Well, sample size of two (probably 50-150M, but by my perspective, that’s high net worth). Both were horrifyingly under-diversified, basically lived the companies they founded. Don’t know if the one I know well ever takes vacations. He does drive a nice car though.
Oddly enough, if you assume a generation is 30 years, then a 40% inheritance tax is about as close to Piketty’s 0.1% - 2% tax as you find on the planet! Oh, that good old socialist bastion, USA! :-).
Yes. If you do a search for “total value of world derivative market” you’ll see lots of tinfoil hat statistics like quadrillions of dollars, but I don’t count those. More realistic statistics show about $700 trillion notional (which is not the number we care about) or $20 trillion market-value as of end of year 2014 (from http://www.bis.org/publ/otc_hy1504.pdf)
That’s about $3,000 for every living human on the planet. It’s a huge amount of dollars, but those are dollars that are mostly just shuffling from one column to another on spreadsheets without really participating in the economy until a company (or whole industry) suddenly goes bankrupt and has to be bailed out. And then it’s in a negative way.
Total excess bank reserves (closely related to quantitative easing) adds almost another 2.5 trillion. That is literally money just sitting there, not participating in the economy, even after intentionally being made more liquid so that it could participate. And that’s for the U.S. alone (I don’t know how to find global stats for that) (from Excess Reserves of Depository Institutions (DISCONTINUED) (EXCSRESNS) | FRED | St. Louis Fed)
So consider $23 trillion global derivatives + U.S. excess reserves. That’s more than 20% of a global GDP of $114 trillion (from https://www.cia.gov/library/publications/resources/the-world-factbook/geos/xx.html)
It’s about $3,300 per person in a world where when average global income is about $15,000 (from GDP per capita, PPP (current international $) | Data)
It’s about 10% of total net worth (about $241 trillion according to https://publications.credit-suisse.com/tasks/render/file/?fileID=1949208D-E59A-F2D9-6D0361266E44A2F8#page=88) with a global average net worth of about $34,000 per person.
If you added in dormant money from the rest of the world’s banks and other schemes, those numbers would probably be a lot higher. But even 10-20% is significant when you’re talking about multiplicative effects.
My understanding is that derivatives do not have much cash at all behind them. Agreed, it’s all zero sum bets, but when we talk about quadrillions on the table in the derivatives market, that’s (again as I understand it), the amount that’s being bet.
For the vast majority of these trades, very little money will trade hands because the final value that the derivative is based on is pretty close to the expected value. Of course, when the value goes well beyond what anyone expected, that’s when the economies explode because bank X now owes several times the GDP of the world. But in either case, they don’t actually have the money backing the derivative locked up. (Or at least most of it, there may be some small amount in escrow.)
Edit: To be honest, I think the world would be rather financially safer if the amount bet was locked up. We’d probably see the derivative market drop to 1/1000th of its current levels, if not less, and those would mostly be boring price hedges (sellling goods in advance, protecting the price you’ll pay for oil, etc.) rather than the grand, next-to-no money down, casino that derivatives often are.
Just wait until the 0.1% start holding States hostage…
Didn’t they already had already taken over congress thanks to their investments in lobbying firms?
In a sense there already is a law of diminishing returns to wealth.
If you’re starving on the street, finding a crumpled $100 bill on the street could easily be the highlight of your year. If you’re a billionaire it wouldn’t be worth your time to bend over and pick it up.
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