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A reminder: take any sum operation of wealth with a huge grain of salt. https://www.reuters.com/article/idUS228821959920140404 https://www.reuters.com/article/

by maratc 5y ago

A reminder: take any sum operation of wealth with a huge grain of salt. https://www.reuters.com/article/idUS228821959920140404 https://www.reuters.com/article/idUS228821959920140404

sergiosgc 5y ago
I disagree with the premise of the article. If someone has negative assets, they are poorer than people with zero assets. The article paints access to credit as a form of wealth, which it is, but in the end wealth is measured by accumulated assets, as a proxy indicator for earning potential. If you use credit to acquire assets, real estate for example, you won't move the needle on your total net worth. So, the overindebted in the US are those who used credit for expenses or for failed investments. They are poorer than those with zero debt. The only exception that I can see, and which the article does not mention, is the use of credit for acquiring untangible assets, such as education. The correction would be to measure earning potential per individual, instead of net-assets, but that is basically impossible at large scale. We are stuck using net assets as a proxy for earning potential. Sum of wealth is an acceptable measure of income inequality.
- maratc 5y ago
  > So, the overindebted in the US are those who used credit for expenses or for failed investments. They are poorer than those with zero debt. Someone who owns a $200,000 house (and a mortgage of $210,000) is poorer than someone who has no house? Someone who took a $50,000 loan for a new car and drove it for one day, technically lowering its price to $45,000, is poorer than someone who has no car?
- hnbad 5y ago
  It's worth noting that Eike Batista, whom the article mentions as an example for someone "anybody trying to get by on less than a dollar a day" would "happily change places with" had most of his assets seized a year after the article was written and was recently sentenced to 30 years in prison. Additionally Jérôme Kerviel's €4.9 billion fine was reduced to $1 million two years after the article came out but he served five months in prison the same year the article was written. The article's framing implies that these "debt billionaires" significantly impact these statistics but doesn't demonstrate whether this is the case by contrasting them with other measures, only making vague comparisons between American and Chinese "savings relative to household income". But arguably a debt-free Chinese person with modest savings is less poor than a working class American with debts they can barely afford paying the interest on because the latter is practically living under indentured servitude.
hnbad 5y ago
This is a fair criticism but the numbers still work out similarly if you look at disposable income. The question isn't how much wealth the bottom 50% or 80% or 90% of a given country has, the question is if we should want society to be structured in such a way that one person can command upwards of $100bn and what having one or more persons with this much financial power does to the democratic system they are supposed to be a part of. If capitalism means voting with your dollar, and democracy means every vote counts the same, how can the two systems coexist if the dollar amounts are so unevenly distributed. The point doesn't hinge on specific numbers, those just define the exact magnitude of the problem. You can say you prefer capitalism, where power flows into the hands of a few from "the market", or you can say you prefer democracy, where power remains in the hands of the people (or in representative democracies temporarily flows from the electorate into the hands of a few elected until the next election). But you can't say you prefer both.

by maratc 5y ago

A reminder: take any sum operation of wealth with a huge grain of salt. https://www.reuters.com/article/idUS228821959920140404 https://www.reuters.com/article/idUS228821959920140404

sergiosgc 5y ago

I disagree with the premise of the article. If someone has negative assets, they are poorer than people with zero assets. The article paints access to credit as a form of wealth, which it is, but in the end wealth is measured by accumulated assets, as a proxy indicator for earning potential. If you use credit to acquire assets, real estate for example, you won't move the needle on your total net worth. So, the overindebted in the US are those who used credit for expenses or for failed investments. They are poorer than those with zero debt. The only exception that I can see, and which the article does not mention, is the use of credit for acquiring untangible assets, such as education. The correction would be to measure earning potential per individual, instead of net-assets, but that is basically impossible at large scale. We are stuck using net assets as a proxy for earning potential. Sum of wealth is an acceptable measure of income inequality.

maratc 5y ago
> So, the overindebted in the US are those who used credit for expenses or for failed investments. They are poorer than those with zero debt. Someone who owns a $200,000 house (and a mortgage of $210,000) is poorer than someone who has no house? Someone who took a $50,000 loan for a new car and drove it for one day, technically lowering its price to $45,000, is poorer than someone who has no car?
hnbad 5y ago
It's worth noting that Eike Batista, whom the article mentions as an example for someone "anybody trying to get by on less than a dollar a day" would "happily change places with" had most of his assets seized a year after the article was written and was recently sentenced to 30 years in prison. Additionally Jérôme Kerviel's €4.9 billion fine was reduced to $1 million two years after the article came out but he served five months in prison the same year the article was written. The article's framing implies that these "debt billionaires" significantly impact these statistics but doesn't demonstrate whether this is the case by contrasting them with other measures, only making vague comparisons between American and Chinese "savings relative to household income". But arguably a debt-free Chinese person with modest savings is less poor than a working class American with debts they can barely afford paying the interest on because the latter is practically living under indentured servitude.

hnbad 5y ago

This is a fair criticism but the numbers still work out similarly if you look at disposable income. The question isn't how much wealth the bottom 50% or 80% or 90% of a given country has, the question is if we should want society to be structured in such a way that one person can command upwards of $100bn and what having one or more persons with this much financial power does to the democratic system they are supposed to be a part of. If capitalism means voting with your dollar, and democracy means every vote counts the same, how can the two systems coexist if the dollar amounts are so unevenly distributed. The point doesn't hinge on specific numbers, those just define the exact magnitude of the problem. You can say you prefer capitalism, where power flows into the hands of a few from "the market", or you can say you prefer democracy, where power remains in the hands of the people (or in representative democracies temporarily flows from the electorate into the hands of a few elected until the next election). But you can't say you prefer both.