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Old 06-27-2012, 08:18 AM   #1
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Relative Wealth

I have watched the Occupy protests with some interest. While I may not agree with their ideas, I have been appalled by their treatment by police forces.

Ignoring the policing issues, I was interested in the idea that the gap between the wealthy and the poor was widening. Historically, when that gap grew to large, we see revolutions.

How do we measure this gap? Income (taxable or not)? Net Worth? Consumption? Do you include government aid?

This is an interesting article on the subject:
http://www.businessinsider.com/econo...errated-2012-6

This author chose to look at consumption. He has an interesting graph that looks at top and bottom household quintiles and tracks their consumption as a percentage of all national consumption.

Interestingly, this percentage is fairly flat over the 25+ year. The top quintile has stayed in a tight ~37%-39% range, while the bottom quintile has stayed in a very tight 9%-10% range.
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Old 06-27-2012, 08:28 AM   #2
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If we're talking about relative wealth, I would think consumption could only ba a small part of a bigger data set to illustrate their point. consumption would naturally be higher in the top quintile, as people earning high six figure salaries tend to buy more expensive cars, bigger houses, etc. For my purposes, relative wealth is best measured by total debt and monthly payments such as electric, phone and cable all subtracted from net wages. Then, I would calculate total wages saved as a percentage of the remainder. If that number is high enough above real inflation numbers so as to actually accumulate in real terms, I would say that induividual is relatively wealthy, irrespective of possessions.

For example, I consider myself firmly middle class, perhaps in the bottom of the top quintile of earners, however, with extremely little debt, I consider myself better off than many of my contemporaries, who believe higher debt loads are 'ok.
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Old 06-27-2012, 08:44 AM   #3
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Originally Posted by ancona View Post:
If we're talking about relative wealth, I would think consumption could only ba a small part of a bigger data set to illustrate their point. consumption would naturally be higher in the top quintile, as people earning high six figure salaries tend to buy more expensive cars, bigger houses, etc. For my purposes, relative wealth is best measured by total debt and monthly payments such as electric, phone and cable all subtracted from net wages. Then, I would calculate total wages saved as a percentage of the remainder. If that number is high enough above real inflation numbers so as to actually accumulate in real terms, I would say that induividual is relatively wealthy, irrespective of possessions.

For example, I consider myself firmly middle class, perhaps in the bottom of the top quintile of earners, however, with extremely little debt, I consider myself better off than many of my contemporaries, who believe higher debt loads are 'ok.
I do agree that true wealth is heavily related to net money coming into the household minus required cash flows out of the house. However, I do not feel sorry for those that are financially illiterate and put themselves the in poorhouse. If you make 200k a year and spend 199.99k a year in monthly bills, you are not poor; you are foolish.

I guess you have to create hypotheticals:

Take each quintile, find their net income (including governmental aid), and subtract out how much money it would cost you to just survive: basic housing, bare bones/no cable and phone, ect. Essentially net income minus truely required expenses would give you that household's maximum surplus to spend/invest/pay down debt.

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Old 06-27-2012, 09:59 AM   #4
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Like I have said in another thread, I think that each individual has a case and it is extremely hard to measure, even grouping a set of similar people together.

Sure you have to factor in what it takes to survive, but that is going to vary by location, by the individual and/or family. Do you take into account the debt? I would say no on a Ferrari or second home, but you would have to account for student debt, because that is what helped give them their salary.

I see some peoples arguments about the gap widening, but I don't see a lot of people willing to do anything about it. Not everyone is going to have a six or seven figure salary and drive exotic cars. You can however, put yourself in a position to live a comfortable lifestyle by working hard and making the most out of your opportunities. You may not always be doing what you enjoy or what you "believe in" but that is life, you have to pick your poison once in a while.
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Old 06-27-2012, 10:28 AM   #5
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I don't really see as big a gap as some would like me to see. As a relatively unimportant speck on an elephants ass, I am but a smallish cog in the wheel of a much bigger machine. Nevertheless, I have managed to insulate myself and family with cash, PM's and other items that will protect us from starvation or worse in the event of TEOTWAWKI. However, I believe that true wealth is not an existential thing like money and "things", rather I believe wealth to be more accurately described as peace within ones self and stability of life. In other words, I have my health, my family and we have relatively few problems, so all in all, I am welathy in that I have no real worries, a happy family and stable lifestyle, all of which has been insulated from disaster through prudent planning. Peace of mind cannot be given a price.
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Last edited by ancona; 06-27-2012 at 12:46 PM.
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