Letters to the Editor
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Keith, you may be on to something
Those who actually study economics will tell you our economy is driven by consumers. The more people spend the more the economy heats up.
There is a finite amount of money circulating within the economy and "investing" (just a fancy way of saying saving) it doesn't do much more than artificially circulate it within the economy since when you "invest" you're basically financing debt. What happens if those who have invested suddenly decide it's time to go liquid? Where is all that cash going to come from? There aren't enough printed dollar bills to cover it all. That's what happened on that Thursday in the fall of 1929 and we all know what happened then.
To see what happens when you start putting money in the hands of the middle class and poor while taxing the rich, look no further than the great economic expansion of the 1990s. The government raised taxes on the wealthiest people in the country while pretty much holding steady on the other 80%. That (along with Alan Greenspan's Fed) gave consumers buying power and fueled the longest continual economic expansion ever in US history.
Ignore the traditional economists. They work for the wealthy and are protecting their turf. They don't want the average person to get a clue because then they'd be out of a job.
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The Rich are Rich Because They Know How to Scarf Up Money
Yeah, the rich get rich by investing. And, I have some beach front property to sell you in Florida.
I've been working for financial corporations, internet startups, and all sorts of cutting edge capitalism businesses, and it isn't pretty.
Remember Robert L. Nardelli? The guy who lost about half of the value of Home Depot which got overtaken in size by its rival while he was chairman? Then tried his best to prevent stock holders -- who in theory actually own the company -- from complaining at the annual meeting? Remember he got his sorry ass fired for doing such a poor job? After they gave him $210 million "for compensation" because he left GE to become chairman what was at the time a company in the top of its market.
Then, there's Carleton Fiorina, the former chairperson of HP who was fired for losing about 40% of the value of HP and pushed what became a disastrous decision to buy Compaq. Remember she got 40 million as a "performance bonus" when she left?
And, the King of Capitalists, the former head of GE, Jack Welch, who got paid approximately one gazzilion dollars because GE did so well under him. You think someone who got paid that much would actually have money. Instead, he billed GE for almost any piece of personal expense: His apartment, his car, private school tuition for his kids, even clothes. Despite the fact that his guy was one of the highest paid CEOs at the time (and got an extremely generous retirement package), he simply couldn't be bothered to spend his paycheck on the daily expenses of life.
I've seen CEOs grant themselves stock options by claiming that they will benefit if the company grows or suffer the consequences if they do poorly. Then, backdate those very options if the company does poorly, so they won't suffer.
Heck, I worked at a company whose stock dropped by more than 90%, so even backdating the options was out of the question. Instead, the company was going to "lend" the CEO money to sell back the options (the terms of the loan putting paying back the loan at the back of the queue. Even his credit cards could be paid before he had to pay for the loan. Of course, that led to tax liability because the government wanted to tax the loan as income. No fear, the company was going to loan him that money too.
When the stockholders balked, he had the company "merge" to another company that was having a cashflow problem. His company still had about $150,000,000 in the bank while the other company was teetering on bankruptcy. Since that other company couldn't afford our company, it was a "merger" where the stockholders of our company got 40% of the merged company (we were a public company) while the other company got 60% of the newly merged company (their company was privately held by about a 1/2 dozen people).
Of course, as soon as the merger took place, the other company closed our company down, raided the bank, and then (surprise, surprise) they forgave the former CEO all debt associated with his stock options. Plus, they gave him a nifty severance package. After all, he shouldn't be thrown out on the streets jobless and without any income. That might have been okay for the hundreds of employees who lost their job, but he as CEO took risks in running this company into the ground, and he should be duly compensated for those risks.
Occasionally, someone might make it big due to actual talent. But 90% of the time, the super rich get that way because of connections, sucking the equity out of corporations, or raiding the public treasury. Remember, you stick up a bank branch and rob $1000: It's a felony. The CEO of the same bank who arranges special deals for himself, gives himself a few million in stock options, and grants himself so many performance bonuses that it runs the same bank into the ground: That's business.
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Not the first time
It seems to me that the second part of Mr. Knight's idea was in effect what stimulated the economy after WW 2 when the GI Bill put millions of dollars into the hands of ordinary Americans who were returning servicemen.
I think that most of them had not come from the middle class of the pre-war society.
After the war, when education and housing were in effect subsidized by the G.I. Bill, the U.S. experienced tremendous economic growth.
I think that most of them had not come from the middle class of the pre-war society.
After the war, when education and housing were in effect subsidized by the G. I. Bill, we experienced a tremendous, historically unprecedented, burst of economic activity. Millions if not tens of millions of families suddenly had the opportunity to get an education, to purchase a home etc.
I believe that it was that economic generosity, what I call Money to the Massed, that stimulated the nation to achieve the phenomenal economic abundance that so many of us benefited from in the late 40's, the 50's and into the 60's. How many of us grew up in homes purchased with the help of the the government via the G.I. Bill. How many of our parents or grandparents were able to advance economically as a result of the educational subsidies? I am sure that a significant number of Americans today are still enjoying the benefits of that long ago policy that resulted in the Upwards Flow of money.
I think that was a kind of redistribution of wealth, whose benefits we continue to experience, and are angry and surprised when they disappear.
YoramG
Jerusalem, Israel