Fenderputty
Banned
My net worth is still negative since my liability is more than my asset. Right?
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Stop adding up the wealth of the poor
- Thread starter xbhaskarx
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My net worth is still negative since my liability is more than my asset. Right?
In what universe? You think he can just snap his fingers and liquidate his $6 billion assets (if he even had them)? There's debt you've accumulated at a loss and debt you accumulated at a gain. Buying a house, for example, is debt you've accumulated, but gained a piece of property. Buying shit on your credit card and not paying it off, is, well you've accumulated stuff that most likely doesn't hold it's value, so it's irrelevant to assume that it is "in something else". Food, rent, and gasoline are not investments and can't be liquidated.
In the case of the indebted guy for $6 billion. He took some risks and did some illegal tradings. He now has nothing to show for it, so all his debt is literally just that. He is in debt, and has no real assets to show for that debt that he can't easily turn back into money.
So, no, it's not that simple.
In regards to what the artciel is actually saying, I agree that it's completely misleading to lump people in debt with those that are poor. It really all depends on our definition of what "poor" is. Is a person that owns a car, a house, and has a stable job with $20,000 in student loans and a $200,000 mortgage, with just $10,000 in the bank poorer than someone in India that is living in poverty? To most people, no. But grouping them together is ridiculous and misleading.
It's also important to note that in the US, it's easy to live outside your means via accruing debt. We have that convenience. Calling those people poor, while somewhat accurate, is a little misleading to the term. They are in debt by choice or bad decision, and poor because of their bad choices, not because some external circumstances. They really shouldn't be considered in this statistic at all. It's misleading.
DoktorEvil
Banned
I read it twice and im not following the author's logic:
The author is saying that indebtedness in America is better than Indian land owners?
terrisus
Member
That it's better to own a home with a $100,000 mortgage than to be living in the middle of nowhere with nothing.
But in examining "worth," the second person would have more than the first.
Simply Sarah
Member
I see what the article is trying to say and I feel it's both correct a counter to Oxfam's point while also being intentional misdirection. Sure, it's not incorrect that you can generally "live better" with debt and assets than you can with no debt and no assets. And sure, this means just because people have negative net worth doesn't mean they're in poverty. Income compared to cost of living can be a better measure of that.
But here's the thing: None of that counters the fact that wealth is concentrated at the top. In fact, it just shows how much more extreme it is than people tend to think of it as being. I mean, sure, you have a house and a car and stuff, but if you're debts exceed your assets then you still have negative wealth. It still means that if you suddenly lose your source(s) of income that you're going to be in a world of trouble really quickly. It means that many of your assets could be claimed by creditors should you be unable to keep up with your bills. It still means that if the lenders decided not to lend anymore that many, many people would suddenly not be able to get all that nice stuff. And it still means that real wealth belongs to a few at the top. It just means they're giving you some slightly nicer scraps from the feast table.
But here's the thing: None of that counters the fact that wealth is concentrated at the top. In fact, it just shows how much more extreme it is than people tend to think of it as being. I mean, sure, you have a house and a car and stuff, but if you're debts exceed your assets then you still have negative wealth. It still means that if you suddenly lose your source(s) of income that you're going to be in a world of trouble really quickly. It means that many of your assets could be claimed by creditors should you be unable to keep up with your bills. It still means that if the lenders decided not to lend anymore that many, many people would suddenly not be able to get all that nice stuff. And it still means that real wealth belongs to a few at the top. It just means they're giving you some slightly nicer scraps from the feast table.
the author is saying that a chinese rice farmer with 47$ in savings has a higher net worth than someone browsing GAF who's 40k in debts because of student loans, but it's a mistake considering the rice farmer to be "better off" because the gaffer likely has a better standard of living and better overall perspectives in life (ymmv)
also, adding up net worths makes for weird situations (which is another problem with this metric)
To give an extreme example (to point out the critizised flaw)
If you have 100 people, the single richtest person having a net worth of $100, 98 of them having a net worth of $99 and one of them being $9999 in debt
Code:
100 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99
99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; 99 ; -9999you could still say with confidence "one percent of the population has more wealth than the other 99% added together", even though the "rich guy" has just one dollar more than each of the 98 other people.
