A lot of rich people are bankers/traders/city types, and in that line of work you don’t get time to do anything else apart from make loads of money.

I have a theory that the Western world is going through an extended version of this

Except that for the economy as a whole (rather than individual people) spending loads is beneficial.

Then the baby boomers came along and went ‘wa-haaaay’ and wasted the lot. We’re now picking up the pieces and could well be doing so for a couple more generations.

Yup, my rents are going to squander all of theirs by becoming water pik….I jest….I mean boaters. Looking at the numbers, when they get to old to live on a damp boat, they’ll suddenly realise that they’ll have to move into social housing. YAY for a self-induced council house move!

Except that for the economy as a whole (rather than individual people) spending loads is beneficial.

Economies can and have worked with people investing their wealth better, the ridiculous amount of cash flow is creating growth….at the very top of the pyramid and creating debt slaves at the bottom.

Economies can and have worked with people investing their wealth better

Yeah possibly, but still, spending creates economic growth.

LHS – The upper classes refer to it as being rich not wealthy (google U/non-U) – typical middle class slip-up! 😀

I’m not a fan of inherited riches it helps imbed and grow inequalities – and inequalities are a big problem for growth in capitalism. The more that rich people use there money to accumulate more riches (rather than spend it) concentrating wealth – then the lower the proportion of wealth that goes into consumption of production. [EDIT] That is surplus value of production goes to the owner of the capital rather than labour – who then re-invest surplus +capital and repeats. This is one of the reasons why the last crash happened – excess of capital looking for investment and the repackaged subprime mortgage market provided a vehicle. Whereas labour tends to spend what it earns rather than accumulate driving the economy.

Before anyone else says it – this is traditionally a Marxist analysis – but there is much concern about just this effect in decidedly non-left organisations like the IMF (and eg the NYT ran a series about whether Marxists analysis was right).

So all those grandchildren blowing family fortunes on pink Bentleys are doing us all a favour.

Nick Mason has got a fantastic car collection, which he does actually drive.

I’ve seen some of them, and his wife drives some as well, in fact they have both names on the side of a couple.
His house and gardens are really wonderful as well.
A good friend of mine isn’t short of a bob or two, semi-retired from his business of supplying security for shipping, including the US Navy, and he travels all over the world, including Afghanistan, along with AK47-toting bodyguard, hoes horse trekking in India, has a lovely house in Devon, doing another up in Cornwall, holidays on Skye, his wife supports an Elephant charity, he supports a school in India, and also a charity along with Sandy Gall helping Afghan bomb victims.
He has a pretty interesting life, and is tremendously interesting to talk to, which is how I got to know him, chatting in his local pub.
He’s also been involved in events at Slapton Sands commemorating events involving the huge loss of life when German E-boats torpedoed ships rehearsing the D-Day landings.
Not too boring, then.

LHS – The upper classes refer to it as being rich not wealthy

Wealth transcends class.

There are plenty of uppers who have no class as well as non-uppers.

I’m not a fan of inherited riches it helps imbed and grow inequalities – and inequalities are a big problem for growth in capitalism. The more that rich people use there money to accumulate more riches (rather than spend it) concentrating wealth – then the lower the proportion of wealth that goes into consumption of production. Whereas labour tends to spend what it earns rather than accumulate driving the economy. Before anyone else says it – this is traditionally a Marxist analysis – but there is much concern about just this effect in decidedly non-left organisations like the IMF (and eg the NYT ran a series about whether Marxists analysis was right).

You could make the counter argument that if the masses were encouraged to create more wealth instead of giving it to the upper classes, then they would be able to pass on better inheritances to their children.

All we are doing by blowing savings, is encouraging a debt fuelled econonomy – which turns us all into chumps for the upper echelons of society to feed off of. That will fuel inequality as well.

I guess if the upper classes/corporations didn’t have that kind of money to lend in the first place then there couldn’t be a debt driven economy….

@molgrips – City people do their best to have some fun you know and their are plenty of financiers which give very generously to charity

@brooess – that’s one reason wealthy families create family trusts, these are managed by a panel of people and it makes it difficult for one rouge generation / offspring to blow the lot. The grandkids, great-grandkids get an income but never get their hands on the “lump sum”

There are plenty of upper class people who do not have much money. Many families wealth was destroyed by the death duties levied after the war.

