Why Would OXFAM Twist The Income Inequality And Wealth Inequality Numbers? I Know Why…

oxfamThe world seems top be abuzz because of today’s Pre-Davos OXFAM report stating how 1% of the world population will shortly own 50% of the world’s wealth. On the surface those numbers could be pretty scary. Bringing to mind scenarios where the wealthy 1% become the evil taskmasters to rule over us all.

The thought that 1% of the worlds population would hold 50% of the wealth should certainly strike fear in us all…

That is unless you have the real numbers and even a passing grade in primary school math. I’m not talking calculus or anything here. The terror of this 1% holding 50% of the worlds wealth can quickly be dispelled with the use of a simple four function calculator.

First some facts…

1) According to the U.S. Census Bureau’s U.S. and World Populations Clock the current world population is around 7,218,930,000. This number is constantly increasing sicne there is a birth every 8 seconds and a death every 12 seconds. To make my point I will use the number above. That’s around 7.2 Billion people living on earth right now.

PopCLock2) According to a handy Wikipedia page using some seemingly reliable sources the 2014 sum total of the worlds wealth is around $263,242,000,000. Sorry for all the zeros but that is just over $263 trillion.  This is also the number shown in the OXFAM Worksheet that went along with their report.

Now the simple math part…

No need to get out your calculator since I will do all the calculations for you. But by all means please do check my math. I know you will want to once you see the number I come up with and how you probably neatly fit into the category of the the richest 1% in the world.

Here we go…

1) Since the World population is 7,218,930,000 then 1% of that world population is (7,218,930,000 x 1% (or 0.01)) equal to  72,189,300 people. Those are the evil 1% hording the planets wealth.

BillGates2) Since the World’s sum total wealth is $263,242,000,000 then the 50% of that wealth that the evil 1% holds is (263,242,000,000 x 50% (or 0.50)) equal to $131,621,000,000,000. Looks like lots of cash, right?

3) Now since the evil 1% or 72,189,300 people in the world hold 50% or $131,621,000,000,000 of the World’s hard-earned wealth that means that on average each of those potential evil doer one-percenters has (131,621,000,000,000 ÷ 72,189,300) exactly $1,823,275.75 dollars in their passbook savings account down at the corner bank.

That’s sounds like a lot of money to hoard. Or is it?

Stop and think about what you are worth for a minute… I’m not talking about how much cash is in your wallet or gold hidden in your wine cellar. I’m talking about how much money do you generate?

That $1,823,275.75 probably looks like a lot of money to you but lets look at it this way…BUFFETT CREDIT

If OXFAM or your favorite uncle or Warren Buffet sent you a check today for $1,823,275.75 (forget about the tax ramifications for now) instead of going out and spending a penny of it, what if you put it all in a supper safe 30 year U.S. Government bond paying 2.5%?

At 2.5% a year interest rate you would receive a nice pretax check from the U.S. Treasury for (1,823,275.75 x 0.025 (or 2.5%)) $45,581.89.  How close is that to your current pretax take home pay plus any returns from your current investment portfolio?

Wait a minute!

That’s right if your gross income on your 1040 this year will shown a number over $45,581.89 and you don’t think it will fall much below that for the forseeable future then technically, I got some bad news for you,  you (your blood, bone, and never-say-quit spirit) are an asset that is worth at least $1,823,275.75. I’m sorry to say you are technically in this exclusive 1% club. No secret handshake required.

88587_wealthiestpeopleThis concept that the present value of your future earnings should be considered at all may seem a little out on a limb but it is not really. Most of the wealth held by all the richest people in the world (people like Bill Gates, Warren Buffet, and Mexico’s Carlos Slim) is in stock certificates and the value of their stock is nothing more than the present value of the expected future cash flows of the those companies. Don’t believe me? Then check here.  Basically what all the words on that page are saying that all a stock is worth is the present value of the expected future cash flows.

So if you are not making at least $45,581.89 a year you can stock reading right now. But if you are making that much or more go look in the mirror. You are the evil 1% the people at OXFAM have in their gun-sights. Be careful because if word gets out your life may be inconvenienced by a crowd of protesters outside your home, office, car, or favorite coffee shop.

How can this possibly be true? How could you actually be part of the evil 1%?

Any time you see supposedly smart people like those at OXFAM start to throw around these type of percent numbers your B.S. meter should start to click like a Geiger Counter within a few miles of Chernobyl Hot Dog, Beer and Perogi stand.

Member: The Evil 1%

Member: The Evil 1%

If you run the real numbers. taking into account the real wealth of people all around the globe, you might find that we are all a part of some kind of 1%. And we are all not that evil. Some one may want to convince you that you are the 99%. Maybe you are. But, run your numbers and you may find that you are solidly in the 1%. Enjoy it. embrace it. Yes, you are special.

The bottom line is that there are a lot of people in the world and there is a lot of wealth. A lot more that the fine people at OXFAM could even imagine. Most of it like the value of a Papua New Guinea Farmers Sweet Potato farm can’t even be accurately measured.

Unless…  You are OXFAM looking for a Monday morning slow news day headline… Then those scary big percentage numbers are just fine.

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.