Didn't know that about the Forex market, nice. How does it change things? — fdrake

Financial markets don't "generate wealth". Comparing the world's GDP with the volume of transactions on financial markets is meaningless. If I, using entity A, sell $300 billion to entity B (which is also owned by me), and then entity B sells $300 billion back to entity A that counts as $600 billion worth of trading in terms of volume. What does that have to do with how much entity A and entity B produce (which does impact GDP)?

I don't think I implied much about how people get rich. — fdrake

You talked about the generation of wealth though.

What I care about is what makes money flow around, apparently this is the Forex Market then the Credit market. — fdrake

Those are tools though. Money can flow for different reasons, such as avoiding taxation, getting ready to do business with another country, etc.

Companies can also sell their shares to generate wealth, the credit market is implicated in business start ups too (most of which fail, as was already pointed out). — fdrake

They don't generate wealth, they generate capital when selling their stock. Capital isn't the same as wealth.

Where is the real money? What does 'real money' mean? — fdrake

Significant sums of money.

Financial speculation generates no wealth, but the credit market is the second biggest, and the first biggest contains currency speculation and exchange. What conception of wealth are you working with? — fdrake

Wealth = production + services

This paragraph is dataless assertion anyway. — fdrake

What data do you want? Take a copy of Forbes for example, and tally up how many billionaires made their fortune from starting a business and how many from the financial markets.

You've provided mostly dataless counterpoints with no arguments. — fdrake

There are arguments there, and they are based on data. It is a fact that most rich people make their fortune from starting a business. I told you what exercise you can do if you don't believe me.

I think there comes a point though when more money doesn't make a difference in terms of personal power. If you have $100 million, you're pretty much as powerful as someone who has $20 billion for the most part. There's not much you can do in terms of personal power with more money. So I don't think personal power can be a source of motivation beyond that level. — Agustino

This would seem to be a difficult thing to determine. Is Bill Gates more powerful than Rupert Murdoch? Does the degree of power, and kind of power, one possesses, depend on where one's wealth is invested as much as the extent of that wealth? Could Bill gates, for example, buy out Rupert Murdoch and appropriate the power the latter presumably wields via whatever control he exercises of the news media he owns?

@Agustino

Financial markets don't "generate wealth". Comparing the world's GDP with the volume of transactions on financial markets is meaningless. If I, using entity A, sell $300 billion to entity B (which is also owned by me), and then entity B sells $300 billion back to entity A that counts as $600 billion worth of trading in terms of volume. What does that have to do with how much entity A and entity B produce (which does impact GDP)?

That specific trade doesn't happen so much does it. The disjunction between the production of goods and services and the amount of money flowing around shows that production and services have a smaller impact on money flow than the exchange of securities.

Significant sums of money.

The significant sums of money aren't contained in the two markets which dwarf all goods production and services many times over?

What conception of wealth are you using then?

I agree, it is possible that capping wealth would be a disincentive to those who, despite their aims, might be thought to create benefits to society. So, I agree it is a diabolically complex issue, as to just how individual desires and social rules forces interact.

I'm not positing any easy answers; even if what would be best to do could be clearly seen, how to implement it might be somewhat of a problem.

This would seem to be a difficult thing to determine. Is Bill Gates more powerful than Rupert Murdoch? Does the degree of power, and kind of power, one possesses, depend on where one's wealth is invested as much as the extent of that wealth? Could Bill gates, for example, buy out Rupert Murdoch and appropriate the power the latter presumably wields via whatever control he exercises of the news media he owns? — Janus

I think power is only to a certain degree financial. Mostly power comes in the form of controlling important decision makers through different means, whether political, economic or even militarily.

Financial power is irrelevant in the face of political power for example. Mikhail Khodorkovsky was the richest man in Russia, and in one day his company was bankrupted and he was thrown in jail. Financial power only works if something is for sale.

@'Agustino'

Just some clarification - while it's interesting to find things out about how the income distribution looks like that, the main point of the thread is to assess whether an income distribution shaped like it is now is a good thing or a bad thing. Regardless of how companies get their wealth - which, yes, is composed of goods and services - people are not in the same position of power. Even those who try to usually fail. What people have is their skills and what they can do with them.

I think we can both agree that financial markets amplify trends like these. Your business does well, your stock and derived securities go up in value, people buy these things, it goes up in value more. Then you can sell the shares, generate more money, invest it into expanding production of goods and services...

Overall, the discussion of what factors make wealth is orthogonal to the discussion of what consequences does inequality have.

