How Accumulation of Financial Wealth Might Eventually Lead to a Decline of Tangible Wealth
Let us suppose that wealth continues to accrete to the wealthiest 1-2% of Americans at the present rate (there is no guarantee that it will). Much of this wealth is in land, but not all. Each individual (and family)l makes choices on how to accumulate, and distribute his/their wealth, and what works today might not have much value in the future.
Land that sells for a considerable sum today (because a group of people put a higher value on it than in the past) may not have much value in a future world in which arable land might have more value than land that provides a “good view” of the arable valley. In other words, what we value today might not be as valuable at some time in the future.
Today many people have wealth based on stock in companies. The value of an individual piece of stock goes up or down depending on how much one person is willing to pay another person for that stock. This might even be called the “principle of the last fool”.
A stock gets the reputation of being a “good buy” (either because someone really places a value on it, or is trying to get some fool to purchase it by “word of mouth”), and it continues to go up in value until it reaches the “top”. The principle upon which the stock is sold may be a good one, but the people who own the stock aren’t interested in holding on to the stock, and accruing wealth in incremental amounts. They want a fast pay-off.
The top 1-2% of the population is supposedly accruing wealth at a much faster pace than everyone below them. They may own ranch land out west (which is marginal), or stock in various companies (which will rise and fall depending on factors besides the quality of the engineering or the loyalty of the labor-force). But are they headed for a fall?
Are those farmers who are selling their land as quickly as they can in exchange for money to invest in the stock market adding value to their legacy, or are they exchanging the uncertainty of the harvest for the uncertainty of professional managers who line their own pockets selling artificially pumped up stock bought with stock options?
Let’s assume that the trend continues of the accumulation of wealth to this 1-2% of the population. If they depend on stocks to accumulate their wealth then the stock must represent something. What will it represent?
Mr. X owns 1, 000, 000 shares of Ford Motor Company (he bought it at $50 a share, and it is worth $55 a share a year after he bought it). The new model is coming out, but people aren’t buying. Wealth has been accumulating to the class (percentage) of people of which he is a part since his grandfather’s day.
There have been changes in the economy since that time (the early $1950’s). The unions have been weakened. The employees have been required to pay a larger share of their income for supplements to life (insurance and pension, among others). They also pay a larger share of their income in taxes.
The political climate had shifted from the laboring individual having a large say in how the government was run to a society in which unions had little real power (this was as much the fault of the union members as any other “class” of citizens; as they went through their lives they saw the opportunity for their children not to labor as they had, but to be among the professionals; they strived for that, and were proud when their progeny succeeded).
Now these people (the ones that Ford depends on to buy the bulk of their new cars) have reached an impasse. They cannot afford to buy the new cars that they make. They are shying away from more debt (the tax reductions that were supposed to jump-start the economy in the early part of the 21st Century didn’t work as predicted).
Medicare payments to nursing homes had been eliminated in 2020. This saved billions of dollars for health-care, but bankrupted many families who tried to take care of their elderly (either by paying for nursing home care themselves at $35,000/month, or trying to work and care for a parent before getting sick themselves, or having one spouse quit work). It became apparent how fragile the top-heavy distribution of wealth had made the economy. Note: my father was in a nursing home (a reputable one that wasn’t outrageously expensive). The cost was $15,000 a month during late 2004-early 2005. Medicare paid 100% the first 30 days, and 80% the next 60 days. We came up with $6,000 out of my parents’ savings plus drugs and other “incidentals”, such as physical rehabilitation. I retired to take care of him; my mom, at 78 years of age, felt it was beyond her ability at that time. It would have $15,000 a month, otherwise, until he died, or we got Medic-Aid (which is being cut) from the state of Ohio.
It was decided to eliminate Medicare on January 1, 2023. This put the health and lives of millions of elderly in jeopardy, and affected child-care for working mothers in an unintended way. Note: my mother has spent hundreds of hours baby-sitting grand-children while the proud mothers joined the work-force, and were able to spend money on luxuries they otherwise couldn’t afford. My sister, who is younger at 57, has also done the same for her daughters who are also proud of their work records.
The government (and many mothers) had not realized how dependent they had become on the “hidden” resource of millions of aging women who took care of their own grandchildren as well as those of other peoples. Women who had been so proud of their ability to earn a pay-check learned what their female ancestors had known for centuries: someone has to take care of the kids.
Did she work (and make essentially a minimum wage paying for child care), or did she quit work, and lower the family’s standard of living? Those who quit work directly affected the economy. There was less money to spend on luxuries in millions of households, and companies had to scramble to meet the new reality of a smaller work-force. Companies had to pay more to compete for labor, and turned to illegal immigration to meet the labor shortage.
