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Myth-Busting Left-Wing Lies: Income Inequality

Jacob Wohl

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One of the favorite talking points of the left is so-called “income inequality”. This talking point is one that the left has used very effectively to rile up support from low-income, low information voters.

Te left has not been the only group to use income inequality as a talking point. In fact, during the 2004 election, The Heritage Foundation regularly attempted to use income inequality as a talking point to rally support for George W. Bush.

Post 2008, income inequality became a political talking point almost exclusively used by the left.

There are two key questions when assessing the political viability of income inequality, as a talking point. A) Does income inequality exist? B) Is income inequality a bad thing?

Income inequality certainly exists, but it is not a bad thing. The left insists that income inequality is a factor which correlates to the misery and unhappiness of the those who are poor. This insistence by the left is nothing more than a cheap lie.

In the 2003–2004 essay contest held by the Federal Reserve Bank of Minneapolis, the winner was a paper called “Income Inequality: Not a Government Issue” by Lisa Dahlen. This paper makes clear that income inequality is a big part of the essence of capitalism, and it is what motivates people to take advantage of the social mobility provided to them in a free economy.

Income inequality has a positive correlation with quality of life for those with the lowest incomes. If you were poor, and had the choice to live in a country with high income inequality or a country with low income inequality, the clear choice would be the country with high income inequality.

Income inequality is a very positive result of a free market economy. The economic concept of production is the operative one. Those who produce more than 99% of people are rewarded with the top 1% of compensation. Income is a result of individual decisions, talent, skill and luck.

The only way to “fix” income inequality is to utilize the full force of the government to cap the ambition and potential that individuals have. Forced equality results in less opportunity. Places with low income inequality, like Sudan, prove to be very horrible places to live.

Wealth Inequality — Wealth inequality is another simple corollary of a free market system. As someone’s income outpaces what they can spend, the begin to place the remainder of that money into assets (real estate, stocks, bonds, etc.). As someone places an increasingly larger sum of capital into assets, they begin to take advantage of compound interest, and their net-worth grows over time at exponential, not linear, rates.

For the wealthy, time is quite literally money, as they make increasingly large amounts of money with lower levels of production in order to do so. There’s nothing immoral about this. The rich get richer because they’re better with money than the poor. If you want to be rich, do what the rich do.

Luxury for All — When the first cell phone, the Motorola DynaTAC 8000X, was released in 1973, it ran buyers $4,000 and offered very limited functionality and practicality. Top 1% earners were really the only people that could afford the first cell phones. They were the “test buyers” that allowed for further innovation.

oday there are 7.19 billion active cell-phone subscriptions. Nearly 100% of people in the world have a cell phone, and today’s cell-phones offer people the ability to find the answer to nearly every question that they might have. Even in the poorest parts of the world, the innovation allowed by a free-market with high levels of income inequality has made for higher quality of life.

But I Don’t Want to Be Poor — If you live in the United States, and you a poor, you really only have to do three things to make sure that you enter the middle class. And no, one of them isn’t voting for Bernie Sanders.

According the Brookings Institute, a left-leaning think tank, 70% of people that follow these three rules make it into the middle class.

  1. Graduate high school
  2. Don’t have babies out of wedlock
  3. Get a job

Quashing income inequality is a fantasy of those who don’t want to follow these three simple rules. Instead, they hope that the government can simply take from those who do follow these rules in order to hand cash to those who choose not to.

Those who say “Get rid of income inequality” are actually saying “I don’t want to be poor”. These people can either take responsibility for their own decisions, or they can continue to pray that America becomes a Marxist economy. I recommend the former, not the latter.

A rising tide lifts all ships. Global extreme poverty has fallen below 10%, a drop of more than 75% over the past 25 years. If the left actually wants to improve the quality of life of their inner city constituents, they should promote income inequality, not try to stop it.

The rich get richer, and the poor get…. — One common myth that’s pushed by the left is that “the rich get richer, and the poor get poorer”, because “The system is broken”. The only problem with this statement is that it’s false, and the system is not “broken”. In reality, the rich get richer, and the poor get richer. The difference is that the rich get richer at a faster, geometric, rate, rather than a linear one, because of compound interest.

Markets are efficient — This is why even small government interventions, such as the implementation of a minimum wage, are quickly priced into the market and rendered worthless to everyone other than the politician that used it to garner votes.

Governments simply can’t provide people with a good quality of life. The only way people may achieve a good quality of life is by getting themselves into the economy and getting a job. Even the Brookings Institute realizes this is the case.

The left will likely continue to push the income inequality myth, so long as low-information constituents continue to buy it. The only solution to this is to provide people with an education on economics that isn’t politicized. If people are educated on the basics of economic, and how to read a basic graph, they will quickly realize that income inequality is not only NOT a bad thing, but is also one of the hallmarks of a great free-market economy.

About the Author: Jacob Wohl is the CEO and Head of Fixed Income and Interest Rates for Montgomery Assets, a proprietary trading and asset management firm based in Los Angeles, CA. Jacob Wohl is the host of the Offended America Podcast

 

 

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Jacob Wohl is the CEO and Head of Fixed Income and Interest Rates for Montgomery Assets, a proprietary trading and asset management firm based in Los Angeles, CA. Jacob Wohl is the host of the Offended America Podcast

TRUMP-ENOMICS

Bitcoin rebounds after losing almost a third of its value

Jacob Wohl

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LONDON (Reuters) – Bitcoin surged on Monday, recovering more than $1,000 after losing almost a third of its value in less than four days as traders bought back into the volatile cryptocurrency.

Bitcoin tumbled in the second half of last week, falling as low as $5,555 on the Luxembourg-based Bitstamp exchange on Sunday, a slide of almost 30 percent from a record high just shy of $7,900 on Wednesday.

