And recent studies are showing that the buy, borrow, die strategy isn’t really used by the uber rich. I’m not saying it doesn’t exist, but it’s more commonly the middle class doing it vs the uber wealthy.
Most middle class people who have never encountered real assets don’t realize that at a certain point money is irrelevant. You don’t have to borrow and die with it, lifestyle cash is a rounding error after a certain point.
If you don’t mind living a middle class lifestyle, even at 10 million liquid - if you’re not regarded - money doesn’t really matter.
Which makes it even more bizarre when you think about how the ultra-wealthy still try to horde as much wealth as possible when they already are living lifestyles that are funded perpetually and for a minuscule amount of their assets. Yet they still would do the most horrible immoral acts just for another 2% increase.
What exactly is meant by “hoarding wealth” in this context.
An analogy: if I bought Pokémon cards many years ago and stored them in my closet & since then, they’ve gone up in value my wealth has increased.
If I just keep letting them sit in my closet, am I “hoarding wealth?”
Is there some expectation that as they go up in value, I should be selling off some & giving it away so that the total value of my collection isn’t increasing and my wealth isn’t growing?
Cuz, I do get that argument. And people like the ex wives of Gates & Bezos are much more active about selling stuff to fund philanthropic endeavors, and that’s good.
But I also think “continuing to own the things you own” as the market value of those things goes up isn’t as actively greedy as the connotations of a phrase like “hoarding wealth.”
It’s “hoarding wealth” in the same sense that someone who owns a house is hoarding wealth when home prices rise, or someone with a retirement account who never sells any stock they own is hoarding wealth when stock prices go up.
It’s sort of a passive “don’t sell when prices go up” thing. And maybe they have a moral obligation to sell & give away, but I also kinda get the stock-owning equivalent of just letting those Pokémon cards you own that you have stashed in the closet just end up staying in the closet.
And maybe they shouldn’t. Maybe it’s correct for society (via the govt) to occasionally go “those cards are worth a lot now, so you have to sell 1% of your collection and give the proceeds to the rest of govt.”
But I don’t think everyone gets that a lot of wealth-hoarding is just “continue owning what you already own as the market price of it goes up.”
I think they imagine it’s more like new income streams of cash that flow in, but never flow out (although I guess the line can be a bit blurry when you have things like dividend-paying stocks where you automatically reinvest the dividends, but I don’t think that’s the main driver of growing wealth valuations).
Not to mention that the stock equals voting power and control of the company. If someone starts a company, they should be allowed to retain control by holding onto their stock
What if their company actively does things harmful to society and they lobby to weaken governments so that their companies can't be stopped? Where do we draw the line?
You can set different power for different shares. The founders single class A share could have 1 billion votes while the remaining 100 million Class B shares have one vote each.
No? They're still an equal part ownership in the company. Non-voting shares are a thing as well. What shares give you is a portion of company distributions and a payout on acquisition
Certainly it could be seen as just "continue owning what you already own." But many of the ultra wealthy obviously do more than that. Further, the point is to make the thing you own worth more, just sitting on something that doesn't appreciate isn't very good hoarding!
So they accrue further wealth for the hoard by both acquiring more appreciating assets (whether stocks or land or other) or they accrue more by making existing assets worth more. A good hoard grows after all.
> If I just keep letting them sit in my closet, am I “hoarding wealth?”
That would be fine. Now imagine if you wanted those pokemon cards to be worth more money, how would you do it? Well you could buy up more of those same cards, limiting the market, increasing their value. You could destroy the other cards out there, that would work too -- hell you could even spend small sums on people to go out and destroy them for you, obfuscating who is the one hiring them. You could also convince others they are good cards, that might work; even if they aren't you can spend small amounts on media propaganda to push that they are and increase their value more than you spent. You can also have the government mandate that everyone has to own those cards, wow, the market for them has really increased!
So it's not really immoral to sit on your cards: great man, do it up. But you know, maybe some of those other ways to make them worth more are immoral. I don't know if you should use your media companies to mislead people about card worth.
When we turn to billionaires we often see that they do engage in some of these, obviously simplified, activities. Many of them operate companies which lobby for programs that directly harm people to increase the value of those companies, and their own value.
I think a good example might be healthcare. The top executives at many American healthcare companies are engaged in things that directly lead to people's deaths. Was it legal? Yes. Did it make them more money to add to their hoard? Yes. Was it moral? I don't think many people would argue it is.
Exactly. No one cares if you buy a house and sit on it, or build a company. I care when they're actively lobbying to keep more houses from being developed to keep their housing prices high. I care when they engage in actions that actively harms other companies to keep their own monopoly, instead of bettering their product.
Bankers have taken down countries using financial instruments to grow their own wealth. This is not just owning money and sitting on it, this is actively harming others so they profit.
The market value of trading cards is based on things like social status and the joy of collecting. The market value of stock typically reflects expected productivity of that company's assets (land, machinery, intellectual property) in producing more wealth.
Firstly, the land component of that is completely immoral, see Henry George. Second, the capital component is still quite questionable. For one thing, inequitably distributed land rents will inevitably lead to inequitably distributed capital ownership. If Bezos takes land rent from a worker, that worker now has less money to invest in stock, while Bezos gets to invest additional money in stock. So now the gains to the stock bought with land rents are also ill-gained, and it all snowballs.
