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How do you take into account negative wealth? If 20% of americans have zero or negative wealth, and you need the positive wealth from the 20th-40th percentiles

How do you take into account negative wealth? If 20% of americans have zero or negative wealth, and you need the positive wealth from the 20th-40th percentiles to make up for the negative, do you say the bottom 40% account for zero percent of U.S. wealth? Or do you just call negative wealth zero for these purposes? How's the calculation work? I'm asking because I'm wondering whether it's "the rich are too rich" vs "debt is getting crazy" or somewhere in between.

founderling 7y ago
Money is debt. Imagine an island with two residents. Alice and Bob. There is no difference between these two scenarios: 1: Alice has 1 seashell. Bob has 0 seashells. 2: Alice has 0 seashells. Bob has 0 seashells. Bob owes Alice a seashell. Either way, Alice can go to bob and exchange her wealth for an apple. In scenario 1, she gives him a seashell. In scenario 2, she pays by voiding his debt. Either way, Alice owns 100% of all wealth.
- 6gvONxR4sf7o 7y ago
  Isn't scenario 1 equivalent to 3: Alice has 0 seashells. Bob has 1 seashell. Bob owes Alice a seashell. Once all the accounts are settled by Bob paying Alice the seashell he owes her, it becomes scenario 1, so this seems a better match for scenario 1 than scenario 2 does.
  - founderling 7y ago
    Maybe. What I wanted to emphasize is that a dollar "In the bank" means nothing else then "The bank owes you a dollar". And banks do not lend money they don't have. And where do they have it from? From other customers. Ergo: Your $1 in wealth is someone elses $1 in debt.
    - 6gvONxR4sf7o 7y ago
      I agree with that, but it doesn't answer the question of how to account for negative wealth in a X% of americans own Y% of wealth calculation. In scenario 2, Bob has negative net wealth. In scenario 3, Bob has zero net wealth (which is why 1 and 3 are equivalent, not 2). Supposing we had a scenario where once all accounts are settled, Alice has 2 seashells, and Bob had -1 seashells, does alice have 100% of all wealth? 200%? (Equivalently, Alice has 1, Bob has 0, and Bob owes Alice 1) (edit for everyone else: this thread is confusing because I changed my comment to respond to founderling's edit, but founderling responded to my original comment before I changed it... ¯\_(ツ)_/¯)
      - deleted 7y ago
        [deleted]
      - founderling 7y ago
        Alice has 2 seashells, and Bob had -1 seashells does alice have 100% of all wealth Yes. Bob has no buying power at all.
    - AnthonyMouse 7y ago
      > And banks do not lend money they don't have. Actually that is exactly what banks do. You go to the bank and take out a loan, they credit your account with $1000 and then you owe them $1000 and they owe you $1000. The thing balancing the cash in your account isn't some other customer's cash, it's the debt you owe them. The amount of physical cash in their vault as a result of you taking out the loan hasn't changed at all. They're required to have a certain amount of cash in reserve to cover cash withdrawals, but that amount is not 100%.
zanny 7y ago
They go hand in hand, and are not mutually exclusive, instead often feeding one another in myriad ways. Housing is an obvious one - the rich accumulate capital, the gross inequality reduces the market for the "good" kinds of investment capitalism is purported to promote - small business creation, innovation, etc - so without opportunity - and wealth inequality diminishes opportunity society-wide - the rich will instead find other avenues to grow their slice of the pie. Buying politicians for tax cuts like were seen last year, speculative housing bubbles because of the few things that are scarce and nobody can opt out of land occupancy is one of them (and the poor want to move towards opportunity, almost exclusively found in cities in the modern era, where land capture can be made its most lucrative), stock buybacks in corporations, etc. So housing prices go up, lack of collective power means the working class see no wage increases, debt has to increase to maintain lifestyle. Higher debt means less potential for upward mobility and the lenders are almost exclusively the rich - so you are constantly making short term loans where the interest is diverted from your productive gains right in the pockets of creditors. But its not just housing. There are dozens of nigh independently influenced aspects of living in the US that are impacted by wealth disparity and the distorting effects its concentration have on liberty, prosperity, even security. But almost all of them cause increases in debt because as you get relativistically poorer the fixed costs of life go up and you cannot opt out of them.

