Comments on: How not to report on the poor and the wealthy A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: MaxMeridius Tue, 24 Jul 2012 19:33:24 +0000 Based on the averages from the Pew report, the effective interest rate is 790.83%…

By: Ragweed Tue, 24 Jul 2012 17:23:38 +0000 From the PEW report:

“Lenders usually charge about $15 per $100 borrowed per two weeks (391 percent Annual Percentage
Rate or APR).”

But, there are additional fees if the loan cannot be paid back in full and needs to be rolled over.

“For example, a person who borrows $400 for a $60 fee for two weeks would have paid approximately $480 in fees after renewing the loan for four months, but would still owe the original $400.”

That is $480 in interest and fees for a $400 loan – not far off of $520 for a $375 loan.

By: TinyTim1 Tue, 24 Jul 2012 14:47:11 +0000 Felix as almost every poster has pointed out – you need to adjust the beginning of this post.
The $520 is an understatement not overstatement and the $3,000 figure just plain wrong.

Also regarding the hidden trillions – I am glad you are pointing out the clear spin behind the numbers.
However, I suspect that a great number of those trillions would have resulted from capital gains which when onshored would result in substantial tax burdens. Hence we MIGHT claim that a nice redistributive move would be to force wealth onshoring.

By: CheekyBlueBird Tue, 24 Jul 2012 13:09:50 +0000 I’m a fan and follow your posts, but I’m not sure about these two underlying assumptions in this post: “The reality is that the wealth of the global super-elite does not, actually, cause poverty; nor is there any obvious way of using it to alleviate poverty.”

It is very clear that in some countries an extractive elite is responsible for poverty: Angola, Equatorial Guinea, Nigeria, Russia, Turkmenistan, Uzbekistan all come readily to mind.

What is less clear is the extent of outflows in countries where the extractive behavior of elites is less well recognized. Attempting to quantify it is therefore interesting, and the question that I would like to know: how well did the report do this? I would be interested to know what academics, the IMF, etc. had to say about this. This seems especially relevant given the discussion of tax evasion in the Greek context.

Your point about the existing stock of wealth now being out of reach of the ability of governments to tax might be valid. But a discussion of the size of that stock is important to recognizing the cost in term of lost government revenue of failing to take collective action on tax havens, etc, to account for outflows in the future.

On another subject, the bit about “poor people find it difficult to stay on top of their finances” not being news, I would argue that in the US context at least, that there has been a failure of regulation that has enabled predator practices on the poor. The failure of regulation has been happening particularly at state level, and it is important to have a sense of practices in states overall to have a comprehensive overview. Not enough research has been done on this, and good that Pew and others are attempting to put this together.

By: dorfl68 Tue, 24 Jul 2012 12:05:12 +0000 “Which in turn means that the $520 in interest is paid on $3,000 in loans, not $375 in loans.”

Felix, you need to brush up on finance math. The loan balance is $375. It’s outstanding for less than a year, and they pay an aggregate of $520 interest. In fact, the loans were only roughly half a year outstanding, so this is much worse

By: Bobon123 Tue, 24 Jul 2012 08:55:03 +0000 In the first part, you said the problem was the absence of a link: providing the link, the author would have read the article better.
There is a clear counterpoint to that. You provided the link to the countries with a wealth tax, but still you made a mess of the list. Italy has no wealth tax.

By the way, there are much more countries with a wealth tax on the middle-class. Indeed, most countries has a tax on real-estates: you can’t offshore your villa in Tuscany. Of course the issue is that for the 99% of the households real estates (your house) cover around 80% of total wealth.

By: realist50 Tue, 24 Jul 2012 04:20:16 +0000 Lots of negativity toward Felix in the comments, but I thought it was a good post. His point on stocks and flows reminds me of The Liar’s Poker anecdote about John Gutfreund bragging about how at the time (mid-80s) Salomon Brothers had assets equal to the Gdp of one of the 40 largest countries in the world, and another (Jewish) exec replying, c’mon, John, we’re not the Netherlands, we’re a bunch of leveraged Jewish guys in New York.

By: y2kurtus Tue, 24 Jul 2012 01:33:56 +0000 I’m a banker. The idea of charging someone $65 eight times on a balance never exceeding $375 dollars is unethical, amoral and preditory.

The hard truth is that most of those customers would be pushed out of the lending system without those sickening rates. In my view they would be better off in the long run off without access to payday loans.

It depresses me to say it but what we need is a national forced savings program. Impose a 10% leavy on all wages with minimal access prior to age 67. Let people borrow against their accounts at 5% over the 5 year treasury and withhold their tax refunds if they fail to pay themselves back.

The last thing I want to see is another goverment mandate… but the alternitive the prudent face is paying 50% higher taxes just to fund the status quo.

By: FifthDecade Mon, 23 Jul 2012 23:37:11 +0000 Voters in Switzerland have rejected Capital Gains Tax in a recent Referendum. Everyone’s happy with the Wealth Tax though – it’s fair to all, and is levied at very low interest rates with a substantial lower band in which it does not apply. It’s a very effective way to tax Capital without disturbing financial transactions.

By: TFF Mon, 23 Jul 2012 23:34:17 +0000 The obvious way for the uber-wealthy to address poverty is for them to hire workers at living wages rather than at profit-maximizing wages. I can understand, however, why that is a non-starter for those who use their billions to keep score in the game. Felix perhaps would prefer a system that runs the redistribution through government pockets?