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>And it really is as simple as that. It really isn't, because your "simple" comparison is bunk. For one, it's measuring stock vs flow. Stock prices measure sto

by gruez 1y ago

>And it really is as simple as that. It really isn't, because your "simple" comparison is bunk. For one, it's measuring stock vs flow. Stock prices measure stock, eg. the size of a piggy bank. Salaries measure flow, eg. your annual salary. Directly comparing the two results is meaningless. It's easy to demonstrate this with the piggy bank example. If your salary was 50k/year, you saved 5k/year, then your piggy bank would be growing much faster than your salary growth, but it doesn't say much about the economy, or whether you could quit your job or not. In fact, if you started with $0 in savings, your piggy bank growth would be infinite, which really shows how absurd stock vs flow comparisons can be. Moreover stock prices incorporate a variety of factors that are irrelevant to wealth distribution. Low interest rates makes stocks more valuable by reducing the future discount rate, and corporate consolidation makes stock indices go up, but neither of those factors directly affect inequality. For instance, a simple DCF model would value a company with earnings of of $1/share/year at $16.67/share if the risk free rate was 6%, but $33.33/share if interest rates were at 3%. However it's unclear whether such drop in interest rates would double inequality, as a direct comparison would imply. After all, most people hold on to debt (eg. mortgages) as well savings.