Of course, this is not how actual global wealth distribution looks like. Still, the american "credit culture" gives such statistics a nasty skew if calculated this way.
terrisus
Member
That certain debts are worse than others, and that your ability to earn money in also a factor.
Even without getting into the kinds of debts, take 3 people
Person A: $0 in debt, earns $7,800 per year
Person B: $50,000 in debt, earns $20,000 per year
Person C: $100,000 in debt, earns $70,000 per year
I know which one of those three I would rather be.
C, needless to say
However, if solely looking at "worth" at a single moment in time, A would clearly be ahead of B and C.
The article's point is that it doesn't make sense to say that B and C are in a worse situation than A, or that C is in a worse situation than B (after all, he's only -$50,000, as opposed to -$100,000), without considering much more than that.
Right, I understand all that. I just don't see how you get from there to "stop adding up the wealth of the poor." Sure, net worth can be misleading in some cases. So remove those from the calculation when you're doing the comparison.
exactly. net worth is just a momentary slice. cash flow should be a much more important factor.
simply "ignoring" those with negative net worth wouldn't make it any more representative.
If you do include, though, don't do any of these "the top 1% owns more than the bottom XYZ%" comparisons because they're just pointless.
terrisus
Member
Well, sure, "remove those debts which are really a positive from the situation" would be part of (but not all of) the way to address that.
But, unless that is being done, "adding up wealth/debts" as a means of comparison isn't particularly useful.
In aggregate? I don't see why not. More precision would be nice when they're giving such specific numbers, but the only real point of the Oxfam thing is "there are a few people at the top with a shit ton of money, like way more than if you add up a ton of the people at the bottom."
Honestly it looks to me like nitpicking because the article writer doesn't like hearing about wealth inequality. *shrug*
just to be clear, no-one's saying this is some weird "the media are skewing data to make the situation look worse than it is!" thing
global wealth distribution is still heavily fucked. But there's a reason that usually, the "poverty line" is drawn by measuring income and not net worth.
that's exactly not the case. those at the top are still ridiculously rich, even if you used more sensible methods of measuring "wealth".
By these metrics, you'd have 7,5% of the least wealthy tenth of the world population being Americans - which just isn't an accurate depiction of real life.
terrisus
Member
I guess we took different things from reading that article.
Since, it doesn't read to me as a way to ignore "wealth inequality," but to look at who is really more "poor" than someone else.
If someone told me I was "more wealthy" than someone with a $100,000 house, I would laugh at them.
Well, the author links a previous column of his on the same theme: http://blogs.reuters.com/felix-salmon/2011/12/13/how-alice-walton-has-improved-america/
Which, while correctly noting that the stat used to call out Walmart isn't very meaningful, is clearly more about Walmart apologism than anything else.
Wealth, debt, poverty? Doesn't matter. What matters is that the rich keep wiggling their way out of paying their fair share to the upkeep of society.
Keep digging, wealthy people. If you won't give it up voluntarily, don't be surprised if the poor rise up and take it from you by force.
Keep digging, wealthy people. If you won't give it up voluntarily, don't be surprised if the poor rise up and take it from you by force.
crazygambit
Member
Having a mortgage doesn't lead to negative net worth though, since you actually have an asset that's worth more than the loan (unless you're underwater on that loan, in which case, yes it would be negative net worth). Same with the car, though depreciation can be a bitch.
Student loans are definitely negative net worth, since the asset you get is an intangible one. It will hopefully help you generate more income in the future, but from a purely accounting exercise (which is what's done here), it would be a negative net worth. So would credit card debt, since the assets behind that usually have low resell value.
terrisus
Member
Sounds like something I would do >.>
Given Wal-Mart is absurd, there's still a difference between saying:
"Wal-Mart is absurd because of relevant stats X and Y"
and
"Wal-Mart is absurd because of incorrect/meaningless/misleading stats A, B, and C"
Just because something reaches a correct conclusion (in this case, Wal-Mart is absurd) doesn't mean one can't point out that stats A, B, and C were incorrect/meaningless/misleading.