founderling 7y ago

Money is debt. Imagine an island with two residents. Alice and Bob. There is no difference between these two scenarios: 1: Alice has 1 seashell. Bob has 0 seashells. 2: Alice has 0 seashells. Bob has 0 seashells. Bob owes Alice a seashell. Either way, Alice can go to bob and exchange her wealth for an apple. In scenario 1, she gives him a seashell. In scenario 2, she pays by voiding his debt. Either way, Alice owns 100% of all wealth.

6gvONxR4sf7o 7y ago
Isn't scenario 1 equivalent to 3: Alice has 0 seashells. Bob has 1 seashell. Bob owes Alice a seashell. Once all the accounts are settled by Bob paying Alice the seashell he owes her, it becomes scenario 1, so this seems a better match for scenario 1 than scenario 2 does.
- founderling 7y ago
  Maybe. What I wanted to emphasize is that a dollar "In the bank" means nothing else then "The bank owes you a dollar". And banks do not lend money they don't have. And where do they have it from? From other customers. Ergo: Your $1 in wealth is someone elses $1 in debt.
  - 6gvONxR4sf7o 7y ago
    I agree with that, but it doesn't answer the question of how to account for negative wealth in a X% of americans own Y% of wealth calculation. In scenario 2, Bob has negative net wealth. In scenario 3, Bob has zero net wealth (which is why 1 and 3 are equivalent, not 2). Supposing we had a scenario where once all accounts are settled, Alice has 2 seashells, and Bob had -1 seashells, does alice have 100% of all wealth? 200%? (Equivalently, Alice has 1, Bob has 0, and Bob owes Alice 1) (edit for everyone else: this thread is confusing because I changed my comment to respond to founderling's edit, but founderling responded to my original comment before I changed it... ¯\_(ツ)_/¯)
    - deleted 7y ago
      [deleted]
    - founderling 7y ago
      Alice has 2 seashells, and Bob had -1 seashells does alice have 100% of all wealth Yes. Bob has no buying power at all.
  - AnthonyMouse 7y ago
    > And banks do not lend money they don't have. Actually that is exactly what banks do. You go to the bank and take out a loan, they credit your account with $1000 and then you owe them $1000 and they owe you $1000. The thing balancing the cash in your account isn't some other customer's cash, it's the debt you owe them. The amount of physical cash in their vault as a result of you taking out the loan hasn't changed at all. They're required to have a certain amount of cash in reserve to cover cash withdrawals, but that amount is not 100%.

zanny 7y ago

They go hand in hand, and are not mutually exclusive, instead often feeding one another in myriad ways. Housing is an obvious one - the rich accumulate capital, the gross inequality reduces the market for the "good" kinds of investment capitalism is purported to promote - small business creation, innovation, etc - so without opportunity - and wealth inequality diminishes opportunity society-wide - the rich will instead find other avenues to grow their slice of the pie. Buying politicians for tax cuts like were seen last year, speculative housing bubbles because of the few things that are scarce and nobody can opt out of land occupancy is one of them (and the poor want to move towards opportunity, almost exclusively found in cities in the modern era, where land capture can be made its most lucrative), stock buybacks in corporations, etc. So housing prices go up, lack of collective power means the working class see no wage increases, debt has to increase to maintain lifestyle. Higher debt means less potential for upward mobility and the lenders are almost exclusively the rich - so you are constantly making short term loans where the interest is diverted from your productive gains right in the pockets of creditors. But its not just housing. There are dozens of nigh independently influenced aspects of living in the US that are impacted by wealth disparity and the distorting effects its concentration have on liberty, prosperity, even security. But almost all of them cause increases in debt because as you get relativistically poorer the fixed costs of life go up and you cannot opt out of them.