

Do the rich need Americans? - rosariom
http://blogs.wsj.com/wealth/2010/08/02/do-the-rich-even-need-the-rest-of-america-anymore/

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CWuestefeld
_Late last year, the U.S. economy experienced a surprising decoupling. As
stocks boomed, the wealthy bounced back._

Isn't this completely predictable? When the government invests hundreds of
billions of dollars into the market, by way of dumping money into the
financial and automobile industries, and that money's source is loans backed
by the people-at-large, then of course this is happening.

The government is transferring money from the taxpayers to those invested in
the capital markets. Anybody who believes that the government (not just the
GOP but the Democrats as well) is working for the little guy, is a sucker.

~~~
yummyfajitas
_by way of dumping money into the financial and automobile industries,_

Um, the UAW bailout didn't benefit the rich much. Most bondholders/etc took a
haircut. The primary beneficiaries were the upper middle class UAW
workers/nonworkers (they didn't take a haircut).

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Alex3917
The whole reason the UAW is broke is that in the 60s the rich promised the
workers future money they didn't have so that they could take more money out
of the company. How exactly is that an example of the rich losing money?

~~~
yummyfajitas
What I was responding to: "When the _government_ invests hundreds of billions
of dollars into the market, by way of dumping money into the financial and
automobile industries,..."

CWuestfield and I were discussing actions taken by the government during the
bailout, not a business plan the UAW and GM entered into in the 60's.

During the bailout, the administration funneled billions of taxpayer dollars
(many of which were paid by people earning less than UAW employees) to the
UAW. In the process, they also screwed over bondholders (and ignored the rule
of law) who had a legitimate claim to part of the proceeds of GM's
liquidation.

That's an example of the government screwing over the rich (and middle class)
for the benefit of the upper middle class.

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jbooth
Only sort of. There's a case to be made that, without government assistance,
bondholders would be receiving less money in a liquidation than they'll wind
up receiving post-haircut. Of course, they wouldn't get to blame unions for
their poor investment decision, so it might not be worth the lack of emotional
gratification :)

~~~
CWuestefeld
This may or may not be true, depending on specific details that I don't know.

But it's _certainly_ true that equity holders came out quite a bit richer than
they otherwise would have. Owners of common stock are last in line in a
liquidation, so they likely would have gotten very little. But now they've got
more equity than at the time of the bailout.

Thus, the government pumped taxpayer money into GM shareholders.

~~~
yummyfajitas
As far as I'm aware, GM shareholders received nothing.

In the bankruptcy, the Motors Liquidation Company purchased all the valuable
assets (including the names and trademarks) from GM. The proceeds were (and
are still being) used to pay bondholders and other creditors. Anything
remaining would be given to shareholders, but the proceeds of the sale are not
expected to be even close to sufficient for this to occur (that's why GM went
bankrupt to begin with).

~~~
CWuestefeld
I wasn't aware of this. You're saying that the bankruptcy essentially created
a new company, with the original stockholders left with dangling pointers to
essentially nothing but a prayer that the new company might give them
something?

~~~
yummyfajitas
I believe that's the general gist of it, though I freely admit I don't know a
lot about it. I'd be very happy to defer to someone who knows more about it.

[http://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorg...](http://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization)

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geebee
The editorial hinted at an answer...

"The American wealthy benefit greatly from the country’s legal system and
business transparency, not to mention its armed forces."

I guess you'd agree or disagree to the extent that you believe the US
military, government, and courts are required to maintain a safe, stable world
where trade can take place unabated enough to allow the rise of a global
elite. It's not just the US, of course - you could also ask if the haven of
Monaco could survive without the military strength of nearby european powers.

~~~
hammock
Actually IPOs are at an all-time low in the US (Facebook is the new model); so
much for the "transparency" argument. Additionally, big business is almost
unanimously using pre-dispute arbitration clauses now, so much of the action
happens independent of US courts.

~~~
geebee
This definitely weakens the transparency argument, though I wouldn't go so far
as to say it eliminates it.

The problem is, it can actually be very difficult to evaluate the contribution
of the courts and the military to the stabilization of international trade. A
resident of Monaco could certainly stump me by asking "well, if the US or
French military is so essential for my protection, then who is it who would be
attacking me?"

I suppose I could try to come up with an answer (probably easier during the
cold war), but the unsatisfying response is "who knows, but a rueful glance
through history suggests it would probably be someone."

You probably believe that the rich need the US and allied military to the
extend to which you agree with that answer. Same kind of goes for the courts -
rather than point to a particular need fulfilled, a lot of people would say
that without a system for resolving crimes, torts and even contracts, a modern
economy simply couldn't exist.

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theoj
The original Salon article is much better in its analysis:
[http://www.salon.com/news/us_economy/index.html?story=/news/...](http://www.salon.com/news/us_economy/index.html?story=/news/feature/2010/07/27/american_people_obsolete)

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ldayley
This article makes good points, but it fails to raise alarms for me. Knowledge
has few national boundaries (and largely shouldn't), why should capital?

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wnoise
Labor in general has large national boundaries. These are lowered slightly for
knowledge workers.