The significant sums of money aren't contained in the two markets which dwarf all goods production and services many times over? — fdrake

No - those are repeated transactions using mostly the same pool of money.

The disjunction between the production of goods and services and the amount of money flowing around shows that production and services have a smaller impact on money flow than the exchange of securities. — fdrake

Money flows around just to facilitate production of goods and services for the most part - there's also pure financial speculation.

What conception of wealth are you using then? — fdrake

I already said that wealth is the production of goods and services.

it is now is a good thing or a bad thing. — fdrake

I think it's neither, but people make it so.

It seems to be that in militarily sustained dictatorships, a few individuals or even one individual, can possess great power. This is power in the hands of the politician, but only so long as he keeps the military pacified. In so-called free market democracies individual politicians and even incumbent political parties as wholes would seem to exercise far less power. In capitalist societies covert as opposed to apparent power seems to, by and large, be associated mostly with possession of wealth.

@Agustino
Just some clarification - while it's interesting to find things out about how the income distribution looks like that, the main point of the thread is to assess whether an income distribution shaped like it is now is a good thing or a bad thing. Regardless of how companies get their wealth - which, yes, is composed of goods and services - people are not in the same position of power. Even those who try to usually fail. What people have is their skills and what they can do with them.

I think we can both agree that financial markets amplify trends like these. Your business does well, your stock and derived securities go up in value, people buy these things, it goes up in value more. Then you can sell the shares, generate more money, invest it into expanding production of goods and services...

The important thing is that a typical person will not have access to these money amplification effects, so they cannot benefit from them. Another example in this regard is that if wage growth lags inflation it disproportionately effects people with low income. Being low income exposes you to risks that are already hedged against if you have more money.

Overall, the discussion of what factors make wealth is orthogonal to the discussion of what consequences does inequality have.

In capitalist societies covert as opposed to apparent power seems to, by and large, be associated mostly with possession of wealth. — Janus

Really? I don't think so, control over the public opinion is the source of power in democracies.

I don't agree. "Public opinion" never seems to reach a level of coordination that would be adequate to think of it as an exercise of power. The closest it comes to that would seem to be during elections. But it's efficacy is questionable as, for example, under Australia's current effectively 'two party' system, there is little to choose between the two major parties, so it is debatable as to whether the "public" is exercising any significant power of choice.

And furthermore, manipulation of "public opinion" is rife throughout such systems, and operates in such diverse and subtle ways that determining exactly where effective power lies is difficult if not actually impossible.

Also, I would say that "control over the public opinion" is the manifestation, not the source, of power in democracies. That "control", whatever it might be believed to be worth in terms of power's real effectiveness, flows from a great diversity of sources.

The important thing is that a typical person will not have access to these money amplification effects, so they cannot benefit from them. — fdrake

Wealth isn't simply money. Wealth = Value x Quantity of Goods or Services Sold. I can have no money for example, but if I control a valuable service or product, I can sell it and make the money I don't have in no time. So just because the money isn't currently in my pocket, would it follow that I'm not wealthy in the above scenario?

If I'm the only person in the world who knows how to fix a specific component of specific type of ship's engines without which those particular ships can only move at 60% of their normal speed, but I have no money, do you reckon that's a problem? No, I can easily earn even $50,000/hour. So I am wealthy, even if I don't have money, because it's not money that makes you wealthy. It's your control over the above equation.

So you are wealthy either if you control a distribution network that can pump out a large volume of products/services quickly, or alternatively, you have an extremely valuable product/service as in the ship example I gave above. In these terms, money is a shadow. So wealth is the area under a value - quantity graph.

Employees tend to think of wealth in terms of money, but that's not an efficient way to think about it. It won't help you increase it. Usually, most employees have a low value - low quantity equations, hence why they don't earn a lot of money either. And they can't earn more unless they alter the equation. As I said before, money is a shadow, not the real thing.

I don't think this is relevant to inequality.

I don't think this is relevant to inequality. — fdrake

No, but it was dealing with your mistaken notion that the 99% don't have access to wealth generation mechanisms.

Really? What access to them do the 99% have? Besides their jobs.

Really? What access to them do the 99% have? Besides their jobs. — fdrake

Starting a business? :s

Ah yes, if only someone working two full time jobs would have thought of that, how stupid everyone is!

Well yeah in the West this should really be no problem. The poorest in the West are nothing like the poorest in other parts of the world, who don't even have access to basic education, electricity, hot water etc. I can see how those people need external help in other areas of the world, but those people in the West? :s Really? They can't open their computers, go to libraries, etc. to find the knowledge they need?

