Tuesday, May 05, 2009

Don't Hate The Rich, Be One Of Them


Don't hate the rich, be one of them. Who said that? 1,000 guesses and you won't get it right. Where was it said. 10 guesses and you probably will get it right. We'll get back to this shortly.

Meanwhile, if we look back a couple of months, here is what was written in The New York Times:

Published: February 25, 2009

WASHINGTON — President Obama will propose further tax increases on the affluent to help pay for his promise to make health care more accessible and affordable, calling for stricter limits on the benefits of itemized deductions taken by the wealthiest households, administration officials said Wednesday.
And CNN just reported the following:
By Jeanne Sahadi, senior writer

NEW YORK ( -- President Obama on Monday spelled out his proposals to close corporate tax loopholes on U.S. multinational corporations and crack down on overseas tax havens.

The goal is to help create new jobs in the United States and make the tax code fairer. All told, the administration said the changes would raise $210 billion in tax revenue over 10 years.

"I want to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens," Obama said in a White House announcement.

But tax policy experts and corporate lobbyists say such measures, unless accompanied by a reduction in the corporate tax rate, will push more companies to move their operations -- and jobs -- overseas to more tax friendly countries.

All right, we all know that President Obama believes people and corporations that earn more should pay more than the rest of the population... which they are already doing.... He means increase the differential in the tax rates. Our history has shown that this is a self-defeating effort. While it levels the playing field, it lowers the playing field. It does not create new jobs... except perhaps in government agencies... and it does not make the government bring in more taxes in the long run.

But this is consistent with the political posturing from the Obama Democrats. I say posturing because behind the scenes many Democrats, including President Obama, are somehow becoming quite wealthy despite the restrictions on their government earnings... or getting the wealth close to home.

Regardless, lets go back to the beginning of this post. Here is the answer:

By Li Hongmei People's Daily Online

Despite the turmoil in financial markets and global economic downtrend, the Chinese rich will go on accumulating wealth faster than ever anticipated. According to the private wealth report released some time ago that the number of China's high net worth individuals is growing by leaps and bounds on a year-on-year basis. The concept of so-called high net worth individuals refers to those with net assets of at least US$1m excluding their main home.

The survey conducted by China Merchants Bank and Consultancy Bain & Company indicates that as many as 320,000 Chinese individuals will possess at a minimum 10 million yuan (US$1.46m) each in disposal assets as of the end of 2009. A total of 8.8 trillion yuan in disposable assets held in the happy few rich hands is already tantamount to the 29 percent share of the country's GDP total of 30 trillion yuan.

The upward revision in the wealth forecast not only reflects China's generally effective fiscal and monetary policy in recent years, but also showcases that the Chinese wealthy, the enterprising minority of the population allowed by the policy of reform and opening up to get rich first, have now become more adept at shifting their funds out of troubled markets into more profitable areas. Additionally, wealth creation in China, meanwhile, has benefited from the country's closer integration into the global economy.

Admittedly, in a still developing nation like China, the general public seems to grudge accepting the fact that a rising number of high net worth individuals have emerged and the wealth they controlled has been dramatically expanded. Influenced by the decades-long planned economy, the Chinese have been accustomed to the Chinese-style egalitarianism, shaping the stereotyped mindset of 'eating from the same big pot.' Hence, a great many people cannot rub off the deeply ingrained prejudice against wealth, as they were taught that there was something wrong inherently with being rich.

If viewed through the prism of social development, one can easily understand why wealth used to be so despised in traditional Chinese society. China is typically an agricultural country, and in its time-honored history, the theory of 'attaching great importance to agriculture but restraining commerce' has been hammered into the people's mind, well and truly. With time, 'poverty mentality' would come into being, which encourages the thinking that if you have more, then I must have less. Even worse, now that many of the Chinese have grown up exposed to similar thinking and similar teachings, they tend to form an abnormal psyche of 'hating the rich.'

Misconducts of some affluent people as well as the illicit channels they used to accumulate their wealth will undoubtedly add a further irritant to the discontent of the less fortunate. Such terms as 'corrupt rich,' 'stinking rich' and other much harsher things are often used by ordinary Chinese to describe those 'wealthy but bad guys' in their eyes.

More often than not, many of the newly emerged rich people are still magpies, good at hoarding but poor in management. And they have little sense of charity, donation and social commitments, this being yet another reason to make them scorned by the public. Some even believe that the rich got that way by stepping on the poor. The rich, however, can hardly convince the less fortunate majority that it isn't wrong to be wealthy. So in a society with the rapid economic growth and increasingly enlarged circle of affluent individuals, it is quite desirable to cultivate a wealth culture, which can, for one thing, gradually change people's thought process and make them believe everybody can escape poverty and get rich through efforts.

Secondly, a sound atmosphere in which wealth creation is encouraged will also help people retrain their mind, pushing out the old 'poverty mentality,' and replacing it with a 'wealth mentality.' If more people are devising ways to create wealth, in a long run, it will contribute to building a harmonious and mass affluent society, as more people will have the ability to help the less fortunate.

A society without producing wealthy people is never progressing on the healthy track. Indeed, even the Bible says 'money is the root of all evils.' In this light, a highly commercialized society is not a noble one, either. But it is noteworthy that wealth in itself has nothing to do with guilt or innocence, and what matters most is how to manage it. Nevertheless, it will be beneficial to the general good of a society that, instead of bitterly envying the rich, more people are learning to become one of them.
I'm having a hard time wrapping my mind around the fact that China has now joined the Cato Institute.


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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
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Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)