It rebounded on Monday, trading up more than 14 percent on the day at $6,718, though that was still more than $1,000 less than last week’s record high.

Market-watchers said the fall had been driven by a decision on Wednesday to abandon a planned software upgrade that could have split the cryptocurrency in a so-called “fork” – a move that had initially had a positive impact on the digital coin, sending it to a record high of $7,888 on the view that this marked a resolution of a long-term dispute.

But some were disappointed that “Segwit2x” fork had been abandoned. It would have increased the capacity of the “blocks” transactions are processed in, thereby reducing competition to get payments processed and lowering transaction fees.

Consequently, analysts said, some of those who see low fees as important to the future of bitcoin were selling it for a clone called Bitcoin Cash that spun off from the original in August. Its block sizes are larger, and therefore transaction fees are lower.

Bitcoin Cash tripled in value at the end of the week as bitcoin slid, reaching an all-time high just below $2,000 on Sunda and briefly overtaking Ethereum as the world’s second-biggest cryptocurrency.

But traders bought back into the original bitcoin on Monday, sending Bitcoin Cash plummeting. It was trading down over 30 percent on the day at around $1,097, according to industry website Coinmarketcap.

“Bitcoin and Bitcoin Cash will co-exist and serve different use cases, just like Bitcoin and Ethereum. It’s not a zero sum game,” bitcoin and security expert Andreas Antopolous said in a post on Twitter.

Bitcoin is up more than 500 percent so far this year.

(This version of the story was refiled to change headline to “claws back” from “rebounds” to avoid confusion)

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TRUMP-ENOMICS

Chinese Firm Tencent Quietly Bought 12% Stake in Snapchat

Jacob Wohl

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(Reuters) – Tencent Holdings Ltd now has a 12 percent stake in Snapchat operator Snap Inc, company filings showed on Wednesday, the latest in a string of major investments in the United States by China’s new tech heavyweights.

The details of the stake, revealed by Snapchat after badly received quarterly results, came as U.S. and Chinese firms announced $9 billion in new deals on the arrival of President Donald Trump in Beijing.

It helped the U.S. company recoup a slide of almost 20 percent in pre-trading in New York after it reported third-quarter revenue and user growth well below Wall Street expectations.

Snap shares recovered to trade down 12 percent at $13.29 in premarket trading from a close of $15.12 on Tuesday.

“While such news may be initially perceived as positive by the market, one has to remember that Tencent’s holdings in Snap is the non-voting Class A shares, which makes a possible acquisition of Snap by Tencent less likely,” said Morningstar analyst Ali Mogharabi.

Along with Alibaba and Baidu, Tencent has poured billions of cash from a decade of growth in China into buying U.S. firms and holds 5 percent of electric car maker Tesla, as well as stakes in ride service company Lyft and augmented reality startup Magic Leap.

The largest social media and gaming company in China and owner of the popular mobile application WeChat, it had previously invested in Snap through an affiliate in 2013, and has been referred as a “role model” by Snap’s co-founder and Chief Executive Evan Spiegel.

Snap said in its quarterly report that Tencent had bought 145.8 million shares of its non-voting Class A common stock on the open market. Snap had about 1.2 billion shares outstanding, as of Oct 31.(bit.ly/2zqvybE)

“The positive side of this could be that the two companies may create business partnership of some kind or Tencent may aid Snap in expanding its reach into China,” Morningstar’s Mogharabi said.

Unlike many U.S. stock market-listed corporations, Snap is not obligated to disclose changes in Tencent’s ownership of Snap’s Class A stock. Snap said it had only received the details of the stake from Tencent this month and declined to answer further questions on the filing.

Snap, on Tuesday, reported third-quarter revenue and user growth well below Wall Street expectations, as it struggles to compete with Facebook Inc’s Instagram. The company has disappointed investors each quarter since it floated on the New York Stock Exchange in March.
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TRUMP-ENOMICS

Fox held talks to sell most of the company to Disney

Jacob Wohl

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Reuters Reports Fox’s shares jumped 7.1 percent to $26.76 in afternoon trading in response. Disney shares climbed 1.7 pct to $100.33.

The two sides are not currently talking, CNBC said, but had held talks in the last few weeks, reflecting a view among Fox executives that the media company could not reach the size needed to compete with Amazon.com Inc, Netflix Inc and other major media players. cnb.cx/2hgHcPA

For Disney, a deal could bring additional programming it could use to lure audiences as the company tries to navigate consumers’ rapid migration to digital viewing and spending by technology companies pushing further into Hollywood.

Disney, which under U.S. rules could not own two broadcast networks, would not purchase all of Fox, CNBC reported. It would not seek to buy Fox’s sports programming assets for fear of running foul of antitrust laws with its own ESPN network, and would also not buy Fox News or Fox’s broadcast network or local broadcasting affiliates, the report said.

It did discuss buying Fox’s movie and TV production studios, cable networks FX and National Geographic and international assets such as Star and B Sky B, CNBC said.

Fox has bid $14.5 billion to acquire the remaining 61 percent it does not own of Sky Plc, but the acquisition has been delayed by British regulators.

Disney has been struggling with subscriber declines at ESPN, its biggest network, and is planning to launch direct-to-consumer video streaming services to reach younger audiences that have shunned traditional cable and satellite offerings.

Much of Fox’s revenue has come from its cable division, which houses Fox News, FX and other channels. Fox said in August that it expects to see high single-digit domestic affiliate fee growth every quarter in fiscal 2018.

Fox and Disney are co-owners of Hulu, a streaming service that offers on-demand and live TV packages. Hulu also is partially owned by Comcast Corp and Time Warner Inc.

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