What if US wealth was redistributed overnight?

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Lucky C
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What if US wealth was redistributed overnight?

Post by Lucky C »

Thought of this "what if" scenario and I'm interested in hearing your predictions:

Wealth in the U.S. is about $90 trillion (individuals + non-profit orgs) and the U.S. work force is at about 150 million workers. Imagine overnight all the wealth in the U.S. is redistributed equally among all workers, who wake up to find that their net worth is $600k each. The exact number doesn't matter, just something in the range of $500k - $1M per worker or per family. Assume everyone gets a balanced distribution of cash, investments, property, etc. However nothing else in the world (jobs, prices, etc.)... yet. What happens next?

Many people like us would be able to FIRE, or just quit to go on a long vacation until the cash runs out, but of course too many people quitting the workforce at once would cause a major disruption. Would it put upward pressure on wages and inflation?

I'm sure many people have written about what would happen with this scenario, with a linear progression and clear conclusion that supports their economic opinions. I'm wondering about what interesting things might really happen in this non-ideal complex system of ours?

ether
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Re: What if US wealth was redistributed overnight?

Post by ether »

My money would be on massive price inflation since the demand for luxury goods and services would greatly outstrip supply. There is a reason car sales are highest during tax refund season. Look at how people act when they get a couple thousand for free, imagine if they got a couple hundred thousand!

Toska2
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Re: What if US wealth was redistributed overnight?

Post by Toska2 »

Wealth inequality back to current ratio in 40 years. Wealth equality skewed more to the countries we outsource to.

Campitor
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Re: What if US wealth was redistributed overnight?

Post by Campitor »

Toska2 wrote:
Tue May 30, 2017 8:43 pm
Wealth inequality back to current ratio in 40 years. Wealth equality skewed more to the countries we outsource to.
You're an optimist - I'd predict the wealth imbalance to swing back to normal within 10yrs. ;)

Dragline
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Re: What if US wealth was redistributed overnight?

Post by Dragline »

Yes, the histories of lottery winners and highly-paid young athletes would support that thesis. Most people blow it within a short period of time. Some of it out of massive consumption, but also a lot out of ignorance about how to manage it and bad business ideas that fail.

But there would be massive inflation short-term, particularly on housing and vehicles of all shapes and sizes. Basically the same idea as the Bush rebate on a grand scale -- a/k/a "helicopter money".

IlliniDave
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Re: What if US wealth was redistributed overnight?

Post by IlliniDave »

Toska2 wrote:
Tue May 30, 2017 8:43 pm
Wealth inequality back to current ratio in 40 years. Wealth equality skewed more to the countries we outsource to.
I'm not even sure it would take 40 years except maybe it would take that long for the largest fortunes to be amassed. But the 1%-99% divide would begin to resemble today within 10 years I suspect. Huge numbers of people would be broke again in 5 years.

Above median retirees would get hit disproportionately hard among those who "lose" initially in such a scenario.

Riggerjack
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Re: What if US wealth was redistributed overnight?

Post by Riggerjack »

Above median retirees would get hit disproportionately hard among those who "lose" initially in such a scenario.
Read it again. ALL retirees are now penniless. Only employed workers have money.

Self employed, screwed.

Own you own business, the market just completely changed adapt, or die, quickly.

We finally balance the budget and start paying down federal debt. Just because workers got their windfall, doesn't mean the government doesn't want their pound of flesh. Using today's tax code means this feel good scenario, the government will take about 39% of all wealth, unless this windfall is subject to payroll taxation, in which case the Federal cut will be well over half.

As with most redistributed wealth, it will just fill government coffers.

SErickson
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Re: What if US wealth was redistributed overnight?

Post by SErickson »

Campitor wrote:
Wed May 31, 2017 2:06 am
Toska2 wrote:
Tue May 30, 2017 8:43 pm
Wealth inequality back to current ratio in 40 years. Wealth equality skewed more to the countries we outsource to.
You're an optimist - I'd predict the wealth imbalance to swing back to normal within 10yrs. ;)

YEARS you say... I'm not even sure a return to the status quo would make sense to count in Months. :lol:

ducknalddon
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Re: What if US wealth was redistributed overnight?

Post by ducknalddon »

I suppose you could get a feel for what would happen by looking at Germany and Japan after WW2, not all wealth was wiped out but there was a significant levelling of the playing field. I often wonder how much of that contributed to their post war success.

BlueNote
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Re: What if US wealth was redistributed overnight?

Post by BlueNote »

It's hard to predict how an adaptive system like the economy and culture of a whole country would react but I can't imagine a great outcome overall. Massive amounts of trust would be lost and would probably be lost permanently for the government. It would be horrible, I'd say high inflation, poor levels of capital formation and a general decline in the standard of living would ensue. People would probably start hoarding hard assets (guns, food, precious metals and the like) out of fear. In order to seize all the assets the government would have to mobilize a huge police/military force , it would be absolutely insane, might trigger a civil war or total breakdown of society.

