as State Sponsored Communism :P
So, just let me ramble a second and let me know if I understand correctly.
First Point: Diagnose failure and characterize problem.Third Way Economics majorly fails to advance the living standards of the average person. This is not so much because Third Way doesn't advance productivity, but because it does not distribute the gains of the economy equally. And the uneven wealth distribution has actually caused damage to GDP growth, too, which will only increase with time.
So that's how we diagnose failure.
Second Point: Disprove Third Way's standard prescription. Third Way emphasizes education and equalization of opportunity as solutions to this, since Third Way is market oriented...but that's obviously insufficient, you can see that in how median wages stagnated DESPITE increases in education. So Third Way naturally cannot get us out of this mess.
Third Point: Identifying the underlying reason for failure. You're pointing towards increase in globalization, which is causing a huge increase in the supply of labor, which naturally means labor is undervalued vs. capital. Third Way economics cannot actually fix this based on education, because the underlying supply-demand dynamics demand labor get less of a share, and simply increasing human capital would never correct this problem.
Fourth Point: Suggest replacement. Not seeing this one yet...sounds like the standard would be tax the rich and give to the middle class, with justification being "middle class Americans deserve to enjoy the riches of the world, too." Standard Social Democracy, not even a real fundamental change, really, just changing the burden of who pays for the government we have.

So that close to what you're thinking?

Blademaster
21 Jan 15,, 16:22
The story of 1% owning a majority of wealth is nothing new. It has always been like that for millennia. Kings and nobles would own vast tracts of land and in the past, land & property was a marker of the extent of wealth and the masses' standard of living was abysmal not improving that much. Even in the early days of the Republic, you had few landowners that own vast tracts of land. It was just that at that time, there were more land than people. In modern times, the situation has changed to that even though that 1% owning a large majority of wealth, it didn't stop the standard of living from improving for the masses on a scale that we can see and directly measure. We live in a time where conditions in society allows that even the wealthy 1% still owns a majority of wealth, any significant increase of wealth no matter how the distribution goes translate into a higher standard of living for the common man on the street. Compare the living conditions of a common man today to 50 years ago in USA. Today, even though the common man's share of wealth is much lower, he still has a way better living standard, i.e., he can eat meat nearly everyday, it is much easier to own a bigger house, he can have multiple tvs and multiple cars, access to better healthcare that can solve way more problems than the healthcare of 50 years ago, better access to education, more educated (50 years ago, the rate of reading level and math level was vastly lower and less people went to school), he can eat better, he can live longer, he can enjoy life in a better quality, he can travel farther (for example, it was very expensive to travel halfway around the world and was only fit for the rich and famous people 50 years ago. Now the common man can travel halfway around the world without busting his budget or savings.), he can talk to anyone on the planet anytime anywhere without busting his budget, and the list goes on.

The system works as long as the measure of standard of living improves for the common man. As long as the common man sees his conditions improve, he will accept that the 1% owns a large majority of wealth and win. As the saying goes, the house always wins at games of stakes but that doesn't stop people from coming to casinos and hoping for the next big score. Look at Las Vegas. Las Vegas is one big giant vacuum of money for 99.9% of people that visit Las Vegas. People regularly lose on average $1,200 even though their chances of winning big is less than 1% and they are still fine with it because as long as they are having fun to make up for their loss, they will come every time they get a chance. Las Vegas casinos understand those rules of the game very well. They do their damnest to make sure that when people come here, they have a good time. The minute they stop having a good time, those casinos through various ways ship them out before they lose more money and really start losing their shirts and start questioning the system as the casinos need to maintain the image of Las Vegas as a place to have a good time so people will still keep coming.

Likewise with the 1% owning a large majority. They know that as long as the masses are content and happy to see improvement, the masses will not question the system, i.e., the current 1% can keep their money and not worry about a mass revolt and a communist uprising or class revolt (the communist uprising or class revolt will not change the system. It will just swap out the people who are in the 1% for a different set of people who can be in the 1% and the system of 1% owning a large majority will continue just under different players). So as long as the common man can achieve the American Dream (it is a concept that changes with the time and not concrete and iron solid) of their day through ordinary means, i.e., it is fairly easy to get a loan to buy a good home and get some healthcare coverage and have your own means of transportation, the common man is not gonna look too hard at the 1% or how the game is rigged. He will just try to play the game and go home if he loses and be content.

astralis
21 Jan 15,, 16:39
GVChamp,


Third Way Economics majorly fails to advance the living standards of the average person. This is not so much because Third Way doesn't advance productivity, but because it does not distribute the gains of the economy equally. And the uneven wealth distribution has actually caused damage to GDP growth, too, which will only increase with time.
So that's how we diagnose failure.


i wouldn't say "majorly fails", but has been ineffective. this is a bit of squabbling over the terms, but i think it's important to recognize that there is some truth in the statement that even when median income has not moved, what one can buy with 50K today is different from what was possible in 1990. the advent of the iphone/internet, for instance.