cameldrv 1y ago
If you want a flow, here you go: https://fred.stlouisfed.org/series/A053RC1Q027SBEA https://fred.stlouisfed.org/series/A053RC1Q027SBEA Corporate profits in the U.S. have almost doubled since 2019.
- gruez 1y ago
  That has other issues. For instance change in ownership structures (eg. mom & pop shops selling up to private inequality) would change this figure without anything else changing. The statistic for "Share of Labour Compensation in GDP", which avoids such issues shows that while it has dropped (ie. more money going to capital), the scale is grossly exaggerated. https://fred.stlouisfed.org/series/LABSHPUSA156NRUG https://fred.stlouisfed.org/series/LABSHPUSA156NRUG
- potato3732842 1y ago
  All these "doubled since 2015/2019/20whatever" stats tie back to a dirty word that starts win In and ends with "flation" And, as everyone who wasn't lying for various reasons predicted and anyone can see by looking at prior comparable events in history can tell you, wages are one of the last things to go up.
  - ffsm8 1y ago
    You do realize that inflation hits at least as much for employees though right? (Likely even more, because all things equal, you're still better off if numbers are bigger) If anything, you'd be strengthening cameldrv and Epa095s point...
    - grafmax 1y ago
      Inflation is typically better for the wealthy. Cost of living goes up. This hits you if you are a worker. But if you’re wealthy this is a small dent in your budget at best. On the contrary, you hold many assets, which generally appreciate with inflation, effectively hedging away the negative effect.
  - _DeadFred_ 1y ago
    Bro, the CEOs said on conference calls it wasn't about inflation and bragged about their profits. https://www.theguardian.com/business/2022/apr/27/inflation-corporate-america-increased-prices-profits?utm_source=chatgpt.com https://www.theguardian.com/business/2022/apr/27/inflation-c... https://groundworkcollaborative.org/work/big-profits-in-small-packages/?utm_source=chatgpt.com https://groundworkcollaborative.org/work/big-profits-in-smal...
    - potato3732842 1y ago
      Bro, they have to. If they said they were making double because dollars worth have stonk no go up.
      - _DeadFred_ 1y ago
grafmax 1y ago
People who have less flow and no stock can increase their savings less than those with stock and the same flow. Many are not able to save at all. Those without stock receive only flow. Those with stock receive both flow and stock, and those with more stock profit more from rising stock. So the relationship between stock and “flow” is absolutely relevant if we want to understand wealth inequality, because the working class primarily receives money through wages (most of it going out to pay for things such as basic necessities), with the ownership class accruing profit that they receive by virtue of ownership.
- robertlagrant 1y ago
  It's still a really silly comparison.
- WalterBright 1y ago
  > People who have less flow and no stock can increase their savings less than those with stock and the same flow. If they have savings they can buy stock. Nobody is sentenced to have savings only. > with the ownership class accruing profit that they receive by virtue of ownership. Anyone can buy stock with less than $100 and thereby join the ownership class.
  - grafmax 1y ago
    Workers savings doesn’t change the fundamental dynamic. Their savings are dwarfed by those of their bosses. So when stocks double, workers, even accounting for savings, benefit far less in absolute terms than owners. Assets under capitalism follow a Pareto distribution - a minority owns a majority of the wealth. And having $100 in savings doesn’t free someone from wage labor.
    - WalterBright 1y ago
      To get big money, you need to start your own successful business. But still, investing in stocks can make you quite comfortable.
    - 1y ago
Epa095 1y ago
Feel free to look at dividend yields, but I can pretty much guarantee that it has not halfed in the period the stock market doubled. Most likely it stayed relatively flat, somewhere between 1.5% and 2%. So if you had 100 million you would get 1.7 million as dividend 5-7 years ago, now it's roughly doubled, without selling any of your stocks. Not that it really matters. Given how much faster the stock market grows compared to salaries you can sell a few percentages of your wealth every year, and still get richerer by doing nothing besides owning.
- gruez 1y ago
  >Feel free to look at dividend yields, but I can pretty much guarantee that it has not halfed in the period the stock market doubled. Most likely it stayed relatively flat, somewhere between 1.5% and 2%. Eyeballing this chart it looks like it dropped around a third since the pandemic. https://ritholtz.com/wp-content/uploads/2021/09/spx-div-yld.png https://ritholtz.com/wp-content/uploads/2021/09/spx-div-yld.... https://ycharts.com/indicators/sp_500_dividend_yield https://ycharts.com/indicators/sp_500_dividend_yield
  - grafmax 1y ago
    If yields stay the same actual dividends still grow in a rising market. Of course dividends aren’t a good representation of increased wealth. Stock price + dividends is. Companies generate profit which gets added to the balance sheet or paid out as dividends. It’s basically two ways of accounting for the same income (with some minor differences like tax implications).
  - Epa095 1y ago
    (First, I apologise that this message must be hasty, I must do life stuff). I really feel like your first graph proves my point? OK, at times it goes up, at times it goes down. But since 2002 the dividend is the same, but the S&P 500 is 7x. So the lazy capitalist puting in 10 million there in 2002 got 132k in yearly 'income' then, now he gets 925k yearly. You wanna figure out how much average salary increased the same period? I am willing to bet it's closer to 2 than 7. And that shows who gets the fruit of our increased productivity. Owners.
deleted 1y ago
[deleted]
FabHK 1y ago
Good point. Doubling in 7 years means around 10% growth per year. So, if someone took out 10% of their stock nest-egg per year, it wouldn't have grown at all. Having said that, GP does illustrate Picketty's point in Capital in the Twenty-First Century that r>g, that is return on capital is greater than economic growth, and Picketty did theorise that this would inevitably lead to concentration of wealth (unless war or other calamities reset the scale).
- bluecalm 1y ago
  I am sure the point must be more sophisticated as even with 0% growth there would still be significant return on capital (risk free rate + acceptable risk premium). That is to say the world where return on capital is not greater than economic growth doesn't make any sense.
  - carlob 1y ago
    The point is not whether or not it makes sense. The point is that it is fairly natural for a capitalist system to have r>g and that causes concentration of wealth. If you look historically the increasing concentration of wealth only really gets reversed by wars or revolutions. So what Piketty is arguing for is a more gentle way of redistributing wealth, because typically when one gets to 1914 levels of inequality, well… we know what happens.
    - gopher_space 1y ago
      > because typically when one gets to 1914 levels of inequality, well… we know what happens. When it comes to resource sequestration this is a fundamental law of nature. There's no safety in a world where random people on the street see your death as a biological imperative.
stephen_cagle 1y ago
At the risk of being pedantic, is a "piggy bank" really the right metaphor for this? A piggy bank has actual money within it, regardless of what I think of the piggy bank, it still has money within it. While a stock's total market cap technically only represents the last transaction price multiplied by the number of outstanding shares (kinda). Anyway, just making the point that it isn't like a "bank" in that there is not money in a container of any sort (obviously, banks lend out their own deposits so even my correction is also wrong). I'm don't have anything better to replace it with, but I am just questioning the "piggy bank" as a metaphor here.
WalterBright 1y ago
Another way to say that is comparing velocity to distance traveled is not meaningful.
bobsomers 1y ago
> Moreover stock prices incorporate a variety of factors that are irrelevant to wealth distribution. This handwaves away the most important fact w.r.t. stocks and wealth distribution, which is that wealthy people own stocks and poor people don't. A whopping 38% of Americans don't own any stock.
mitthrowaway2 1y ago
It's not quite as bunk as that. If you take the time-derivative of the stock price it becomes a flow, and as stock prices are approximately exponential, the growth rate will be half of what it is today at approximately the same time range that the value itself was half of what it is today. (Obviously, with a lot more noise added).
TFYS 1y ago
Isn't the point still valid if you consider just the return on capital? If the market cap of the S&P500 was about 18 trillion in 2015 and returns 10%, the income going to to the owners of that capital is 1.8 trillion. In 2025 the market cap is 53 trillion, and a 10% return is then 5.3 trillion. That's an increase of almost 300%. Now if the average salary was 48,000 in 2015 and there were 150 million people employed in the us, that's 7.2 trillion. The 2025 average is about 66,000 with 160 million employed. That's about 10 trillion. Around 40% increase in income going to labor. Am I missing something?