DoktorEvil
Banned
YEAH!
GO USSR!
Hopefully is a strong word here, considering the labor market can usually be flooded with a surplus of degrees in certain fields.
Pagusas
Elden Member
Yup! I'm basically in C, earn 105k/year but have about 45k in debt between auto and students loans between my wife and i (plus now a mortgage, but thats an investment to me, and honestly one I see gaining me money into the future, but still thats -300,000 added onto that.) Add up the savings, retirement and such, and minus it from the debt we have and we'd probably be like -20,000 net worth. But honestly its not a huge issue as most of that debt can be reduced in payment if tragidty strikes, we have coverage on things if we lose our jobs to insure the mortgage is covered, and we have enough in savings to help us float along for a few months while we secure new revenues. We're 29 years old, Its hard to have a high net worth at this age.
terrisus
Member
Yeah, that was just a quick and less than ideal example, still lacking in much of the detail of the situation, for a general example.
terrisus
Member
AbortedWalrusFetus
Member
I am going to pick a nit here, but the people who gain the most from society DO pay the most in taxes by a long margin. They just do not pay the largest percentage of their income.
Corronchilejano
Member
Pagusas
Elden Member
I was just about to point it out too! ... and then I remembered how bad my grammar and spelling are..
terrisus
Member
Yeah, that's more or less where I am too >.>
A bit higher income, with about doubt the debt, but general idea anyway.
I missed the typo, so everyone is safe from that :þ
DoktorEvil
Banned
One caveat here. Take it for what it's worth here, an opinion:
IMHO, It's an investment if you intend to use that property to produce income/cash flows or certain your property will appreciate in the time horizon in which you sell. Otherwise, with the ebb and flow of the real estate markets, calling your primary home an investment is a highly risky move. I personally would not call that an investment.
Pagusas
Elden Member
Oh I know, I dont consider it a primary investment at all, by using the term investment I simply mean that I expect the value of it to offset its current negative value towards my net worth. I'd never put all my eggs in one basket (my house). Really I see my house as my home, I'm likely to put more money into it than I'll ever get out of it, but thats a Quality of Life thing and it has its own value (thats worth more than money sometimes). When choosing the home I did try to insure I picked the "safest" bet in terms of value/future growth potential. But its still highly volitile. I choose to live in Frisco because I felt the property had the best chance of increasing in value in time.
Regardless, you are absolutely right.
DoktorEvil
Banned
With the manner in which the financial collapse occurred, I'm very precarious of people who call their primary home an investment.
Naturally, I like to play the wet blanket and remind them of that. I do this with my parents way too often.
Pagusas
Elden Member
Yep, I'm feel fortunate that I was able to avoid the impact of the recession by living in an area that went relatively unaffected, then as we are coming out I relocated my self to a booming market to ride the wave of career growth that comes with the upward momentum. Home values are going to go up and down like crazy, I intend to stay in this one for as long as possible, if somehow the market crashed and the value evaporates, then at least I still have a very low interest rate mortgage that I can afford and continue using it for its QoL value. While I wasnt directly affected I still see the lessons from it: Dont sell your future for short term gains, avoid ARMS/Variable rates, Stability has a value and should be considered in any investment, Keep a nest egg thats actually viable, dont rely on one source of income and always keep your skills diversified.
hipbabboom
Huh? What did I say? Did I screw up again? :(
You say that under the idea that the current tax laws are fair. You cannot gain that much from the society you owe your wealth to without caring a far higher responsibility to put more back in. Not as though the 1% are paying 48% of their income that they're supposed to back into society to begin with but that's not the bone I even want to pick. They should be paying 80%+ back. Does that scare you cuz that's where I'm coming from if you know what I mean.
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