Spartan_Warrior
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Re: What if US wealth was redistributed overnight?

Post by Spartan_Warrior »

It's an interesting question, but seems intrinsically contradictory. Would this overnight redistribution take place as the result of direct government action? Nothing else really makes sense to explore as a philosophically interesting thought experiment... for instance, large-scale banking glitches or hacking attacks from some Cold War-era Batman super-villain would be fixed eventually and, while temporarily disruptive on the scale of a major terrorist attack, would probably have negligible permanent change on the status quo. So I doubt that's what you mean.

If this redistribution is a government action, though, then it couldn't possibly happen "overnight", as even the passing of a bill into law takes time. But more importantly, it begs the question of what precipitated such an intervention, as it is in no way likely in the current sociopolitical climate. Indeed, such a tremendous and specific action would have to be preceded by a complete turnover of the current government (historically this would be in the form of revolution) or some otherwise (unprecedented) large-scale class consciousness that took place among a significant majority of the populace and/or the ruling class.

It's a question that can't be answered in a vacuum. The material conditions leading up to the action need to be considered. Otherwise you arrive at tautologies like, "Well, poor people will probably just spend it all and be poor again." A (too) simple answer to a (too) simple question.

As the question is posed, and given the assumptions for the preceding conditions that I described, then presumably this redistribution would NOT occur in a vacuum. It would likely be one measure of many taken by a revolutionary government in an attempt to transition away from capitalism. "All the wealth in the US" includes corporate wealth as well as the personal wealth of the CEOs and other capitalists, who would therefore no longer be able to pay wages or protect their ownership of the means of production (nor buy influence among politicians). Perhaps the new government has stepped in to assume a more centralized role in the economy to shore up such a gap. Presumably, with such control, they would be able to head off some amount of inflation and control pricing for local goods at least. However, the US dollar would eventually (probably sooner rather than later) cease to be the reserve currency (in favor of, what...? The Euro? The Yuan?) which would lead to severe shake-ups in global markets, maybe problems with imports, etc. Other (capitalist) nations would sanction the US in retribution, if not being involved in war outright. Indeed, I would expect global war and/or local civil uprising/revolution (probably supported by moneyed interests abroad) to be the ongoing background circumstance. The US, with its military supremacy--assuming this is still intact after whatever circumstances led to this point--would either conquer these other nations and spread its worker's revolution to the globe, which is the best chance of its success; or it would at least hold off its enemies and merely be isolated from the global stage while weathering constant sabotage and sanctions. The displaced upper class and those ideologically in their service would remain troublesome for generations, necessitating more violence. These people would also likely be hoarding other stores of value (gold, land, etc) that would need to be appropriated more forcefully than via a digital switch of the bank account numbers. Meanwhile, the new centralized US government would probably give way to a dictatorship as the original revolutionaries, workers, and philosophers died off and power transitioned to career military, bureaucrats, and other opportunists. Unless, somehow, the first-wave revolutionaries were able to structure the government in such a way as to avoid this (e.g. new Constitutional amendments, etc) and maintain control of the government for the people, perhaps this could be avoided. In this case, the new government would work to automate society to produce the needs for all people without the exploitation of human labor (which is probably already possible if it were actually attempted) with the eventual aim of transitioning its central control of the economy back to the now class-less citizens who would own all things in common. By this point, the need for currency at all would exist only for the US to trade internationally with whatever capitalist states remain on the world stage, swirling down the toilet of end-stage capitalism by their lonesomes. Without the perverse incentives of capitalism exploiting the majority of mankind's energy and focus for the benefit of the extreme few, the problems of hunger, climate change, and war would practically solve themselves. Meanwhile, the full brain power of a liberated humanity at leisure would be freed up to solve any remaining problems, with the opportunity for true innovation from everyone, rather than most flipping burgers so a few can count dollars. With our shit finally together on Earth, eventually we would move beyond to responsibly colonize space. In our now civilized form, the other intelligent species we encounter will consider us among their equals rather than brutal hierarchical primates subject to annihilation or imprisonment in an intergalactic zoo. Harmonious space communism will ensue. See also: Star Trek.

Lucky C
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Re: What if US wealth was redistributed overnight?

Post by Lucky C »

This may sound dumb, but I was thinking of it like a gimmicky movie plot where there doesn't have to be a logical explanation. Someone who's down on their luck and broke goes to check their account balance in the morning, and finds out they have hundreds of thousands of dollars now. They talk to the bank and it all checks out, it's their money. The government didn't do it, and a wealthy person didn't voluntarily give it out, but now there's no way to reverse it because it's a stupid movie so just go along with it :)

Now scale that to everyone in the U.S. or the country of your choice. Sure there may be chaos and inequality once again in just a short few years, but what are some things that could happen on a smaller scale and a shorter time frame?