by gruez 1y ago

cameldrv 1y ago

If you want a flow, here you go: https://fred.stlouisfed.org/series/A053RC1Q027SBEA https://fred.stlouisfed.org/series/A053RC1Q027SBEA Corporate profits in the U.S. have almost doubled since 2019.

gruez 1y ago
That has other issues. For instance change in ownership structures (eg. mom & pop shops selling up to private inequality) would change this figure without anything else changing. The statistic for "Share of Labour Compensation in GDP", which avoids such issues shows that while it has dropped (ie. more money going to capital), the scale is grossly exaggerated. https://fred.stlouisfed.org/series/LABSHPUSA156NRUG https://fred.stlouisfed.org/series/LABSHPUSA156NRUG
potato3732842 1y ago
All these "doubled since 2015/2019/20whatever" stats tie back to a dirty word that starts win In and ends with "flation" And, as everyone who wasn't lying for various reasons predicted and anyone can see by looking at prior comparable events in history can tell you, wages are one of the last things to go up.
- ffsm8 1y ago
  You do realize that inflation hits at least as much for employees though right? (Likely even more, because all things equal, you're still better off if numbers are bigger) If anything, you'd be strengthening cameldrv and Epa095s point...
  - grafmax 1y ago
    Inflation is typically better for the wealthy. Cost of living goes up. This hits you if you are a worker. But if you’re wealthy this is a small dent in your budget at best. On the contrary, you hold many assets, which generally appreciate with inflation, effectively hedging away the negative effect.
- _DeadFred_ 1y ago
  Bro, the CEOs said on conference calls it wasn't about inflation and bragged about their profits. https://www.theguardian.com/business/2022/apr/27/inflation-corporate-america-increased-prices-profits?utm_source=chatgpt.com https://www.theguardian.com/business/2022/apr/27/inflation-c... https://groundworkcollaborative.org/work/big-profits-in-small-packages/?utm_source=chatgpt.com https://groundworkcollaborative.org/work/big-profits-in-smal...
  - potato3732842 1y ago
    Bro, they have to. If they said they were making double because dollars worth have stonk no go up.
    - _DeadFred_ 1y ago

grafmax 1y ago

People who have less flow and no stock can increase their savings less than those with stock and the same flow. Many are not able to save at all. Those without stock receive only flow. Those with stock receive both flow and stock, and those with more stock profit more from rising stock. So the relationship between stock and “flow” is absolutely relevant if we want to understand wealth inequality, because the working class primarily receives money through wages (most of it going out to pay for things such as basic necessities), with the ownership class accruing profit that they receive by virtue of ownership.

robertlagrant 1y ago
It's still a really silly comparison.
WalterBright 1y ago
> People who have less flow and no stock can increase their savings less than those with stock and the same flow. If they have savings they can buy stock. Nobody is sentenced to have savings only. > with the ownership class accruing profit that they receive by virtue of ownership. Anyone can buy stock with less than $100 and thereby join the ownership class.
- grafmax 1y ago
  Workers savings doesn’t change the fundamental dynamic. Their savings are dwarfed by those of their bosses. So when stocks double, workers, even accounting for savings, benefit far less in absolute terms than owners. Assets under capitalism follow a Pareto distribution - a minority owns a majority of the wealth. And having $100 in savings doesn’t free someone from wage labor.
  - WalterBright 1y ago
    To get big money, you need to start your own successful business. But still, investing in stocks can make you quite comfortable.
  - 1y ago

Epa095 1y ago

Feel free to look at dividend yields, but I can pretty much guarantee that it has not halfed in the period the stock market doubled. Most likely it stayed relatively flat, somewhere between 1.5% and 2%. So if you had 100 million you would get 1.7 million as dividend 5-7 years ago, now it's roughly doubled, without selling any of your stocks. Not that it really matters. Given how much faster the stock market grows compared to salaries you can sell a few percentages of your wealth every year, and still get richerer by doing nothing besides owning.

