Why Do We Hate the Rich?

Initially, I actually supported Occupy Wall Street.  I united, in spirit, with them in their stand against government bailouts of poorly managed businesses.  Then they started the "99%" campaign, and my support stopped.  I have nothing against the 1%.  In fact, I aspire to be one.
Class warfare has always existed in America, on some level.  The Great Recession appears to have transformed despising the wealthy from an activity of the scorned and bitter to the de rigeur social movement of the decade.  Quite frankly, I just don't understand it.  Everyone wants to be rich, yet we hate those that are?  Is this just jealousy run amok, or is there a deeper, more insidious issue at hand?
I think I've figured it out:

1)  We misunderstand the rich.  I blame reality television for this.  If comments on news articles are representative of the American public, when most people think of the wealthy, they think of Paris Hilton, Kim Kardashian, or even Steve Forbes.  Inherited wealth.  But most millionaires didn't inherit their wealth, they earned it.  The reality is a full 80% of millionaires are first generation.  They worked hard, took risks, and made the most of opportunities - they didn't have their money handed to them.  Most of the 1% are doctors or small business owners.  Why would we hate these people instead of admire them?

2)  We don't understand Economics.  A common argument from those frustrated with the growing wealth gap is CEO pay.  I'm not sure why we focus on CEOs in this discussion when they comprise a mere 10% of the hated 1%, but we do.  This indicates people don't understand the Economic Law of Supply and Demand.  There are 7 billion people on this planet.  There are probably 700,000 who are qualified (education, experience, capabilities) to be a CEO.  Given my experience with CEO's, I wouldn't credit more than 7,000 people as capable of being good CEOs.  What does that mean?  The supply of good CEOs is in severe deficit to the demand of good CEOs.  When a product is scarce, its value rises.  The other market force in play here is risk.  Being a CEO is not an easy job which is why so many CEOs are very quickly former CEOs.  The average tenure of a CEO is not much more than a Kardashian marriage (two Kardashian references in one post...I'm culturally relevant!).  To entice someone into risk usually requires money.  So CEO pay is driven both by scarcity, and by risk.  Of course it is disproportionate.

3)  We forget who are the "investors".  This is the element that, ashamedly, amuses me the most.  We bemoan "Wall Street Investors" for taking risks and causing catastrophe and forget they take risks because the investors they represent want larger and larger returns.  And who are the investors? The 99%.  The everyday working man.  But, wait, you don't have a stock broker or an investment portfolio?  You do if you have a 401k or a pension plan.  The largest single owner of wealth in the United States is not Bill Gates or Warren Buffet - it's CALPERS, the State of California's employee retirement plan.  At $202 billion, CALPERS is equivalent to four Bill Gates.  The top 300 pension funds own $20 Trillion of wealth.  It are these pension funds that drive decisions on Wall Street.  So the great, macabre joke of the financial collapse, the sad truth behind the greed that led to this disaster, is that it is shared not by the 1% who, according to the research published in the book "The Richest Man in Town", invest in their own business, not other people's.  The greed belongs to the 99% who demand higher returns in their 401k plans!

Ultimately, we will never eliminate class warfare unless we implement Pure Communism and everyone receives an equal share of the GDP.  We will never eliminate a wage gap in a society that rewards higher skills with higher pay.  And you won't get rich by occupying Wall Street.  You won't improve your financial situation by sitting in a park cooking s'mores with your friends lamenting how unfair the world is.  You get rich by taking risks, by thinking unconventionally, and by generating revenue by all legal means.

You want to change the system?  Occupy a seat in government.  You want to get rich?  Occupy a job that people value.

Occupying Wall Street is just another way of saying:  "I live in my parent's basement".

Why Occupy Wall Street is Misguided

If you read my prior two posts, you can probably guess where I stand on this issue.  The problem isn't Wall Street.  It isn't the banks.  It isn't even the wealthiest 1% (I'll have another post on this specific topic later this week).

The problem is Washington - and, oddly, I don't mean Obama. 

Washington has completely lost touch with America...though I don't think this is new, it's just worse.  Remember the late 1980's when Barbara Bush, then FLOTUS, visited a grocery store and was amazed at the scanning technology used at the checkout line?  Yeah, politicians have been out of touch for a while.

But today, it's worse.  Today we have Democrats still operating under the assumption that Americans not only want but need government protection from themselves.  That if the government wasn't planning our retirement for us, telling us what we should eat, or paying for our health care that we would all be aimlessly roaming the streets.  We have Republicans still operating under the assumption that Protestant Christianity represents the majority of America, that regulation is unnecessary (unless the toxic waste dump is next to their property), and we need the government's help to protect our children from outside influence.  They're both wrong.

The reason they are so out of touch is Congress doesn't live in the real world.  They live in Washington.  And we never force them to live in the real world because we keep electing the same people back to office!  We're all guilty of it:  "It's not MY politician that's the problem, it's everyone else!"

When you lose touch with the average American, you can no longer represent them.  When your salary is guaranteed for life, even if you stop working, how can you pass labor laws for the average worker?  If your retirement plan is fully funded by the government and doesn't require you to pay into it, how can you reform social security?  If your health care plan covers everything, with no copay, and never questions if you needed that surgery to enhance your wife's breasts, how can you contribute to a discussion seeking a solution to control rising costs of health care?

After electing FDR to his fourth presidency, the American public realized long-term government servitude is not right for our country.  How is it, more than 80 years later, we have not come to the same realization with Congress?

It is time we did.  In the absence of a Constitutional Amendment limiting all Congressman to 12 years of service in either house, it is up to us as voters to do the job.  Vote out the incumbents, even if you are crossing party lines to do so.

Vote for someone else.  If you have two choices on the ballot, and one is an incumbent, and the other is a convicted axe-murderer, vote for the felon - at least he's had the chance to reflect on his crimes.

We shouldn't be occupying Wall Street.  We should be occupying Pennsylvania Avenue.

Heidi's Bar: Understanding the Financial Crisis

Heidi is the proprietor of a bar in Detroit.

She realizes that virtually all of her customers are unemployed and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.  Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers' loans).  Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit .

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at Heidi's local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral! At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINK BONDS.

The bank bundles these "securities" and trades them on international securities markets. The bank pays rating agencies to give these bonds a AAA rating by promising them fees for rating several more bonds they will create in the coming months.  Naive investors don't really understand that the securities being sold to them as "AAA Secured Bonds" really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by Heidi's bar. He so informs Heidi.  Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations to the bank she is forced into bankruptcy. The bar closes and Heidi's eleven employees lose their jobs. 

Overnight, DRINK BOND prices drop by 90%.

The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.  The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the BOND securities.  They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers. In addition, the laid-off workers' pension funds and IRAs all suffer substantial loss in value.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.  The funds required for this bailout are obtained by new taxes levied on employed, middle-class, nondrinkers who have never been in or heard of Heidi's bar.

Now do you understand why Occupy Wall Street is upset?