Wealth and the debt culture

People with wealth are blamed for our problems because many middle class, and certainly most poor, cannot imagine how wealth is accumulated. It’s not about how much Steve Jobs took home in a year, it’s how much wealth he had accumulated via his life’s work – that is to say, Apple and his other investments.

Sadly, the answer is literally in the palms of those who don’t understand it. Cradling an iPhone or typing on a Windows-powered laptop, people who blame the wealthy for the world’s problems lack the intelligence to come to the following conclusions:

  • In a capitalist society, new wealth is created, in part, through ideas brought to action: services & goods which are different than services & goods already on the market.
  • Sometimes, these services or goods are only marginally different or just not very intelligent to begin with, but are backed by a strong marketing campaign. Think Apple computers, pet rocks, hybrid cars.
  • Many new ideas by individuals or smaller corporations are funded by venture capitalists (read: very wealthy people) who figure out what to invest in based in part on who and how many will buy the product or service and the risk involved. That iPhone in your hand was studied and re-imagined a hundred times before it arrived in the store for you to buy, and it’s not just the engineer or focus group facilitator who got a bonus.

So people buy the products, venture capital money continues to roll in, more ideas are funded, and more people buy. Credit becomes easy to find even among the low income crowd, until there’s a glut of new stuff, and a glut of people willing to part with money they don’t have to buy the stuff.

Does this sound like a sustainable model of consumption?

Who is to blame for it? Is it the greedy venture capitalist who did the market research and parted with a few million dollars to fund an idea with plenty of risk involved? Is it the government for flooding our banks with cash and insisting that banks give it out at low interest rates?

Look in the mirror for the answer.

It’s you, dear consumer. It’s true that government, media, and large corporations in our increasingly soulless society don’t make it easier for you. But many people become wealthy not through sleazy, illegal methods, but by having the discipline to forfeit the desires of today for the long term goals of tomorrow.

Even upper middle class folks who own small businesses and devote long hours to ensuring they succeed have to give up valuable family time, gifts for their kids, and short term investments. These people are mostly honest, hard-working, and have no designs of expanding their business beyond their town.

And what do you see when they succeed? Usually they give back to the community in some way, even if it’s just sponsoring baseball uniforms for Little League.

And so it goes with the wealthy: those with wealth, who can continue to generate wealth simply by investing a good chunk of cash in safe, low-interest bearing accounts, will continue to give the lion’s share of any charity at home or abroad.

What do consumers do, by comparison? Spend. They have no wealth, and many can barely be considered affluent just in terms of household income, yet as soon a a little money comes their way, they spend it. On their homes, on themselves, on vacations, on televisions, on gizmos.

Eventually, you look at the mail and realize those eight retail cards you opened will spike in interest if you don’t pay them off soon. Spending has to curb temporarily; you can’t afford the iPad, home theater system, and the Disney trip. Choices have to be made. And not the fun choices, like Starbucks or Dunkin Donuts for breakfast.

Instead of holding people responsible for their debts or fixing the system so it doesn’t happen again, we keep the boom and bust debt cycle going – despite the fact that most people probably should never have had access to the type of funds requiring better decision-making capabilities.

When millions of people are allowed to put themselves in this position all at once, suddenly the house of cards, comprised of easy credit and a fragile banking system, falls. But as long as more wealthy are around to help pick up the pieces and save us from ourselves, then continue the venture capital game, the cycle continues.

25 Comments

  1. Conservatives need to connect the dots:

    The trees went away at the same time the moral center of society went away.

    Ponder, ponder.

  2. Chen says:

    Control of wealth gives power. Those most focused on earning money have the most power. If you neglect certain morals like “don’t defecate where you eat” it becomes even easier to make money. If you lie publicly and make lucrative deals behind closed doors: behold, more money and power! If you play on the masses innate selfish stupidity by promising free money with no work through nation-wide marketing campaigns (someone had to pay for it – cui bono): behold, you can change laws to make it easier to protect your money position, cut out competitors, and make more money. You don’t even need to run a company anymore or produce anything, if you control a large investment firm and put your people in charge of the central bank you win modern society’s game of “Monopoly.” The system is not one under which it is possible to have a healthy society.

    1. The system is not one under which it is possible to have a healthy society.

      This sounds like a failing innate to any system where the incompetent outnumber the competent, democracy is the mode of decision-making, and commerce is not regulated by common sense.

    2. Moira says:

      It’s the system that encouraged everybody to live in debt, because in order for the economy to keep on growing, the democratization of debt was an easier way to take than increasing wages in a globalized world where Chinese workers are paid peanuts and so are the goods that they produce. Middle class is disappearing, rich people are less in number and richer, poor people are more and poorer. USA gave away its soul when it accepted to swap a culture of saving with a culture of debt. It hasn’t been the choice made by some irresponsible ones: a whole system went that direction.

  3. Chen says:

    If you were given freedom and chose to sell yourself for shiny objects, voluntarily subjecting yourself into servitude (slavery?) are you intelligent enough to vote on the fate of a nation?

