Could The Latest Income Inequality Data Be Lying To Us?

mouth moneyTwo interesting Income Inequality stories seem to be bouncing around.

One story from The Atlantic claims that a shorter life could be the unfortunate fallout from Income Inequality. That means a shorter life for those with less money. I’m sure the story would have been buried if  it showed the opposite was happening. If a life of champagne and caviar was prematurely killing the members of the 1% club we would probably not hear about it.

The other story covered in the Huffington Post and many other places is about how French Economist Thomas Piketty seems to think that Income Inequality will just keep getting worse unless we impose a Global Wealth tax to redistribute income. And do it fast!

It’s amazing what people will say to create a hot headline when they are on a book tour. And how they bend statistics and common sense to get a little time out in the light of day.

And… These are normally pretty smart people. Is this like yelling fire in a crowded movie theater ow what?

First lets look at the story in The Atlantic about how richer people just seem to be living longer…

BN-CK785_income_G_20140417175313The data and pretty charts seem to say that if you are not part of the wealthiest one percent you should probably buy a big life insurance policy because you will have a short life.  They are trying to say that less money causes a shorter life.  This is like gathering some numbers and finding out that people who use Macintosh computers live longer so the U.S. Government  should  distribute Macs to everyone so they can all live longer healthier lives. It it was only so simple.

What this study fails to point out are the thousands of other factors that could be at work shortening peoples lives beside their Income level or if they own a Mac Computer.

The choices made by someone in some backwoods West Virginia county compared to a Washington D.C. one percenter could be very different and profoundly influence each of their lifespans. Simple choices like drug and booze consumption, what they eat, how they exercise will make the difference not so much the size of their bank account.

I would propose that someone earning very little money but making good health choices will always live longer. And… It does not cost much more to make clean health choices does it?

If you think I am wrong then tell me why the five place on earth where people live with the longest lifespans do not seem to be populated by rich one percenters?  Yes… These are places like Okinawa, Japan and Ikaria, Greece.

wealth tax2How about what that French Economist has to say…

Basically his concern is that the rich will just keep getting richer and the poor will keep getting poorer.  And his briliant solution… A global Wealth tax!

When I hear this stuff I start to think people have been living in some subterranean cave and just poked their heads out for a few minutes to look at the world.

If this economist would have looked around a little longer before spouting he would have discovered that the stock market has had a great run up since it crashed back in 2008. This is how things like the stock market have worked since the beginning of time. They go up and they go down. When they are going up like they have been people who take risks get rewarded. At least on paper they get rewarded.  I say that because much of this wealth he is talking about is “fantasy wealth”. Bill Gates and Warren Buffet’s vast riches mostly exists as numbers on some computer somewhere. As soon as the stock market heads down, and it will, that wealth disappears. It’s “fantasy wealth”!  Just like monopoly money.

And… If a global wealth tax is put in place a portion of all this “fantasy wealth” will need to be turned into real cash. So what do you think will happen to the stock market if most of the people sitting on shares of stock, where this wealth is located, need to sell some stock to pay a global wealth tax?

marketcrashWhat happens when there are more sellers than buyers in any market?

That stock market will crash right along with any market like Gold, real estate, or Bennie Babies when there is a rush to sell.

And.. As we hopefully all know crashing markets don’t help anybody.

The smartest thing I saw was a New York Times article that smartly points out that how all this 99% and 1% class warfare talk is pure nonsense since the 1% and 99% are not any people in particular. They are just buckets and people move in and out of these classifications all the time. According to this real research 12% of the U.S. population will move in and out of the top 1% bracket over a ten year period.

And… 39% of Americans will spend a year in the top 5% of the income distribution, 56% will find themselves in the top 10%, and a whopping 73% will spend a year in the top 20% of the income distribution.

When you start looking at real numbers this Income Inequality story starts to make more sense.