Second Point: Disprove Third Way's standard prescription. Third Way emphasizes education and equalization of opportunity as solutions to this, since Third Way is market oriented...but that's obviously insufficient, you can see that in how median wages stagnated DESPITE increases in education. So Third Way naturally cannot get us out of this mess.


rather, Third Way policies ALONE cannot get us out of this mess. for instance, i highly doubt our economy would be BETTER if education/college attendance levels had stagnated...;)

education/technology is still highly important for keeping the US competitive in a global marketplace. OTOH it's not the end-all/be-all for economic growth, either. for instance, the US did not suddenly become less educated or lose some huge technological lead in the two years between 2007 and 2009, yet trillions of dollars of wealth had evaporated in that timeframe. that's one issue.

another issue would be the Third Way silence on education outside of college, IE trade schools. free trade is all very well, but not enough time was spent (especially in the '90s) addressing the losers of a free-trade agreement. there was a large assumption that there would be some disruption but in the end, everyone would go to college and things would be fine. adjustment has been rockier than that.


Third Point: Identifying the underlying reason for failure. You're pointing towards increase in globalization, which is causing a huge increase in the supply of labor, which naturally means labor is undervalued vs. capital. Third Way economics cannot actually fix this based on education, because the underlying supply-demand dynamics demand labor get less of a share, and simply increasing human capital would never correct this problem.

again, i'd say that more accurately education is not sufficient, especially given that other countries-- especially developing ones-- are also improving their educatonal systems. and they're coming from a lower base, so their relative gains are larger.

too much of the '90s optimism that we'd just continue the "new economy rate of growth" forever. there will be crunch times, and the Neo-Keynesian economic theories that underlined the Third Way were fairly silent on the issue.


Fourth Point: Suggest replacement. Not seeing this one yet...sounds like the standard would be tax the rich and give to the middle class, with justification being "middle class Americans deserve to enjoy the riches of the world, too." Standard Social Democracy, not even a real fundamental change, really, just changing the burden of who pays for the government we have.


a different justification and different change, really. rather than "middle class Americans deserve to enjoy the riches of the world", i'd say that "middle class Americans deserve more opportunities."

one of the standard tropes of the Third Way is that they do not care how, or how much, the rich make, as long as we can expand the opportunities open to the poor and middle class. this is actually a bit of co-opting of conservative theories of "trickle-down" into the old liberal ideology.

but since the Great Recession it's become pretty clear that there's a limit to this: there's definitely areas where how and how much the rich make can hurt the broader economy and those opportunities for the rest. "too big to fail"; the financial markets, and the way that wealth is channeled into short-term beneficial, long-term destructive areas.

it's hard to argue now, for instance, that the accelerating trillions of dollars funneled into the various derivative markets have significantly improved the overall economy. yet at the same time national infrastructure is falling apart because returns on those are measured in decades and not quarters.

policy-wise, this means that the focus should not be a direct "tax the rich", but to tax potential economically destructive behaviors. that financial transaction tax sounds like a decent idea, for instance.

and to demonstrate that i haven't abandoned the Third Way altogether, i do agree that there should a long-term restructuring of our welfare state to increase the monies spent on infrastructure and scientific investment rather than merely subsidizing post-retirement folks. that's why i was such a big supporter of some medical reform, because so much of our money is locked away there.

GVChamp
24 Jan 15,, 15:33
Dammit, man, I have limits on my working memory! All these nuances are overwhelming me with detail. Appeal to my inner-INTJ and just get to the point! :P

Your education point is noted. Third Way emphasizes education, particularly 4-year schools of the upper middle class, as the predominant way forward. You don't disagree that education is important (obviously), but that it's not enough, particularly if you are going all in on 4 year schools. Conservatives will find a lot of agreement with you here. We're quite fed up with the "everyone goes to college" mantra.

So the real emphasis would be:
1. It really does matter if the rich get richer, if they are getting money off of value-destructive opportunities. Most noted is Finance. And Third Way, let's be honest, was REAL apologetic towards Big Banks. It's part of why the UK and the US have giant banking sectors (though the US still has smaller and more regulated banks than the Germans or the French, IMHO).
2. We really need to more proactively address losers. Third Way is not aggressive enough in protecting people from economic dislocation.
3. Third Way does not pay attention enough to counter-cyclical economic policy. This is REAL important when you consider Point 2. Losers lose in recessions, and they stay losers...long-term unemployed, anyone? These two reinforce each other. Not surprising, Third Way comes at the tail end of the Great Moderation, when it was assumed that we would never again have a Great Recession.

So it that closer? Just trying to get a fully fleshed out picture!

kato
24 Jan 15,, 18:42
(though the US still has smaller and more regulated banks than the Germans or the French, IMHO).
There are at least two US banks that are (considerably) bigger than the biggest of the four German "big banks", and at least five US banks bigger than the second-biggest German one.

If you want underregulated big banks, you might want to look either one country west or one south. Or, for that matter, on the other end of the planet.


Losers lose in recessions, and they stay losers...
From a Swabian perspective: Get rid of US personal debt culture, and you get rid of most of those gamblers.

GVChamp
25 Jan 15,, 23:40
There are at least two US banks that are (considerably) bigger than the biggest of the four German "big banks", and at least five US banks bigger than the second-biggest German one.

If you want underregulated big banks, you might want to look either one country west or one south. Or, for that matter, on the other end of the planet.


From a Swabian perspective: Get rid of US personal debt culture, and you get rid of most of those gamblers.

But are those figures adjusted for the total size of the economy?