    It seems about time America openly acknowledge its new Chinese masters. Bow down! If you are a good slave, you will get to sell your children out for a shiny touch-screen device to watch porn and cartoons on!

    1. Robert B says:

      Chen–we are about to do to those silly Chinese what we did to those silly Japanese–inflate our money and thereby nullify the debt. This is fair play because China pegged their money to ours to always make theirs worth less. On top of that, it was mostly American corporate cash that built China. And then the silly Chinese built empty cities with empty malls and so forth. The Chinese are broke and, with the stroke of a pen, the US treasury and Federal Reserve are about to deal them the death blow–inflation.

      hehe–who’s smarter, Chen? Those gullible Chinese or their masters on Wall Street?

  4. crow says:

    OMG! It’s all my fault :(
    Oh well.
    ‘Morning Frank: nice to see you again.

  5. Riley says:

    Thanks for this article. Thoughtful and engaging and something deep to chew on.

  6. Cannibal LOLocaust says:

    I find this article fascinating, mostly because in my prodding I haven’t found that leftists as a group actually know that many rich people.

    I myself am certainly not rich, nor were my parents, but thanks to their sacrifices to put me in a better position than they were in, I have a chance at becoming rich.

    I have however met many rich self made people of many shapes and sizes. Self made millionaires, self made tens-of-millionaires, self made entrepreneurs, doctors, high end lawyers, celebrity fitness trainers, inventors, famous musicians and more.

    I can tell you that despite what the proletariat on Wall Street think, these people all have the following things in common as a group:

    -Superior discipline. They prioritize their life and do not piss away time, money or energy unless the overwhelming majority of their efforts can go to their…

    -Goals. They actually have them. All the time, in fact. It seems like people of a certain socioeconomic status all have goals. It doesn’t seem like they have singleminded goals either, that’s the kind of thing you see out of upper middle class technical workers. Actual rich people are like mad scientists, constantly having more thing to do than they have time in a day. Everything in their life is dictated by some kind of goal, all the way down to improving what kind of toilet seat they sit on to take a shit.

    -Superior organizational capabilities. They all have thousands of miniature goals, but they are not generally scatterbrained, their minds are able to organize all of these goals into a coherent vision, of which each accomplishment is a tiny part on the road to realization. If they are not genetically gifted with a mind that can organize, they externalize their thoughts onto paper, charts, greaseboards, calendars etcetera so as to achieve a similar albeit prosthetic result.

    -Superior health, fitness and appearance.

    -Superior social finesse.

    -SUPERIOR MORALS. I have rarely if ever met an atheist Ubermensch. Almost all of the Ubermenschen I have met have been either Christian or of some strong moral and spiritual foundation of other origins. Somehow, despite the proletesters’ accusations of psychopathic tendencies in business people, I have observed that for some reason a weak moral foundation is incompatible with a wildly successful life. I have a few guesses as to why that is – perhaps the demands of the kind of work it takes to become so successful as to rise out of the working class are so extreme that they are insurmountable without spiritual foundation. Perhaps it’s impossible to keep themselves motivated without a vision of a grand scheme of things in which they fit. I can’t say anything for sure except that rich people know the glory of God while the unwashed masses are the godless. They know where the lines of right and wrong lie, and will not cross them even if they can get away with it. They limit themselves to good action as much as can be expected of a human, and regularly return to nature on their vacations; hunting, hang gliding, sailing, backpacking, to refresh themselves in the glory of God’s creation.

    If these fucking cretins from Occupy had any idea what rich people were actually like, they’d bow down until their foreheads touched the ground and beg these people to run society for them.

    Unfortunately, cretins by the dunning-kruger effect would be biologically incapable of recognizing the greatness of those who rule and would probably fling feces in a rage.

    1. crow says:

      Now that’s a superior comment!
      All based upon the power of observation and consideration.
      Nobody has to tell him he’s right, nobody needs agree.
      Well done, well said, etc :)

    2. Chen says:

      Sounds like a good circle, but your generalizations certainly don’t encompass all rich.

      I’ve also met many self-made millionaires in my industry. Many seem like nice people, and require some honesty within their actual organizations, but in regards to making money: anything legal goes. It is often at the expensive of gullible and stupid people – products with vastly inflated claims, downright misleading offers. These same people also happily live the hollywood-image lifestyle, spend large amounts of time drinking/partying and visiting clubs, travel to Las Vegas regularly for vacations, own or frequent strip clubs, and do not hold orthodox/conservative religious views.

      1. Chen says:

        That isn’t to say they aren’t very intelligent, they generally are smarter than average – they just don’t hold what could be considered typical conservative morals. They are just extremely selfish people who happily pursue hedonism.

      2. Robert B says:

        Chen–

        he was talking about Christians…….you know, people with souls.

    3. Robert B says:

      Well said sir. It mirrors my own life experience–for the most part. I have met individuals who have “gamed” the system, but I have also watched them fall from grace and end up losing most if not all of their money. Funny thing is, had they just been patient–and therefore honest, they could have had it all, instead of poverty and usually jail time.