Tom – the debt we take on is the way that consumption is grows.

Consumption needs to continue, but the rich are accumulating a growing proportion of the surplus value. So they lend the money to us so we can consume and keep buying stuff to keep the economy going. BTW I’m not a conspiracy theorist – all this stuff happens as the result of individually rational decisions – it just has a potentially destabilising impact that is being realised post last crisis. Unfortunately its very difficult to do anything about.

if the masses were encouraged to create more wealth instead of giving it to the upper classes

Explain that?

I agree…. I need to think about this more then pester my missus about economics.

I guess the simple answer would be to encourage people to stop spending using debt, crash the entire system and start again. Maybe ban mortgages on houses and force people to buy them outright? That would soon wipe out housing value and reduce a massive source of inequality.

But hey, no one will ever try that for shits and giggles.

if the masses were encouraged to create more wealth instead of giving it to the upper classes

See Olddogs post – but errr, I don’t know, spend and invest their money with co-operative companies that they are a part of and make sure that their earnings don’t flow into the hands of the already ridiculously wealthy? Basically keep the money within their own class.

At the end of the day, inequality has been shown to reduce growth – which I think is causing a bit of cognitive dissonance within the world of economics as it’s currently dominated by free market think tanks and academics.

I know **** all about economics though, I’m just musing out loud.

What I think ….

There needs to be a balance between investment and spending basically. Nothing wrong in borrowing for investment either – and arguably nothing wrong with affordable structural debt eg mortgages. It’s when the whole economy hinges on growing borrowing to finance growth that we have problems.

The free-market model would say balance should happen naturally, but I think that the power asymmetries are too skewed in the favour of capital – so it needs more active management so labour and capital get a fair share of surplus so they both have incentives to work/spend and invest. But being able to manage the economy at all is difficult enough, doing this in a world of international competition seems impossible.

Others will disagree with what I think, I am a bit Lefty McLeft

Ideology shouldn’t come into it at all Oldboy, we need evidence based economics not the left vs right paradigm that we have now.

If reducing inequality increases growth and social stability, surely that is good for a capitalist society? Reducing inequality doesn’t have to be a left wing dogma, it can be evidence based.

true … unfortunately how to address inequality is ideologically divided!

Don’t see why more evidence can’t be injected into that debate as well…

Ideology shouldn’t come into it at all Oldboy, we need evidence based economics not the left vs right paradigm that we have now.

Don’t think so – because your ultimate goal varies depending on which side you sit, and as above – how to achieve it.

inequality has been shown to reduce growth

Hmm.. every time I see things like this claimed, I can’t help thinking it’s much more complex than that.

That would soon wipe out housing value and reduce a massive source of inequality.

@Tom – what this will actually achieve is 1) bankrupt the financial system – so people lose their cash savings, business cannot get any loans 2) All existing home owners (which is majority of people in the UK) will be bankrupted.

So we have an economic Armageddon for the benefit of the small number of people who cannot currently buy a home. The Solution to the problem you believe exists is for the government to build more social housing so that there is a good stock of quality rental properties available to those who cannot afford to buy.

At the end of the day, inequality has been shown to reduce growth

I think the world is far more equal than it was 50,100 and 200 years also. The “poor” now have access to homes, health care and benefit payments – these things didn’t exist before. I think the gap between rich and poor is smaller than it was 100 years, look at say the top and bottom 10%.

Well, this has gone off at a bit of a tangent, hasn’t it?

There was an interesting point above about poor people being equally dull.
Yes, I agree, that is the case.
For every rich person who can think of nothing more imaginative to do in their ample spare time than ride a horse, because that’s what all their rich friends do, there are hundreds of poor people watching football because that’s what their peer group does and they can’t imagine a different life.

It’s just that I guess there does tend to be a correlation between income and intelligence (with numerous exceptions, before the pedants jump in), so I would expect rich people to have proportionally more interesting lives.

Riding horses isn’t intrinsically dull.
Neither is watching football.

To say they are is judgemental and a little arrogant.
The problem seems to be that you can’t accept that other’s harmless leisure choices are equally as valid as your own.

