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Oldtimer_7
Guest
Time for a math lesson. If we take a number of people off the street, some will have more money than others. We can measure that gap. Then we give everyone a dollar, or Euro, or dinar. The gap does not change. If we give everyone 10%, or any other percent, more, then everyone has more money, but the gap grows. Does this mean the rich get richer, and the poor get poorer, no Just the opposite.
I volunteer with Habitat for Humanity and get to see the financial statements of families. Many get more in various subsidies such as food stamps than the pay of college professors or other professionals in many parts of the world. I also get to see the debts they get into. Most of the families are great about pinching pennies, but then go to the local rent-to-own store and get a 50 inch television. If they do pay it off, then they buy the TV at about three times its market value. If they miss one payment, it all goes back to the store and they are left with nothing but memories.
Sadly, in this country in particular, what is missing is any sort of financial literacy. Most people, not just the poor, do not understand finances or how to plan them. We offer nine training sessions for our prospective partner families and four of them are directly related to finances. That is eight hours of instruction to erase a lifetime of financial ignorance. While it is better than nothing, why do we have to put such an emphasis on it when we supposedly have a public education system in this country?
I volunteer with Habitat for Humanity and get to see the financial statements of families. Many get more in various subsidies such as food stamps than the pay of college professors or other professionals in many parts of the world. I also get to see the debts they get into. Most of the families are great about pinching pennies, but then go to the local rent-to-own store and get a 50 inch television. If they do pay it off, then they buy the TV at about three times its market value. If they miss one payment, it all goes back to the store and they are left with nothing but memories.
Sadly, in this country in particular, what is missing is any sort of financial literacy. Most people, not just the poor, do not understand finances or how to plan them. We offer nine training sessions for our prospective partner families and four of them are directly related to finances. That is eight hours of instruction to erase a lifetime of financial ignorance. While it is better than nothing, why do we have to put such an emphasis on it when we supposedly have a public education system in this country?
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manualman
Guest
When I was a kid, education included financial matters. I can recall learning about compound interest (i.e. buying non-necessities with a credit card is a fools game), instruction on how checking accounts worked and how to balance the statement, we even did a 6 month project where we invested $10,000 in funny money in individual stocks to see how the markets worked. This was grade school.
Today, they teach 'em how to unroll a condom instead. That’s progress for ya…
Today, they teach 'em how to unroll a condom instead. That’s progress for ya…
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mary_bobo
Guest
Excellent points. We have to put up with it because most of our kids go to government schools and we all know what shape they are in.
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TheTrueCentrist
Guest
Stratification of wealth is not healthy for society, this is a well established principle. Many of Mexico’s current problems are due to an incredibly affluent population living next door to serious poverty, for example.
The contention that “poverty is caused by ignorance” may have some merit, however it does not explain why the gap between the rich and poor is widening by itself.
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Ridgerunner
Guest
Anytime there is a recession, this surely happens, because those whose resources are limited tend to use them up just to stay afloat. Those who have more are less vulnerable, but do take hits to their net worth. Some who are relatively well off panic and bail out at the bottom. One of my relatives asked about doing that, and I advised him not to. He then sheepishly told me he already did, for the most part, and right at the very bottom. If he had stayed with it, he would have been greatly better off.
Those who are quite wealthy take hits to their financial statements, for the simple reason that recessions carry most assets downward. But such people are more easily able to outlast the effect and, for some, outearn the downturn in their net worth in the interim.
In other words, the wealthier one is, the less likely he is to “burn through” his wealth in bad times, and the less vulnerable he is to being laid off, because employers tend to keep key employees to the very last, and those tend to be the better-paid supervisory people.
Having said that, though, I think there would be a point at which many of those who are considered “rich” by most have not been able to earn their way out of it and have also taken hits to their wealth. Some people can wait out bad times. Some could, but panic. Some can’t wait bad times out.
Those who are quite wealthy take hits to their financial statements, for the simple reason that recessions carry most assets downward. But such people are more easily able to outlast the effect and, for some, outearn the downturn in their net worth in the interim.
In other words, the wealthier one is, the less likely he is to “burn through” his wealth in bad times, and the less vulnerable he is to being laid off, because employers tend to keep key employees to the very last, and those tend to be the better-paid supervisory people.
Having said that, though, I think there would be a point at which many of those who are considered “rich” by most have not been able to earn their way out of it and have also taken hits to their wealth. Some people can wait out bad times. Some could, but panic. Some can’t wait bad times out.
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TheTrueCentrist
Guest
Yes, but since the poor have a floor to hit while the rich do not, shouldn’t a recession decrease the gap? Moreover, if a rich person and a poor person take 5% hits to their net worth, the gap between them will narrow.
What is missing from Oldtimer’s statement is that education is increases the likelihood of a recession-proof job.
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Ocean52680
Guest
In order to get a better perspective on the data, I would like to know how many people in the 3rd and 4th quintiles use to be a top 20% earner in the last three years. Annually, a great deal of people move up and down the tax bracket. I wonder how many people here on CAF took a pay-cut in last two years? I bet the number is quite large.
By the way, I think statistics on marriage are far more concerning.
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Oldtimer_7
Guest
Certainly education is not the only determinant. I once took a ride with a recovering alcoholic who was related to most of the people in the eastern of the county we lived in. He recited the provenance of every farm we passed. In an hour’s drive, I do not think that there was one farm that stayed in a family’s hands for more than three generations, either due to alcohol or gambling, usually the combination of the two.
The Amish usually drop out of school the day the law allows, and French peasants are not known for their great education, but they understand financial prudence and are willing to forgo present pleasure for long-term gains. They do not participate in the modern banking systems and are well insulated from the vagaries of the market.
Of all the industrialized countries, we have the lowest savings rate. I think it is close to zero or possibly slightly negative. In contrast, the average Japanese or Chinese save about 20% of income. Their governments have had to have campaigns to encourage them to spend money. Imagine that in the US.
The Amish usually drop out of school the day the law allows, and French peasants are not known for their great education, but they understand financial prudence and are willing to forgo present pleasure for long-term gains. They do not participate in the modern banking systems and are well insulated from the vagaries of the market.
Of all the industrialized countries, we have the lowest savings rate. I think it is close to zero or possibly slightly negative. In contrast, the average Japanese or Chinese save about 20% of income. Their governments have had to have campaigns to encourage them to spend money. Imagine that in the US.
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