In 2009, the worst economic year for working people since the Great Depression, the top 25 hedge fund managers walked off with an average of $1 billion each. With the money those 25 people “earned,” we could have hired 658,000 entry level teachers. (They make about $38,000 a year, including benefits.) Those educators could have brought along over 13 million young people, assuming a class size of 20. That’s some value.
Apparently the 25 hedge managers did something that is even more valued in our society. But how valuable was it, really? To assess that, we need to answer a few basic questions:
1. What do hedge managers do?
They run funds into which very rich people put money to make even more money. Hedge fund managers move the money around in very risky ways to get the most enormous yields possible. (Wealthy investors believe they are entitled to double digit and even triple digit returns.) Because hedge funds are considered playthings for the rich, who presumably are fully aware of all the risks, they are exempt from most financial regulations. (We’ll soon see if the financial reform bill now moving through the Senate changes this in any substantial way.)
They run funds into which very rich people put money to make even more money. Hedge fund managers move the money around in very risky ways to get the most enormous yields possible. (Wealthy investors believe they are entitled to double digit and even triple digit returns.) Because hedge funds are considered playthings for the rich, who presumably are fully aware of all the risks, they are exempt from most financial regulations. (We’ll soon see if the financial reform bill now moving through the Senate changes this in any substantial way.)
The wealthy will have placed an estimated $2 trillion into hedge funds by the end of this year. (That’s about $6,500 for every man, woman and child in the U.S.)
2. Where does all that hedge fund money come from?
It’s mostly excess cash the super-rich have in hand now that their tax rates have dramatically declined. In the 1970s the marginal rate on those with incomes above $3 million (in today’s dollars) was 70 percent. Today, the effective rate on the 400 richest Americans is 16 percent, according to the most recent IRS data.
It’s mostly excess cash the super-rich have in hand now that their tax rates have dramatically declined. In the 1970s the marginal rate on those with incomes above $3 million (in today’s dollars) was 70 percent. Today, the effective rate on the 400 richest Americans is 16 percent, according to the most recent IRS data.
The wonderful thing about putting your money in a hedge fund (or managing one) is that the income you get from it is not taxed as income (say, officially at the rate of 35 percent). Instead, it is treated as a business investment, something that’s good for the economy and that we need to encourage through a low tax — a “capital gain.” The tax rate on capital gains is 15 percent. This is one reason that Warren Buffett can say that he pays a smaller percentage in taxes than his secretary.
Do we really need more teachers? 'Room' for everybody
ReplyDelete"...The provisions mirror the state's "rubber room" law, which makes it nearly impossible to fire tenured teachers and has led the Department of Education to warehouse some 675 unwanted teachers in so-called reassignment centers daily at a cost of $40.5 million last year."
What do hedge managers do? - They run funds into which very rich people put money to make even more money.
As long as they are not risking your money you do not have business of telling people how to risk their money
Where does all that hedge fund money come from? -It’s mostly excess cash the super-rich have...so no one is asking for you to put your money there right?
As long as the hedge funds don't ask me(the taxpayer) to bail them out,if their risky bets result in failure I do not care how much the hedge fund manager get as compensation or what is the return of the investment of the rich person invested in the fund
But you see you should be concerned, if teachers get $50 000 a year without working, because this money are coming from your ever rising property taxes
Oh yeah,
ReplyDeleteSomething/ Someone is worth as much as Somebody else is willing to pay for it.
So apparently 1 hedge manager is worth as much as he is being paid ($1 billion or more) and 1 teacher is worth as much as he is paid ($50 000)
Supply and demand!
fdr
ReplyDeletecynical colmunist
you are an idiot
to justify why someone makes 1 billion a year when we have bailed out the banks to the tune of 23 trillion
you are a fool on the wrong website
in fact if i had it my way you and many others would be in big concrete cells
america is collapseing because our goverment has sold out our jobs
and sleeze balls like yourselfs that think someone is worth a billion dollars for massive fraud
but in a country were our leaders are corrupt politicans are scum
and we love war only one thing will be left
and thats we feed on ourselves
like the greeks we have become free to act like animals
you are an idiot and i feel sorry for your family
I agree with Cynical Economist. As long as we aren't charged for bailing them out when their bets fail, then who cares? Taxes are paid on that money earned.
ReplyDeleteAlso, the writer of the article seems to suggest it was better when the super rich were being charged 70% taxes. Why on earth should anyone at any income level be charged more than 15% of their income in taxes?
you cant see we will be bailing them out next
ReplyDeleteyou are a fool
but thats why im rich because of people cant see
the coruption and by denieing it i will make more money
so thanks
only a fool would agree with cynical
but thats why many will be more prepared than most
also i feel sorry for many when they see how america has been destroyed by greed
so imbrace cynical 443
because you reap what you sow
For those who care, the comments at the link to this article are excellent.
ReplyDeleteThe cynical economist says:
ReplyDelete“As long as the hedge funds don't ask me(the taxpayer) to bail them out,if their risky bets result in failure I do not care how much the hedge fund manager get as compensation or what is the return of the investment of the rich person invested in the fund”
I love all this theoretical stuff ,trumpeting heroic individualism and the virtues of free market economics .Its good for kicking up dust to divert attention from actual practice of how the system works . Still maybe the sheeple have short memories?
Luckily for the rich like Buffet and hedge fund managers the real world does not work like that fantasy economics stuff “cynical economist” blows dust about .
Even Buffet calls the derivative bets in the hundreds of trillions “ weapons of mass destruction”
“Long live free money for the rich” says:
What does he think the bailout by the taxpayers was for at Bear Sterns , Lehman’s, AIG that already have cost the US taxpayer trillions in derivitive bet payoffs and refunds?
Candy Fairy floss handouts?
Or , mostly bailout for covering losses on derivatives bets by banksters and hedge funds as their losses were socialised and capital refunded so that they could back in on the game without any risk to their own skin . The Fed tossed out all sorts of guarantees for borrowing money on the cheap to encourage even more risky bets for the now too big to fail corporations and hedge funds! That is what the financial coup was for. Bailing out bankrupted Casino Capitalism Banksters ,Hedgies and the Rich. All very necessary for the continuance of the system and hedgie parasites., AIG for one paid out lost derivative bets in the tens of billions with taxpayer money
Long live free money for Hedgies too! And long live the american taxpayers.
HERE IN BRITAIN IF YOU ASKED THE PUBLIC THEIR OPINION ON HEDGE FUNDS THEY'D THINK YOU WERE ASKING ABOUT GARDENING.There's three politicians competeting to be Prime Minister on May 6th and none of them have spoken out against the abuse of power by those I describe as the Mammons. If Joe public doesn't PROTEST maybe they deserve what they get?
ReplyDelete