gruez 1y ago
>Feel free to look at dividend yields, but I can pretty much guarantee that it has not halfed in the period the stock market doubled. Most likely it stayed relatively flat, somewhere between 1.5% and 2%. Eyeballing this chart it looks like it dropped around a third since the pandemic. https://ritholtz.com/wp-content/uploads/2021/09/spx-div-yld.png https://ritholtz.com/wp-content/uploads/2021/09/spx-div-yld.... https://ycharts.com/indicators/sp_500_dividend_yield https://ycharts.com/indicators/sp_500_dividend_yield
- grafmax 1y ago
  If yields stay the same actual dividends still grow in a rising market. Of course dividends aren’t a good representation of increased wealth. Stock price + dividends is. Companies generate profit which gets added to the balance sheet or paid out as dividends. It’s basically two ways of accounting for the same income (with some minor differences like tax implications).
- Epa095 1y ago
  (First, I apologise that this message must be hasty, I must do life stuff). I really feel like your first graph proves my point? OK, at times it goes up, at times it goes down. But since 2002 the dividend is the same, but the S&P 500 is 7x. So the lazy capitalist puting in 10 million there in 2002 got 132k in yearly 'income' then, now he gets 925k yearly. You wanna figure out how much average salary increased the same period? I am willing to bet it's closer to 2 than 7. And that shows who gets the fruit of our increased productivity. Owners.

deleted 1y ago

[deleted]

FabHK 1y ago

Good point. Doubling in 7 years means around 10% growth per year. So, if someone took out 10% of their stock nest-egg per year, it wouldn't have grown at all. Having said that, GP does illustrate Picketty's point in Capital in the Twenty-First Century that r>g, that is return on capital is greater than economic growth, and Picketty did theorise that this would inevitably lead to concentration of wealth (unless war or other calamities reset the scale).

bluecalm 1y ago
I am sure the point must be more sophisticated as even with 0% growth there would still be significant return on capital (risk free rate + acceptable risk premium). That is to say the world where return on capital is not greater than economic growth doesn't make any sense.
- carlob 1y ago
  The point is not whether or not it makes sense. The point is that it is fairly natural for a capitalist system to have r>g and that causes concentration of wealth. If you look historically the increasing concentration of wealth only really gets reversed by wars or revolutions. So what Piketty is arguing for is a more gentle way of redistributing wealth, because typically when one gets to 1914 levels of inequality, well… we know what happens.
  - gopher_space 1y ago
    > because typically when one gets to 1914 levels of inequality, well… we know what happens. When it comes to resource sequestration this is a fundamental law of nature. There's no safety in a world where random people on the street see your death as a biological imperative.

stephen_cagle 1y ago

At the risk of being pedantic, is a "piggy bank" really the right metaphor for this? A piggy bank has actual money within it, regardless of what I think of the piggy bank, it still has money within it. While a stock's total market cap technically only represents the last transaction price multiplied by the number of outstanding shares (kinda). Anyway, just making the point that it isn't like a "bank" in that there is not money in a container of any sort (obviously, banks lend out their own deposits so even my correction is also wrong). I'm don't have anything better to replace it with, but I am just questioning the "piggy bank" as a metaphor here.

WalterBright 1y ago

Another way to say that is comparing velocity to distance traveled is not meaningful.

bobsomers 1y ago

> Moreover stock prices incorporate a variety of factors that are irrelevant to wealth distribution. This handwaves away the most important fact w.r.t. stocks and wealth distribution, which is that wealthy people own stocks and poor people don't. A whopping 38% of Americans don't own any stock.

mitthrowaway2 1y ago

It's not quite as bunk as that. If you take the time-derivative of the stock price it becomes a flow, and as stock prices are approximately exponential, the growth rate will be half of what it is today at approximately the same time range that the value itself was half of what it is today. (Obviously, with a lot more noise added).

TFYS 1y ago

Isn't the point still valid if you consider just the return on capital? If the market cap of the S&P500 was about 18 trillion in 2015 and returns 10%, the income going to to the owners of that capital is 1.8 trillion. In 2025 the market cap is 53 trillion, and a 10% return is then 5.3 trillion. That's an increase of almost 300%. Now if the average salary was 48,000 in 2015 and there were 150 million people employed in the us, that's 7.2 trillion. The 2025 average is about 66,000 with 160 million employed. That's about 10 trillion. Around 40% increase in income going to labor. Am I missing something?