The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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Don’t . . . Eat The Rich

There has been a book, a song, and a play entitled “Eat the Rich.”  It plays into a very basic human jealously, but it has been emotionally reinforced by the belief that the rich benefited unfairly during the Global Financial Crisis (GFC) of 2008/9 . . . while others were suffering.

It is often reported that the rich got richer during the GFC.  Yes, it is true they owned a larger piece of the pie or national wealth after it was all over.  But, it was a smaller pie!  Like almost everybody else, the rich lost money during the GFC.  In dollar terms, they lost more per person than those in the middle or lower classes.  In percentage terms, they lost less.

For the middle and lower class, their home is usually their largest investment.  Housing also got crushed during the GFC.  If you have 10% equity in your home and if the market value drops 10%, then you have lost 100% of your equity.  The vast majority of the rich have little or no mortgage debt.  They argue their percentage of total national wealth increased because they were more risk adverse and avoided mortgages.  In other words, they were smarter.

The rich also stayed in the stock market for the long-run, even when it was down.  The other classes needed whatever cash they had in stocks and sold them, which means they missed the huge bull market that followed the GFC.  In other words, the rich were smarter.

Or, they could afford to be smarter.

Being rich means you can afford to have a nicer lifestyle, PLUS you have more choices and can choose to be smarter.

But, being smarter doesn’t make you any tastier to eat . . . The rich benefited because they were lucky, not because they were bad or devious.  The rich are just people too!  Please don’t eat them!!