I suppose always doing the same thing could be deemed to be dull – or at least make you a dull person to talk to. Poorer people may well be the dullest unfortunately as don’t have the opportunities to travel and enjoy as varied a life as the better off. I’m aware of council estate kids in West London who’ve never been to central London, not sure why but suppose they see little reason to go as happy sticking with what they know.

Rich is relative, compared to most all on here are rich.
You may have a point.

I suppose always doing the same thing could be deemed to be dull

What, like going out on a Mountain Bike day-in day-out?

How about playing the piano everyday?

I guess wing-suits would become really dull if you just keep doing it 365 days a year.

Also, remember that the actual cost of building a house is quite high and would be hard to afford without a mortgage.

Social housing is generally a good thing, but then if you live in one all your life you never get anything back from it. So then your grandkids never get a chunk of money they can use to invest in property or pay for university or whatever.

Home ownership seems to be quite a powerful mechanism for enriching (in capital terms) society, because it turns dead money (ie rent) into an investment with a good rate of return.

Some sort of variable shared equity social housing would perhaps work. So you can opt to pay extra on your rent to own a small percentage of your council house. Then if you own enough you can opt to have it sold.. Or maybe just take a dividend from the next tenant’s rent.. Hmm… Then this ownership share could be passed on to your kids when you die.

Home ownership seems to be quite a powerful mechanism for enriching (in capital terms) society, because it turns dead money (ie rent) into an investment with a good rate of return.

Alternatively investment in existing housing stock is dead money as it could otherwise be invested in productive businesses that generate employment.

I can’t imagine that being motivated in life simply by money and the status confered by monetary gain makes for an interesting persona.

That said, as ever, the most visible examples are often the most vapid and attention-grabbing ones.

Headline: ‘Why are poor people so boring?’

I mean, all they do is smoke fags and play pool innit?

I’ve refrained form this thread in the main because I know 3 mates who are vastly wealthy and guess what, only 2 are boring.
1 has all the stuff he finds interesting in this world of his, none include bikes, he has a few cars (McLaren thingy, Ferrari thingy and one of those funny electric jobbies) married a 23yr old ex dancer, works in Russia and has a place there too, jets to places for “fun”
1 has a longstanding wife, 1 kid, 1 house in Surrey, 2 cars (an XC90 and Golf) and spends bugger all on anything, make me buy the curry and on occasion he’ll dip in his pocket and buy a round. To say he’s tight is an underestimate on a magnitude scale of 100, he’s a 90.
1 has married twice, no kids, heli ski’s and snowboards in Zermatt and has a sting of girlfriends longer than I can do a fixie skid.

When you are out with either they are so not boring, they are the most friendly happy and upbeat folks I know.

@bikebouy – we are glad you awaited to craft that most excellent contribution

Malvern Rider – Member

I can’t imagine that being motivated in life simply by money and the status confered by monetary gain makes for an interesting persona.

I would agree, however also understand that a lot of very successful people who have become rich are not motivated by money, nor status conferred by money. They are much more likely to be driven to be “the best”

Hmm.. every time I see things like this claimed, I can’t help thinking it’s much more complex than that.

http://www.theguardian.com/business/2014/feb/26/imf-inequality-economic-growth

And that’s coming from the big bad IMF.

As has been mentioned, cash flow drives growth, locking wealth up in a few individuals can stiffle cash flow.

I think the world is far more equal than it was 50,100 and 200 years also. The “poor” now have access to homes, health care and benefit payments – these things didn’t exist before. I think the gap between rich and poor is smaller than it was 100 years, look at say the top and bottom 10%.

It’s not in the United States, that bastion of free market policy.

http://articles.latimes.com/2013/sep/11/nation/la-na-nn-income-inequality-20130910

Of course, most people will ignore the evidence and just carry on spouting their own passé ideology – much like with climate change.

jambalaya – Member

@bikebouy – we are glad you awaited to craft that most excellent contribution

Awe fanx 😀

You are correct TOM, it is a lot like climate change!

Well, I guess Stiglitz doesn’t have the same consensus as climate scientists do. But that’s irrelevant right now as economics is stuck at the hard sciences equivilent of witch doctors and shamans and that’s mostly because people have a vested interest in making sure the discipline stays that way.

Does this mean that some people are wealthy and good fun?

B******!!

Does this mean that some people are wealthy and good fun?

But are they REALLY happy?