Musings Report 2023-7 2-11-23 Wealth Destroys Whatever It Touches
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Wealth Destroys Whatever It Touches
The central irony of wealth is the disconnect between our unquenchable desire for it and the reality that it often destroys everything it touches.
That includes places, people and cultures.
The secondary irony is that the vast expansion of "money" in all its forms in the past 30 years has greatly enriched and expanded the class of individuals with large sums of wealth to squander.
This isn't just the billionaire class. Most of the damage is done by the millionaire class with enough money to scoop up houses and land in desirable areas as "assets" to park excess capital, pricing out locals and anyone living on earned income.
It's difficult to grasp just how little of the hundreds of trillions of dollars added to global wealth (currently around $450 trillion total) has trickled down to the bottom 50%.
In the US, the wealth of the bottom 50% of the populace--roughly 160 million people--fell to $260 billion in the wake of the 2008 Global Financial Crisis.
A handful of billionaires owned more wealth than half the country. It's now improved to the point that the bottom 50% own about 3% of all private-sector wealth
The top 1% captured nearly twice as much new wealth as the rest of the world over last two years.
But it isn't just the top 1% who have enough wealth to destroy whatever it touches. The top 3% now have enough, thanks to the vast expansion of financial wealth.
In the US, the top 3% number around 10 million people, roughly 4.5 million households. Globally, there are at least 20 million very wealthy households. High-net-worth individuals (HNWI):
| Region |
HNWI population |
HNWI wealth |
| Global |
20.8 million |
$80 trillion |
| North America |
7 million |
$24.3 trillion |
| Asia-Pacific |
6.9 million |
$24 trillion |
| Europe |
5.4 million |
$17.5 trillion |
The problem for this class is where to park their excess capital. They often choose real estate, which has steadily gained value for decades.
The class just below the HNWI class is wealthy enough to have the same problem. That adds tens of millions of additional wealthy people seeking places to park their (somewhat smaller) stash of excess capital.
If you visit globally desirable cities like Paris or Bangkok, look at residential buildings in desirable neighborhoods in the evening when most residents will be home for at least awhile. There are often very few lights on.
This is because most of the flats are "investments" owned by people who became wealthy in the past 30 years of vast financial credit-asset bubbles.
This phenomenon--artificial housing shortages --caused by the top 5% parking their excess wealth in real estate, and pricing out locals by bidding up the prices--is global.
There are countless examples of placed ruined by the wealthy parking excess capital in desirable locales. This account describes what happens to a once-stable and eclectic locale once global wealth washes ashore:
What price paradise? How a Mallorcan artists' haven became 'a ghost town'
Desirable locales are often limited in size and populace. A few hundred wealthy buyers anxious to outbid each other are more than enough to upend the local economy, effectively destroying the place.
There's another driver of the wealthy creating artificial housing shortages and bubbles: they park excess capital in real estate as AirBnB rentals.
Yields on bonds were so low for so long, it made financial sense to buy flats and houses and rent them out for a return while also pocketing the capital gains.
In Honolulu, Hawaii, households that don't inherit wealth (or a house) or earn top 3% salaries cannot afford to buy a home.
There are now more part-Hawaiians in Las Vegas than there are in Honolulu, as families move to Las Vegas because they can afford to own a house there.
This explosion of global wealth has destroyed many places around the world, impoverishing the residents and cultures by pushing housing prices into the stratosphere, as the "competition" is the vast pool of global wealth.
Yes, there were always wealthy who congregated in the Cote d'Azur and other established enclaves of wealth. But their numbers were relatively small.
The enormous expansion of the global wealthy class has increased the number of households with excess capital to park to the point that this class is so now large it has ruined hundreds of small places and even major cities.
Wealth also destroys personal relationships by injecting the distorting power of money into marriages and friendships.
I’m a therapist to the ultra-rich. Trust me when I say 'Glass Onion' is not as far-fetched as you think.
Wealth is also toxic to cultures and societies, which are distorted and deranged by floods of wealth seeking status and places to park excess capital.
I’m a corporate fraud investigator. You wouldn't believe the hubris of the super-rich.
The excess consumption of the wealthy is also accelerating the destruction of the planet.
The best thing that could happen would be a catastrophic and permanent collapse of global financial wealth, on the order of an 80% decline.
Once $360 trillion of excess phantom wealth evaporates, the ability of wealth to destroy everything it touches will be greatly diminished.
Highlights of the Blog
Why People Move from Blue States: It's Not Just High Taxes 2/8/23
Prepare to Be Bled Dry by a Decade of Stagflation 2/6/23
Podcasts:
A Great Stagflation (36 min) with Gordon Long
Best Thing That Happened To Me This Week
Harvested turmeric roots from planting a single small piece a year ago.
From Left Field
NOTE TO NEW READERS: This list is not comprised of articles I agree with or that I judge to be correct or of the highest quality. It is representative of the content I find interesting as reflections of the current zeitgeist. The list is intended to be perused with an open, critical, occasionally amused mind.
Gnosticism in the Modern West (2:23 hrs) (via Chad D.)
Market Concentration in the Food Retail Industry (USDA)
Bonds: 'We are now in the new rising rate cycle,' technical analyst says
Hubert Dreyfus: Heidegger Being and Time lecture (1/3)
My wonderful AI predictions
Citizens’ assemblies: are they the future of democracy?
Is the tiny little neighborhood the city of the future? -- the "15 minute city" idea...
Hypertension Management: An Update (nih.gov)
This former CIA analyst has something to say about the classified documents crisis -- and it's likely not what you think
"The wound is the place where the Light enters you." Rumi
Thanks for reading--
charles
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