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An Interesting Read on America’s Wealth Gap

By JLP | March 12, 2007

I’ll be honest with you,… I don’t know much about the topic of the supposed wealth divide in America. I mean I’m well aware that we have the rich, the middle class, and the poor. But, other than that, I don’t know much beyond what our media crams down our throats (which I typically take with a grain of salt). Last December I read this Alan Reynolds’ editorial titled The Top 1%…of What? (free) in the Wall Street Journal. He makes a pretty strong case that the numbers that the media and politicians like to throw around are misleading.

We all know that the rich are getting richer. It doesn’t take a genius to figure that out. However, are they getting rich at the expense of the lower and middle classes?

Topics: Net Worth Statement | 11 Comments »


11 Responses to “An Interesting Read on America’s Wealth Gap”

  1. Miguel Says:
    March 12th, 2007 at 6:22 pm

    Nice link – very informative and confirms what I’ve been thinking, which is that the income inequality issue is somewhat manufactured. Not to get all political, but there is a Presidential election everybody’s gearing up for, and the challengers need to convince the middle-class that they are not getting their fair share of the spoils.

  2. lorax Says:
    March 12th, 2007 at 6:27 pm

    The question can be answered both ways. Most likely the rising tide is lifting all boats, but “the rich” are lifted more due to their ability to take advantage of better multipliers (ie stocks, commercial real estate). The poor are better off too, but the gap is widening given the differing rates of acceleration. Psychological tests show that people do not perceive widening gaps as fair, even if it means they are better off than before.

    Is this good? Depends on your point of view. Although some history shows that concentrating wealth can stagnate economies since the wealthy will strive to keep the status quo.

    But US history shows that the gap is closed though the political process. The lower two classes don’t want a permanent ruling class.

  3. thc Says:
    March 12th, 2007 at 8:56 pm

    No. Wealth is not a zero-sum game.

  4. VladS Says:
    March 12th, 2007 at 9:38 pm

    Love the topic. A “poor” household with a couple of cars is, in most other countries, anything but. And yeah, there is a rising tide out there. But in capitalism (and thank God for capitalism) the capitalists skim the profits, and thus get richer at an exponential rate. Is there anything wrong with that? Well, it sounds bad, but the alternative is living as a Cuban or as a North Korean, where everyone is at the bottom of the foodchain, except for the royalty.

    lorax, like your comment, but must semi-disagree with your ruling class part. We DO have a ruling class. The DC establishment is the embodiment of a Roman-like republic. We are, indeed, ruled by elites, be it Republicans or Democrats. Even those with bold ideas for reform quickly succumb once they reach the ruling class ladder. And rarely is anyone in that ruling class subject to the laws (legal and otherwise) that bound you and me. Examples abound.

  5. MossysF Says:
    March 13th, 2007 at 7:02 am

    It’s not unexpected. The magic of compounding returns that makes investing work also is at play in the wealth gap. Those who diligently save & invest will see their wealth (net worth) grow faster than the majority who don’t.

  6. MafiaDon Says:
    March 13th, 2007 at 1:11 pm

    The main issue is “the rich” gaining wealth at the expense of the lower and middle classes? YES! The rich manufacture the material goods that the lower and midddle class buy, own the property the they rent, pay wages and receive interest on the money lent. Of course the rich get richer, their money is always coming back to the richest 1% in the country. While this circle is continually rotating, the equity in the companies that the wealth own is continually increasing. But it’s not their fault that the poor were never taught about the power of compound interest.

  7. Sam Says:
    March 13th, 2007 at 7:28 pm

    The envy of people that have more than most is apparently hard wired into our instincts. I read somewhere that a group of monkeys will gang up on a member of their group that gets too many bananas and take them away, even if every other monkeys already have plenty for themselves.

  8. Rob Says:
    March 13th, 2007 at 7:37 pm

    MafiaDon: The information is out there. If people are not educating themselves and are instead waiting to be taught then it is their fault and nobody else’s.

  9. Anissa Says:
    March 13th, 2007 at 11:33 pm

    Financial Illiteracy

    I agree with Rob. People are not educating themselves about the rules. But I also ask myself if I know something about money that a friend of family member doesnt know and they are willing to be taught then I should be teaching them what I know.

    One thing that is asked time and time again in The Money Camp (http://www.themoneycamp.com/?a_aid=1f3b745a)

    Are wealthy people the only ones who are allowed to benefit from tax laws, etc.?

    Although many middle and lower classes think the wealthy have different rules that is simply not true. The rules do not descriminate – they apply to everyone. It is just that not everyone knows the rules.

    The wealthy have taken the time to learn the rules and tax laws. Anyone who wants to do better needs to educate themselves like Rob states. There is enough money to go around its just who educates themselves in such a way to put their money to work for them to gain the benefits of the wealthy.

    A few things The Money Camp loves to teach participants,

    “It is better to tell your money where to go then to ask where it went.”

    “Its not how much money you make but how much you keep.”

    People in general have NEVER been taught about money. Let’s not even start about the lack of financial education our children are NOT receiving!

    Diversification
    Leverage
    OPM (other people’s money)
    Simple interest/Compund Interest
    Good Debt/ Bad Debt
    Passive Income
    Pay yourself First
    Financial Freedom
    Belief system as it relates to money

    Money is simply a TOOL to reach our dreams!

    What if people knew just these few basic concepts listed (there are so many more) above and used them with their money regardless of the amounts on their paycheck? Would their world be changed?

    Financial Literacy is LONG over due. Those of us who know how money works should take a step and mentor someone around us who is willing to learn. It only takes one person to share their knowledge with another person and change their world and someday our childrens!

  10. J.D. @ Get Rich Slowly Says:
    March 14th, 2007 at 6:09 pm

    Great article, JLP. Thanks for pointing it out…

  11. Free Money Finance Says:
    March 16th, 2007 at 4:27 am

    Star Money Articles for the Week of March 12

    Here are interesting posts and news this week from the MoneyBlogNetwork members and beyond: Blueprint for Financial Prosperity recommends investing in your company. Consumerism Commentary discusses discounts at Kohl’s. AllFinancialMatters reads about …

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