Wednesday, April 29, 2009

The Rich Are Still Rich

On the Wall Street Journal blog The Wealth Report, Robert Frank makes a good point:

There is a growing consensus that the rich have lost about a third of their wealth. First came the U.S. surveys, which show millionaires down about 30%–both in wealth and population–as a result of the global financial crisis. Over the weekend comes news that the Sunday Times Rich List shows that the crisis has wiped out about 155 billion pounds ($227 billion), or a third of the wealth of Britain’s 1,000 people. Sir Elton John, for instance, is down 26%.

So if we were to “reset” the world of wealth, we should just knock off about a third....

As Frank points out, wealth isn't the only thing that has declined: prices are going down. And much of what defines wealth is relative anyway.

If your wealth has fallen 30%, and everyone else’s stayed the same, you would feel poorer. But if your wealth fell 30% along with everyone else’s, wouldn’t you still feel as wealthy as before?

And if the prices of things you buy also have fallen 30% or more, wouldn’t your experience of being wealthy stay the same?

It is accepted wisdom that a rising tide lifts all boats. Wouldn’t a sinking tide, when all boats are falling, still leave the yachts on top?

I hope someone will tell this to some of the Wall Streeters profiled in this recent New York Magazine cover story:
“I’m not giving to charity this year!” one hedge-fund analyst shouts into the phone, when I ask about Obama’s planned tax increases. “When people ask me for money, I tell them, ‘If you want me to give you money, send a letter to my senator asking for my taxes to be lowered.’ I feel so much less generous right now. If I have to adopt twenty poor families, I want a thank-you note and an update on their lives. At least Sally Struthers gives you an update.”


The Cooking Accountant said...

What a jerk! He probably never donated to charities in the first place!

I have donated to causes I believe in and continue to do so (granted the $ amount is a little less) even though I lost my job.

I'm a regular person living in NY who still has to pay ridiculous LIRR fares every time I go into the city for an interview. But I still keep my church and cancer charities in mind.

This guy can kiss my a$$. He still has a job, so he shouldn't cry poverty.

T'Pol said...

That guy cannot be human. Why can't he accept that, now more people are in "true" need and so we should try to help even more?

Coupon Artist said...

I think it is ridiculous that people who lost a few million, but still have a few million, would complain about the losses at all. Once you have a certain threshold of money (say, a million or two) what difference does it make if it is cut by 1/3... you still have the money to buy everything you could need to buy or reasonably want to buy. At that point, having the biggest bank account purely becomes a matter of ego and nothing more. Sad.

Mel said...

Egh... people disgust me.

Fabulously Broke said...

What's so wrong with being rich?

I get that everyone is jealous ( who isn't ) but they're human too. If you lost 33% of your income, you'd be pissed no matter what you have left.

And donating to charities is NOT a requirement, it's a nice gesture by everyone, rich and poor to do, to help out others.

Am going to write a post in more detail about this - May 1st.

bugbear said...

I think his comment about Sally Struthers is quite funny, actually.

As to "people really being in need", when was there a time when they weren't?

I think if you lost 1/3 of your wealth, you can't help but be affected and feel poorer. However, you'd have to survey the truly-rich and the mega-rich to find out if that's true at the 10s to 100s of millions range.

given that I make maybe 25k per year, the question is academic to me though.

Michelle said...

No to quibble, but in the msnbc article, Elton is reference to have gone from $343.1 million to $255.5 million, but this includes 60 million to "HIV/Aids and other humanitarian causes"...Now that is how your net worth should decrease!
Quite a contrast to the hedge fund jerk!

Anonymous said...

things I want to say to the cashier when they ask for donation for the XYZ fund:

1. it's not tax deductible
2. I'm only 25 and I still need a lot of money ahead of me.
3. that money can grow a lot from now 'till when I retire
4. stop asking me for money.....i go to the supermarket 3 times a week and i've donated already!!
5. i don't really believe in your cause anyways. just stop bugging me!!!

I'm tired of them sometimes.

Chad @ Sentient Money said...

The sad thing is that he actually believes he deserves his high compensation. In a capatilistic society a person would theoretically get paid by how much they produce or have added to the economy. How many hedge-fund managers, mutual fund managers, or I-bank guys have produced anything of value? Value from them would be a higher return than the market or for the I-bankers deals and financing that actually helped start or support quality companies that produce value. What percentage have done that...maybe 3%?

Save your money at the supermarket checkout line and don't donate. Take care of yourself first. Maybe you will be able to save enough over time you won't need a charity to bail you out when times are rough.

Anonymous said...

haha thanks chad (from anonymous). I don't know what this world is going to amount to when I retire in 40 years (hopefully. but i think at this rate maybe 75 is more like the retiring age...)

Anonymous said...

Although the tone the hedge-fund analyst takes makes him seem quite jerk-ish, shouldn't there be some level of outrage on his part? He is going to lose an even greater percentage of his income in order to do what? Pay for an increase in entitlement programs that don't decrease poverty? Pay interest payments on the ever increasing federal debt? Subsidize a bailout plan fraught with fraud and pork?

Why shouldn't he be angry?

stephanie said...

I agree with Anonymous about the outrage of this "jerk." I bet "jerk"'s mortgage payment hasn't gone down, nor has his utility bill or cell phone or anything else just because his net worth has dropped significantly.

Prices HAVEN'T gone down 30%, like many people's savings or net worth has. I have noticed a lot of sales at grocery stores, etc., but these tend to be 10% or less and only sometimes, not an across-the-board 30% decrease in the cost of living, which is what that article makes it out to be.

George said...

It is true that you need to be mentally ready for getting out of poverty. Many people subconsciously think that they don’t deserve to be rich and that is the reason for which people don’t know what to do to build their wealth. Britain Loan may be a good step in starting your own business and getting out of the poverty.