On day 1 of this life-changing event, would most minimum wage workers quit their jobs and enjoy/waste their money? Or after losing their burden of debt and being able to afford decent housing/food/etc., as well as having the support of friends/family who now also have money to spare, would many make better choices?

How would the wealthiest get back to the top of the food chain if the no longer have their many advantages that money can buy? Would they even bother trying to get rich again after losing it all? Would Fortune 500 CEOs keep their prestigious positions, or would it be more appealing to quit and spend time with family after all the money goes away?

How would small towns fare vs. big cities as people adapt to these changes over the following weeks and months?

Of course there are endless ways that people would react to this kind of thing, but I wonder if this magical wealth redistribution could enable some happy self-sustaining communities to be formed. Realistically though, you all are probably right that there would be some unavoidable disastrous results.

chicago81
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Re: What if US wealth was redistributed overnight?

Post by chicago81 »

If this happened, I foresee a massive run on flat screen TVs, playstations, and new autos.

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TheWanderingScholar
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Re: What if US wealth was redistributed overnight?

Post by TheWanderingScholar »

And most of us here would sock it in our bank accounts or investment portfolios. :p

7Wannabe5
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Re: What if US wealth was redistributed overnight?

Post by 7Wannabe5 »

How would this redistribution occur? Most wealth can not be rendered liquid overnight even under normal circumstances, and under this scenario even forms of wealth that are usually fairly liquid would not find buyer on market. So, I would assume it would have to occur through some sort of massively complicated title-transfer mechanism. I'm imagining some kind of random lot buddy-system for the divvy. For instance, maybe Citizen A4768 owns farmland planted in soybeans and associated equipment that was valued at $10,000,000 morning prior. So, his farm would be instantly incorporated and shares would be granted to Citizens B4768 through W4768. Then, if a few months later, Citizen J4768 wishes to buy a McMansion, he would have to sell his shares in the farm in order to do so.

IOW, I think this thought experiment is revealing of the common short-hand error of thinking value = price or the economy = the market.

IlliniDave
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Re: What if US wealth was redistributed overnight?

Post by IlliniDave »

7Wannabe5 wrote:
Sat Jun 03, 2017 10:55 am

IOW, I think this thought experiment is revealing of the common short-hand error of thinking value = price or the economy = the market.
And that "rich " people all have a stacks of cash laying around. Your farmer is a good example of that. And once he loses 94% of the interest in his farm, I suspect he won't be inclined to do all the work to keep it operating profitably any more.

Campitor
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Re: What if US wealth was redistributed overnight?

Post by Campitor »

In order for massive projects to work such as space programs, global health initiatives, corporations, highway systems, etc., there has to be an imbalance of capital because you need to concentrate resources in order to undertake them. Entertaining EQUAL wealth distribution via force or passively, is a pipe dream - it would be the end of civilization. Regardless of the system in place (socialism, communism, fascism, capitalism), it's not immune to the underlying economic principles of incentives and finite resources.

The free market, within reasonable limits, is the best means of raising the standard of living for everyone. Resources are finite and need to be allocated as efficiently as possible so they are utilized to their best potential. No single person, group, or government can centrally plan any economy because there are too many exchanges, decisions, and incentives inherent to any economic system. The free market allows ideas to move forward or disappear which optimally redirects resources that otherwise would have been consumed in a suboptimal enterprise.

Failure is a necessary evil in order to flush out the wasteful use of capital - capital being intellectual property, money , or labor. Failures are a healthy component of an enlightened society because it drives civilization forward. Failures inform us of what isn't needed or inefficient and allows others to redirect capital to successful endeavors made available from someone else's failure. There has never been equality of income in any society because it never works - there will always be individuals who will maximize their positions to gain greater access to capital.

Scott 2
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Re: What if US wealth was redistributed overnight?

Post by Scott 2 »

Those who understand wealth is a proxy for power, not a way to buy stuff, would accumulate it again. In all likelihood, foreigners that still had their wealth would sweep in and get a big part of the pie.

Rapid inflation, followed by collapse, of items the lower and middle classes see as luxury good.

Farm_or
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Re: What if US wealth was redistributed overnight?

Post by Farm_or »

Kinda sounds like the Bolshevik revolution? Ever heard of that?

"History doesn't doesn't​ repeat itself, it rymes."

enigmaT120
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Re: What if US wealth was redistributed overnight?

Post by enigmaT120 »

YoungAndWise wrote:
Sat Jun 03, 2017 9:34 am
And most of us here would sock it in our bank accounts or investment portfolios. :p
I'd be mad because I would end up with less than I have now, not more. I know I'm not the richest person on this forum.

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