Posted on 06/18/2010 8:32:06 AM PDT by SeekAndFind
The two billionaires' request that the rich give 50% of their net worth to charity is misguided.
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In its latest issue, Fortune magazine reports that "Bill Gates, Melinda Gates and Warren Buffett are asking the nation's billionaires to pledge at least half their net worth to charity, in their lifetime or at death." Gates told Fortune that 50% of one's wealth would constitute the "low bar" for giving, while Buffett has pledged to give 99% of his wealth away.
At first glance this is something to celebrate, for it rightly confirms that capitalism is, at its core, quite compassionate. The charitable ways of Gates and Buffett also provide living proof that the "trickle-down theory" is in fact reality.
And when we consider that the greedy hand of government will help itself to half of Gates' and Buffett's money upon death anyway, the idea of them depriving our federal masters while supporting good causes becomes even more appealing.
But while it's exciting to contemplate the giving nature of Gates and Buffett, if their true desire is to help their fellow man, they should hoard every penny of their significant wealth. For the two richest men in the U.S. to monetize their wealth in order to support charities is for them to oversee the conversion of production goods to consumption goods. Some will no doubt benefit in the near term, but the removal of limited capital from the productive parts of the economy will ultimately reduce our standard of living, drive up unemployment and make individuals more--as opposed to less--needful of charity.
Conversely, money saved and invested constitutes capital offered to today's and tomorrow's businesses. When individuals save, they're by definition providing capital to entrepreneurs, and the capital formation that results from saving naturally stimulates job creation.
(Excerpt) Read more at forbes.com ...
There are no jobs without investment, and given the billions that Gates and Buffett control, if they were to hoard their wealth rather than give it away, their wealth-creation motive would boost the job market.
Or better yet, buy guns and communications equipment for the Iranian dissidents.
That would save the world.
This article has a fatal flaw in it.
Suppose you own 1,000,000 shares of corporation X, and want to give away money. The only thing you can do is sell some of your shares to someone, and give away the resulting cash. The shares don’t just vanish in the air, they just belong to someone else now.
Of course, if many billionaires tried to sell all their shares, they might not find that many buyers and have to take a discounted price. That merely shows that their great wealth is not entirely real, and that the shares they own would not be worth as much if more of the total outstanding shares were trading regularly.
If they give the money they take out to poor people, then it will be spent immediately, and return to its rightful owners, the rich people who own the capital. It may be new rich people rather than old billionaires, but it will still be rich people.
Even if they all did this, which I doubt, it would all wind up in the hands of radical, progressive foundations to be used to further the destruction of the economic and political freedom that permitted these fortunes to be amassed in the first place.
Warren Buffet plans to give away over 90% of his wealth to the Gates Foundation. Is this a radical, progressive foundation ?
I agree; but their goal is control of the world and it’s people on every level of life.
If they wanted to help out, they should both go on wild spending sprees, and buy the kind of things, and do the kind of things which create jobs and payrolls.
“The shares don’t just vanish in the air, they just belong to someone else now.”
If opportunities for capital investment were limited, you would be right. Then ownership of capital would be a zero-sum game and society would be indifferent whether the shares were owned by Gates/Buffett or anyone else. What you’re ignoring is that in a free society, opportunities for capital investment are not limited.
Thus, every dollar of investment used to purchase shares sold by Gates or Buffett is a dollar that didn’t get invested in some other venture capital fund or shares of stock in another company.
Consequently, the loss of jobs arising from the reduction in downstream innovation is just as real (albeit invisible since the government only counts jobs actually created as opposed to jobs that could have been created).
The UN?
Tin-horn African dictaors?
Nameless, faceless, clueless bureaucracies?
The people who know how to earn it are the people who know best how to use it.
instead of giving it to charity, they should divide their capital among all adults in the U. S. so that in the end, every adult could be a capitalist.
Pay down the national debt.
Thus, every dollar of investment used to purchase shares sold by Gates or Buffett is a dollar that didn’t get invested in some other venture capital fund or shares of stock in another company.
Consequently, the loss of jobs arising from the reduction in downstream innovation is just as real (albeit invisible since the government only counts jobs actually created as opposed to jobs that could have been created).
Sorry, DrC, but I don't follow you.
Let's assume that, e.g., Bill Gates' total assets amounted to 2 billion shares of common stock in Microsoft. That is equivalent to approx. $50 billion (at $25 per share). Now suppose that he took those 2 billion shares and simply gave one share to each of 2 billion people. Unless they immediately attempted to sell those shares (or the market feared that they might), it would have no discernible effect upon share price.
Instead of one person owning 2 billion shares, 2 billion persons would own one share each.
They would collect their quarterly dividends. Some of them would divest themselves of their share eventually. Others might acquire more shares.
Now, of course, there are second-order effects here that I have not touched upon, but on the face of it, I believe that my logic is sound.
What am I missing?
Regards,
Every adult U.S. citizen is already free to be a capitalist, if he wants.
Regards,
See the second part of my reply.
The people who receive the money distributed spend it right away. It is received back by the owners of capital, who re-invest it.
If they wanted to be good citizens, they'd open an account with me and I'd make sure they invested in good, job-producing endeavors...like making sure every f-ing Democrat in public office is replaced by a conservative.
No the article does not have a flaw. Your reasoning is flawed. In your example you start with TWO People with a billion dollars each (billion A just has his in stock). After billion A gives the money away that he received from billion B buying his shares you now have only ONE person with a billion dollars. Billion A is gone. It’s been spent on charity and is no longer available for investment and generation of more wealth.
| Pay down the national debt.
We are thisssssClose to actually achieving a major slowdown in the eternal creep toward ever-larger government. That is occurring because the US government, and every other government, is running out of debt capacity. When the world's investors finally get spooked (and it's not far away) and they start demanding 8-10 per cent annual yields on Treasury bills because they smell oncoming default, that will finally put the brake on government spending. Nothing else seems to work. |
See the second part of my reply. What do the charities do with the money? They go out and spend it!
Some businessman receives the money they spend almost immediately, and the capital value of his business grows through retained earnings. The charities who received the money are left with nothing.
If the bond vigilantes get even a whiff of default, you'd be praying that it's only as low as 8-10%.
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Not without Constitutional restraints on deficit spending. Lowering the debt now just gives the Big Spenders more headroom in which to work.