After the big die-off of the elderly from 2024 to 2040 (which resulted in a mini-boom for the funeral industry), things began to stabilize, but the mind-set had changed. No middle-aged person believed that anyone could care for them but perhaps their children and themselves. If they were to have the wealth that was needed to see them to the grave then they would have to save it themselves. To hell with consumption!
Personal wealth began to accumulate (and consumption to decline). New cars were no longer a priority, or even second on the list of wants. Houses in “declining” neighborhoods in the inner-city became valuable again (who could afford to travel 20 miles to a suburb even with cars that got 60 miles to the gallon but cost $60,000, and gas that cost $5.00 a gallon).
Those with investments began to worry because investments gained value with consumption, and lost value with conservation. People started to put their money in banks again (which still “invested” in mortgages, but began to shy away from stocks and, even, loans). The economy stagnated.
Former farmers (who now were investors) began to get the old feelings they used to have during bad years on the farm. Most of them had paid off their homes (they had been conservative with their wealth), but the government still needed taxes (especially now that the “bill” had come due, and there was no longer any talk about running government with a deficit until the economy “improved”).
The foreign owners of our governmental debt wanted their money. Conflict overseas had worn out billions of dollars of military equipment which had to be replaced, and we had nothing to show for it. We had only succeeded in providing valuable training to the people that opposed the way we conducted our business.
Our government had to change the way that it dealt with those who volunteered to serve in our armed forces. They were allowed to retire from the service after 30 years, but wouldn’t receive a pension until they turned 75. It was decided to use Medicare to provide health-care for these retirees starting in 2015,
All these changes affected the wealth of this 1-2% in a detrimental way. They lost wealth, both in book value and in real terms. Stock values plummeted, and people began to keep the wealth rather than spend it. The lower classes accumulated wealth while the 1-2% at the top lost value. Bill Gates (who had been valued at over $150 billion at one time, and spent most of the first decade of the 21st Century hovering around $50 billion dollars was soon worth $13 billion as Microsoft strived to sell their bloated operating system at $25 rather than $250 a pop).
Brilliant minds searched for a way out of the morass. How had we come to this? If an effort had been made to share the wealth by being more liberal to those who labored could this outcome been averted, or forestalled. No one knew but the future was not as bright as it had been to those who had been born at the middle of the 20th Century, and come of age during the “Sexual Revolution”.
Let us suppose that wealth continues to accrete to the wealthiest 1-2% of Americans at the present rate (there is no guarantee that it will). Much of this wealth is in land, but not all. Each individual (and family)l makes choices on how to accumulate, and distribute his/their wealth, and what works today might not have much value in the future.
Land that sells for a considerable sum today (because a group of people put a higher value on it than in the past) may not have much value in a future world in which arable land might have more value than land that provides a “good view” of the arable valley. In other words, what we value today might not be as valuable at some time in the future.
Today many people have wealth based on stock in companies. The value of an individual piece of stock goes up or down depending on how much one person is willing to pay another person for that stock. This might even be called the “principle of the last fool”.
A stock gets the reputation of being a “good buy” (either because someone really places a value on it, or is trying to get some fool to purchase it by “word of mouth”), and it continues to go up in value until it reaches the “top”. The principle upon which the stock is sold may be a good one, but the people who own the stock aren’t interested in holding on to the stock, and accruing wealth in incremental amounts. They want a fast pay-off.
The top 1-2% of the population is supposedly accruing wealth at a much faster pace than everyone below them. They may own ranch land out west (which is marginal), or stock in various companies (which will rise and fall depending on factors besides the quality of the engineering or the loyalty of the labor-force). But are they headed for a fall?
Are those farmers who are selling their land as quickly as they can in exchange for money to invest in the stock market adding value to their legacy, or are they exchanging the uncertainty of the harvest for the uncertainty of professional managers who line their own pockets selling artificially pumped up stock bought with stock options?
Let’s assume that the trend continues of the accumulation of wealth to this 1-2% of the population. If they depend on stocks to accumulate their wealth then the stock must represent something. What will it represent?
Mr. X owns 1, 000, 000 shares of Ford Motor Company (he bought it at $50 a share, and it is worth $55 a share a year after he bought it). The new model is coming out, but people aren’t buying. Wealth has been accumulating to the class (percentage) of people of which he is a part since his grandfather’s day.
There have been changes in the economy since that time (the early $1950’s). The unions have been weakened. The employees have been required to pay a larger share of their income for supplements to life (insurance and pension, among others). They also pay a larger share of their income in taxes.