I'm not part of the 1%, I'm middle class, maybe middle-upper class where I'm from. In the West I'd be considered poor or bottom levels of middle class at most. So why is it that someone like me can study and learn, and find all the material I need, and you people in the West can't? And all this while working too.

I don't see the difference between what you're saying and 'if everyone was just in the situation I was in, everything would be OK, therefore it's the poor's fault that they are poor'.

I don't see the difference between what you're saying and 'if everyone was just in the situation I was in, everything would be OK, therefore it's the poor's fault that they are poor'. — fdrake

:-d It's quite tiring talking when you don't bother to read and take in what I've said.

I can see how those people need external help in other areas of the world — Agustino

(not in the West - refering to really poor people, who don't have access to schooling, electricity, hot water, etc.)

I do read what you're saying. People create wealth by offering goods and services. It's their own stupid fault in the west if they're stuck working paycheck to paycheck since they had access to education, hot water and electricity.

You seem to be under the impression that just because it's possible that someone can 'make something of themselves' and overcome the conditions of their environment, it's nothing to do with their environment when they don't do it, and is all their own responsibility not to fall into the traps of their environment.

since they had access to education, hot water and electricity. — fdrake

Yes, they also had access to basic education, even if not higher education, and also any additional education they need through the internet, libraries, etc.

They can work 2 jobs, and I'm sure there's still some spare time at night 1-2 hours to study. They can then work to cut their costs - no drinking, no cigarettes, no drugs, just the bare essentials of life. It's possible actually to live with very little money if you are a bit of a Spartan. Do that for 5 years, and you'll have enough knowledge to change to better-paid jobs, or otherwise start a business or work as self-employed. Why is that path that unthinkable for you?

Many have done it. Here's an example.

The path isn't unthinkable to me. The fact that it's possible doesn't really say anything about inequality though. Other than it's eventually going to buttress an argument you'll make that inequality is a result of poor people not being motivated enough to change their circumstances.

The fact that it's possible doesn't really say anything about inequality though. — fdrake

Why is inequality a problem if you have the means to rise up through your own intelligence and efforts? :s

Because inequality makes it a lot less likely that someone is able to do those things!

Because inequality makes it a lot less likely that someone is able to do those things! — fdrake

The harder it is, the greater the accomplishment of succeeding!

And actually, I don't think inequality has anything to do with someone being able to do this, granted they are in the circumstances I've outlined above. Why does it matter someone has more money than me? Again, go back to the wealth equation. The additional money isn't of much help to him or her unless he or she knows what to do with it.

Before you were upset that I was going off-topic with explaining to you what wealth actually is. But it seems you still don't distinguish between wealth and money for that matter, or understand how wealth is generated (and therefore you think someone having more money than you stops you from being wealthy).

So you're down with the idea that social mobility is impeded by inequality. Good, that's a start. But you don't care because it's still possible that someone 'makes it', without any thought of how wealth redistribution would make it easier to 'make it'.

And actually, I don't think inequality has anything to do with someone being able to do this, granted they are in the circumstances I've outlined above. Why does it matter someone has more money than me? Again, go back to the wealth equation. The additional money isn't of much help to him or her unless he or she knows what to do with it.

Inequality makes crime more likely, it entrenches poverty by locking people out of the benefits of economic growth, or other things which can generate greater income. Inequality is a structural property of the distribution of wealth, you see its effects in the aggregate in a probabilistic manner. You don't see the effects when focusing on individual success stories and the bare possibility of 'making it'.

So you're down with the idea that social mobility is impeded by inequality. — fdrake

No, I'm not down with that idea except in the case of people who are really really poor. I asked you before, how does someone having more money than me prohibit me from becoming wealthy?

Inequality makes crime more likely — fdrake

Right, what does this have to do with the individual becoming wealthy which is the topic, granting that we were discussing social mobility?

it entrenches poverty by locking people out of the benefits of economic growth — fdrake

What benefits? What's the relationship between these benefits and becoming wealthy?

or other things which can generate greater income — fdrake

What things? How?

Also, there is some strange idea going around in most people's minds that you need lots of capital to start a business, or that you need investors, etc. :s I find this idea very strange. It's certainly possible to start with almost no money, without loans, and without any other funding, and then grow organically, or get funding once you're already earning to supplement your growth. In fact, this is the way most successful entrepreneurs start... literarily. I can actually think of few successful entrepreneurs who started with large investments, loans, or capital on hand.