Inequality from Rich to Poor
Ashton Bucheger
Mr. Reuter
Economics -- B2
9/22/2014
We’ve all heard about the great spread of wealth across the U.S. and how the wealth inequality, or distribution of wealth, is large between the rich and poor in America. This inequality between rich and poor has been cause for many reasons the largest of which is the marginal benefit versus marginal cost of the different economic classes. It boils down to the simple fact of the rich have more ‘liquid’ money and with the stock market as it is the more you put into it the more you get out of it or lose in it. “Putting a dollar into the popular S&P 500 index that tracks the largest companies traded on U.S. stock exchanges in March 2009 would leave you with $3 today. That's a nice 200% return, but obviously if you had invested $1 million in the market over the same time period, you would now have $3 million (Long).” The rich just have more to gain by taking the risk the market presents and being able to put more money in than the other economic ‘classes’ as shown below.
Stock market investment by the rich isn’t all bad right? When “Overall, the amount of wealth held by American households increased 14 percent between 2009 and 2011, going from $298,000 to $339,000 in inflation-adjusted dollars, the report said (What).” I mean after all, them getting richer makes the average wealth of America greater that isn’t bad is it? Just because the average wealth of American citizens does get larger as the rich get richer you have to remember where they get their money from and that that margin of inequality keeps getting larger “Yet the study also revealed that only the 13 percent of households with a networth of $500,000 or more saw their wealth increase. Every other income group in the US saw their net worth decline (What).” Even though the average American household’s income has increased only the rich get richer and everyone else gets poorer as the graph below shows.
Yet another source of inequality comes from stocks because if stocks drop in one area and you are diversified your overall status has barely dropped while if you have all your eggs in one basket and the basket tips you stand to lose allot of money. As you get lower and lower down the economic pyramid you are forced to have more and more eggs in one basket because there is no other basket to put them into. A house is one of these forced baskets and is an achilles heel to middle and lower class citizens. “The main difference between the richest Americans and other economic groups, Pew reported, is that the top 7 percent have their wealth diversified in stocks, mutual funds and other financial schemes. For the remainder of the population, household wealth is locked into the value of their homes, the sector that took the greatest hit when the bottom fell out of the US economy in late 2008 (What).” When the house market bubbled and popped the rich had the means to diversify because there wealth wasn’t all sunk into their house and was locked away in other areas of the market. They didn’t lose as much and have recovered faster because they had the ability to expand their wealth on a scale which is simply not usable for most middle and lower class americans, the stock market.
The stock market is not a problem though. The problem is the inequality. If more people were on the same playing field then the game is more equal however only a few have the means to efficiently make use of the better playing field and therefore have an advantage over the rest of the population. The richest of the rich even have an advantage over the rich on this playing field “The greatest demonstration of inequality is most evident in the income generated by not the top one percent, though, but by the sliver of the US population that makes more than 99.9 percent of the country. According to the firm’s research, the top 0.1 percent of Americans earned around $6,373,782 during that same 12-month span — or around 206 times what the average family in the US earned (Inequality).” When the rich are only “reaping in around $1,264,065 in 2012 — or around 41-times as much as the average income for all wage-earners (Inequality).”
In conclusion economic inequality in America is a major issue even if it is not known to be a totally bad or a totally good thing at this time.
Sept. 2014. <http://rt.com/usa/sadoffinequalityrichpoor685/>.
Long, Heather. "Who's Getting Rich off the Stock Market?" CNNMoney. Cable News Network, 18
Sept. 2014. Web. 21 Sept. 2014.
<http://money.cnn.com/2014/09/18/investing/stockmarketinvestorsgetrich/index.html?iid=HP
_River>.
"What Recovery? US Rich Get Richer, Middleclass Treading Water." RT USA. N.p., 24 Apr. 2013.
Web. 21 Sept. 2014. <http://rt.com/usa/usfinancialcrisiswealthoccupywallstreet307/>.