      The old Protestant work ethic maintained that wealth was God’s reward for faith and hard work–always hard work. The view of Calvinists was that the poor were poor due to sloth and a lack of faith–these sins included the idea that they were born of bad stock (genetics) and therefore had a predisposition to maladaptive behavior. Can’t quite remember the Pastor’s name just now, but he was a famous Boston Calvinist who said–and I paraphrase, “God loves the rich, look who he gives great wealth to”.

      1. It mirrors my own life experience–for the most part. I have met individuals who have “gamed” the system, but I have also watched them fall from grace and end up losing most if not all of their money. Funny thing is, had they just been patient–and therefore honest, they could have had it all, instead of poverty and usually jail time.

        This is my experience as well. Most “rich” people are very motivated and disciplined individuals. A minority of people, rich or not, are scam artists and they usually come to bad ends eventually.

    4. Cannibal LOLocaust says:

      Thank you all for your kind words.

    5. While it’s clear that some of those who are rich are idiots, the vast majority seem to have gotten their money the old-fashioned way, by applying themselves and earning it. If you say that at an Occupy protest they will not want to hear it because it makes them look like weaker people for not doing the same thing and becoming rich.

      1. ferret says:

        “the vast majority seem to have gotten their money the old-fashioned way, by applying themselves and earning it.”
        Let me ask: “applying themselves to what?” If it’s about producing some goods, or services, or intellectual properties, then there is little or no chance of becoming really rich; this way one can make a starting capital only.
        I believe, most of rich people are rich in second + generation, meaning they inherited wealth from parents. Even if some of them became rich producing something useful at the beginning, the rest of life is dedicated to the best investment strategies for their money.
        Maybe I’m wrong, but, if I earned a good money for an invention, I would buy stock. Or I should not?

        1. YT says:

          Most millionares are first generation ones and most of their kids will blow it within one or two generations.

          BUT when I say most I mean most individuals. If you weighted the distribution for wealth, its hard to say but I image the exponential distribution (aka 80/20 rule) also applies to the millionare plus crowd.

          So the majority of dollars may be inherited and compound but that would only apply to a small sect of the wealthy families.

          I also imagine the families that amass wealth generation after generation aren’t doing it within the system. They don’t pay 50% estate tax or even have a set citizenship for which to be taxed. Think Rothchild family: only marry other money and do not report their wealth and not citizens of a single country.

          1. Cannibal LOLocaust says:

            Again, just to clarify, these people I meet didn’t inherit anything, thus the “self made” title. The most inherited wealth I frequently have seen is the financial stability of the parents to take out student loans for college, which they pay back.

            Only twice in my life have I met rich people who were born rich, and both of them were girls in their early twenties who did nothing but piss it away left and right while sitting on every brown penis they could find. Needless to say, these “people” will not die rich or pass anything on to their children.

  7. ferret says:

    “What do consumers do, by comparison? Spend. They have no wealth, and many can barely be considered affluent just in terms of household income, yet as soon a a little money comes their way, they spend it.”

    That explains why (according to the statistics in the linked article “those with wealth”) they contribute in charities more than richer ones: they buy a lot of stuff they don’t really need, keep it for a while in the garage, and then donate as tax deductible.

  8. YT says:

    That whole article can be summarized as: Compounding interest. It works for debt as well as assets.

    That said, OWS needs to direct their ire towards rent seekers. Not entreprenuers, traders or people that otherwise provide some value people willingly pay for. The people that change the rules in their favor or break the law without consequences (MF Global is the latest example of this).

    1. ferret says:

      “Not entreprenuers, traders or people that otherwise provide some value people willingly pay for”

      Entrepreneurs buy labor and sell product; they are not producing anything.

      Traders buy product and sell it; they are not producing either.

      Are you sure people willingly pay for “some value” that is not a product or service, but a hidden tax? The tax that is spent not on the peoples’ needs but on lawyers, mass media, government, and other defenders of their privilege.
      I don’t think there is a way to put exact line between rent seekers and other businesses. It makes no good to direct ire towards any of them: the history had proved it created additional loss without improving people’s life.

      1. Chen says:

        Without these “middle men” to organize and direct labor, we’d end up with something like OWL – useless, disorganized effort.

        1. ferret says:

          I agree with you, though I believe the lower layer of these “middle men” organizes labor having the goal to produce something that is believed to be valuable.
          The upper layer is busy with the competition, trying to survive and make profit. The competition is not limited by the quality of product/services; it includes activities directed on killing competitors in any imaginable way, on defending the business from competitors that are trying to kill it in their turn.
          These efforts cost a lot, and that was my point. When the goal is to make profit no matter what the means are, people benefit from it little.

          “OWL – useless, disorganized effort” I doubt it because the event is financed. The one who pays orders the music. And there is no way for many people to gather without a leader who starts the process and leads. If you do not see the leader in the OWL, that means, she is hiding. Though I may be wrong.

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