The political climate had shifted from the laboring individual having a large say in how the government was run to a society in which unions had little real power (this was as much the fault of the union members as any other “class” of citizens; as they went through their lives they saw the opportunity for their children not to labor as they had, but to be among the professionals; they strived for that, and were proud when their progeny succeeded).
Now these people (the ones that Ford depends on to buy the bulk of their new cars) have reached an impasse. They cannot afford to buy the new cars that they make. They are shying away from more debt (the tax reductions that were supposed to jump-start the economy in the early part of the 21st Century didn’t work as predicted).
Medicare payments to nursing homes had been eliminated in 2020. This saved billions of dollars for health-care, but bankrupted many families who tried to take care of their elderly (either by paying for nursing home care themselves at $35,000/month, or trying to work and care for a parent before getting sick themselves, or having one spouse quit work). It became apparent how fragile the top-heavy distribution of wealth had made the economy. Note: my father was in a nursing home (a reputable one that wasn’t outrageously expensive). The cost was $15,000 a month during late 2004-early 2005. Medicare paid 100% the first 30 days, and 80% the next 60 days. We came up with $6,000 out of my parents’ savings plus drugs and other “incidentals”, such as physical rehabilitation. I retired to take care of him; my mom, at 78 years of age, felt it was beyond her ability at that time. It would have $15,000 a month, otherwise, until he died, or we got Medic-Aid (which is being cut) from the state of Ohio.
It was decided to eliminate Medicare on January 1, 2023. This put the health and lives of millions of elderly in jeopardy, and affected child-care for working mothers in an unintended way. Note: my mother has spent hundreds of hours baby-sitting grand-children while the proud mothers joined the work-force, and were able to spend money on luxuries they otherwise couldn’t afford. My sister, who is younger at 57, has also done the same for her daughters who are also proud of their work records.
The government (and many mothers) had not realized how dependent they had become on the “hidden” resource of millions of aging women who took care of their own grandchildren as well as those of other peoples. Women who had been so proud of their ability to earn a pay-check learned what their female ancestors had known for centuries: someone has to take care of the kids.
Did she work (and make essentially a minimum wage paying for child care), or did she quit work, and lower the family’s standard of living? Those who quit work directly affected the economy. There was less money to spend on luxuries in millions of households, and companies had to scramble to meet the new reality of a smaller work-force. Companies had to pay more to compete for labor, and turned to illegal immigration to meet the labor shortage.
After the big die-off of the elderly from 2024 to 2040 (which resulted in a mini-boom for the funeral industry), things began to stabilize, but the mind-set had changed. No middle-aged person believed that anyone could care for them but perhaps their children and themselves. If they were to have the wealth that was needed to see them to the grave then they would have to save it themselves. To hell with consumption!
Personal wealth began to accumulate (and consumption to decline). New cars were no longer a priority, or even second on the list of wants. Houses in “declining” neighborhoods in the inner-city became valuable again (who could afford to travel 20 miles to a suburb even with cars that got 60 miles to the gallon but cost $60,000, and gas that cost $5.00 a gallon).
Those with investments began to worry because investments gained value with consumption, and lost value with conservation. People started to put their money in banks again (which still “invested” in mortgages, but began to shy away from stocks and, even, loans). The economy stagnated.
Former farmers (who now were investors) began to get the old feelings they used to have during bad years on the farm. Most of them had paid off their homes (they had been conservative with their wealth), but the government still needed taxes (especially now that the “bill” had come due, and there was no longer any talk about running government with a deficit until the economy “improved”).
The foreign owners of our governmental debt wanted their money. Conflict overseas had worn out billions of dollars of military equipment which had to be replaced, and we had nothing to show for it. We had only succeeded in providing valuable training to the people that opposed the way we conducted our business.
Our government had to change the way that it dealt with those who volunteered to serve in our armed forces. They were allowed to retire from the service after 30 years, but wouldn’t receive a pension until they turned 75. It was decided to use Medicare to provide health-care for these retirees starting in 2015,
All these changes affected the wealth of this 1-2% in a detrimental way. They lost wealth, both in book value and in real terms. Stock values plummeted, and people began to keep the wealth rather than spend it. The lower classes accumulated wealth while the 1-2% at the top lost value. Bill Gates (who had been valued at over $150 billion at one time, and spent most of the first decade of the 21st Century hovering around $50 billion dollars was soon worth $13 billion as Microsoft strived to sell their bloated operating system at $25 rather than $250 a pop).
Brilliant minds searched for a way out of the morass. How had we come to this? If an effort had been made to share the wealth by being more liberal to those who labored could this outcome been averted, or forestalled. No one knew but the future was not as bright as it had been to those who had been born at the middle of the 20th Century, and come of age during the “Sexual Revolution”.