Mr. Reuter
Economics -- B2
9/22/2014
Inequality From Rich to Poor
We’ve all heard about the great spread of wealth across the U.S. and how the wealth inequality, or distribution of wealth, is large between the rich and poor in America. This inequality between rich and poor has been cause for many reasons the largest of which is the marginal benefit versus marginal cost of the different economic classes. It boils down to the simple fact of the rich have more ‘liquid’ money and with the stock market as it is the more you put into it the more you get out of it or lose in it. “Putting a dollar into the popular S&P 500 index that tracks the largest companies traded on U.S. stock exchanges in March 2009 would leave you with $3 today. That's a nice 200% return, but obviously if you had invested $1 million in the market over the same time period, you would now have $3 million (Long).” The rich just have more to gain by taking the risk the market presents and being able to put more money in than the other economic ‘classes’ as shown below.
Stock market investment by the rich isn’t all bad right? When “Overall, the amount of wealth held by American households increased 14 percent between 2009 and 2011, going from $298,000 to $339,000 in inflation-adjusted dollars, the report said (What).” I mean after all, them getting richer makes the average wealth of America greater that isn’t bad is it? Just because the average wealth of American citizens does get larger as the rich get richer you have to remember where they get their money from and that that margin of inequality keeps getting larger “Yet the study also revealed that only the 13 percent of households with a networth of $500,000 or more saw their wealth increase. Every other income group in the US saw their net worth decline (What).” Even though the average American household’s income has increased only the rich get richer and everyone else gets poorer as the graph below shows.
Yet another source of inequality comes from stocks because if stocks drop in one area and you are diversified your overall status has barely dropped while if you have all your eggs in one basket and the basket tips you stand to lose allot of money. As you get lower and lower down the economic pyramid you are forced to have more and more eggs in one basket because there is no other basket to put them into. A house is one of these forced baskets and is an achilles heel to middle and lower class citizens. “The main difference between the richest Americans and other economic groups, Pew reported, is that the top 7 percent have their wealth diversified in stocks, mutual funds and other financial schemes. For the remainder of the population, household wealth is locked into the value of their homes, the sector that took the greatest hit when the bottom fell out of the US economy in late 2008 (What).” When the house market bubbled and popped the rich had the means to diversify because there wealth wasn’t all sunk into their house and was locked away in other areas of the market. They didn’t lose as much and have recovered faster because they had the ability to expand their wealth on a scale which is simply not usable for most middle and lower class americans, the stock market.
The stock market is not a problem though. The problem is the inequality. If more people were on the same playing field then the game is more equal however only a few have the means to efficiently make use of the better playing field and therefore have an advantage over the rest of the population. The richest of the rich even have an advantage over the rich on this playing field “The greatest demonstration of inequality is most evident in the income generated by not the top one percent, though, but by the sliver of the US population that makes more than 99.9 percent of the country. According to the firm’s research, the top 0.1 percent of Americans earned around $6,373,782 during that same 12-month span — or around 206 times what the average family in the US earned (Inequality).” When the rich are only “reaping in around $1,264,065 in 2012 — or around 41-times as much as the average income for all wage-earners (Inequality).”
In conclusion economic inequality in America is a major issue even if it is not known to be a totally bad or a totally good thing at this time.
Bibliography
"Inequality Gap between Super Rich and Poor Continues to Widen." RT USA. N.p., n.d. Web. 21Sept. 2014. <http://rt.com/usa/sadoffinequalityrichpoor685/>.
Long, Heather. "Who's Getting Rich off the Stock Market?" CNNMoney. Cable News Network, 18
Sept. 2014. Web. 21 Sept. 2014.
<http://money.cnn.com/2014/09/18/investing/stockmarketinvestorsgetrich/index.html?iid=HP
_River>.
"What Recovery? US Rich Get Richer, Middleclass Treading Water." RT USA. N.p., 24 Apr. 2013.
Web. 21 Sept. 2014. <http://rt.com/usa/usfinancialcrisiswealthoccupywallstreet307/>.
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