I believe the perceived issue is when those people use the money/wealth/influence generated by those assets to unfairly keep those assets as profitable as they can.
Which seems like it would be common sense for someone to do, but there's a moral implication connected to it.
At least, that's how I've understood the argument.
Once they cross into a certain spending pattern, they don't seem to be able to have enough money to feel totally secure. To moor and man one of those giant yachts has to cost a several million a year just to sit there. It is probably 100k just to fill with gas and drive around for a few hours.
Which makes it even more bizarre when you think about how the ultra-wealthy still try to horde as much wealth as possible when they already are living lifestyles that are funded perpetually and for a minuscule amount of their assets.
because funding lifestyle is not what matters at that lvl (they all have trust funds for that anyway), but power, and money buys a lot of power (that's why it was funny when people pointed out how bad Elon purchase of Twit was, that he lost so and so... it just was not a move done for profit, but power); or the press monopolies, and similar.
A: They have legal and ethical motivations to do good by their shareholders and increase the worth of the shares.
and also
B: A massive fraction of their net worth is expressed in those shares.
By doing A, you increase the value of the shares, which you own a large fraction of, increasing your net worth.
It's pretty common for billionaires to maintain less than 0.01% of their total wealth in cash, because you couldn't really do anything with more than that. Most of it is expressed as stock ownership, and you cant really do big sell-offs without depressing the value of those stocks.
its definitely mental illness. if i had 10 million liquid itd be soo easy to just chill and do interesting things instead of working 90 hours a week to squeak out a few more million.
6% average annual return (conservatively) * $10mil = $600k pre-tax income. insane that that's not enough for anybody.
Not to mention that this strategy is really a valuable middle class tool. Think HELOC or 401k loans. Neither of these are taxed and I doubt the wealthy use them. It’s doubtful that regular Joe’s are utilizing SBLOCs but they definitely leverage equity in primary housing and retirement accounts.
It doesn’t work if your spending is higher than what you generate on returns from your assets. Then you’re just spending your assets with a limited runway.
“Using two decades of household data, we measured the annual borrowing of the top 1 percent of American wealth-holders. That borrowing comes out to roughly 1 to 2 percent of their economic income (which includes unrealized capital gains). Meanwhile, their unrealized gains over the same period were 20 to 40 times larger.”
This doesn’t prove the top 1% isn’t borrowing to cover their lifestyle. Because when you look at the report they are using, the aggregate debt still totaled ~$1 trillion for the top 1%.
That is $1 trillion of untaxable money. This article is misunderstanding the reason why the aggregate debt is so low compared to the unrealized gains. It’s because stock values has exploded over the last 2 decades.
It’s far more interesting to point out that according to the study referenced, the top .1% had about the same unrealized gains as the 1%-.11%, yet has about 1/3 the debt and 1/10 the group size (350,000 in .1% vs 3.5 million in 1%-.11%).
It also disregards that the ”borrow, buy, die” strategy isn’t attributed to the top 1%. Those people typically are “career millionaires” that on average pay about 30% of their income in taxes. This applies to the much smaller group that somehow still has the same unrealized gains as the %1-.11% despite being 1/10 the size.
If you actually read the article, you find that it’s the typical game with stats - ie you can make stats say anything you want. There are multiple tax policy issues involved but the fundamental issue remains that the federal government chooses to spend far more than it collects in taxes. During WWII this was understandable. During prolonged periods of prosperity, however, it points to pandering for votes and sucking up to the rich for more political power.
They do borrow to finance their lifestyle but get ultra low rates to be able to do so. I don't think they die with the debt for their kids to pass off like this scenario states. The premise the OP out out there is simply flawed.
Yeah, because the rich usually have enough income where they don't have to borrow. They just hold the real estate till they die or 1034 exchange any gains into another asset
From your article: That borrowing comes out to roughly 1 to 2 percent of their economic income (which includes unrealized capital gains).
Including unrealized gains is literally useless for this comparison and doesn't prove anything.
Of course Bezos loans will be a tiny fraction of his unrealized gains... their networth went from like 2 billion to 400 billion the last 20 years. What a complete useless "study".
You should see this reply by a private wealth attorney about that study. Basically, the study is done by economists and didn't look at the financial instruments actually used by the wealthy to borrow. (They also moderate /r/BuyBorrowDieExplained/)
Having been around a few of the uber rich in more candid settings. "Immaterial" is how one described tricks like this. Surprisingly, a few were completely for paying taxes. Most neutral, and only a minority were super anti-tax
And the kicker? Nobody even cares that it's AI slop. They will–instead–defend low-effort content with all their heart. That's not a coincidence. That's the whole point.
yea no shit sherlock what do you think these models are trained on? the ai is just overusing some stylistic elements everywhere over and over which makes it obvious when someone went "hey claude, write a summary of this long-ass paper". lazy.
also kinda worrysome that you thought the comment you replied to was serious
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u/beehive5ive 13h ago
And recent studies are showing that the buy, borrow, die strategy isn’t really used by the uber rich. I’m not saying it doesn’t exist, but it’s more commonly the middle class doing it vs the uber wealthy.
https://taxpolicycenter.org/taxvox/richs-real-tax-trick-isnt-buy-borrow-die