Nassim Taleb's suggestion is to simply deny institutions the option of growing large enough that their demise would threaten the system. Once an entity gets too large to fail it should be split so that the remaining pieces can fail individually without dragging entire system with it. This would get rid of the moral hazard "heads I win, tails someone else loses".
If we are specifically talking about the financial institutions, then good luck getting in on some of the biggest deals over banks without the same constraints.
Exactly why it makes sense to limit corporation size. Honestly, I think things would be much better off with a progressive tax on the number of employees and contractors a corporation has.
Anything up to 10000 is 0%, and after that, the brackets go up to 80% (for 1 million or over).
That's not to say the pain felt was greater or even the same as those with less, but it is simply not true that somehow the wealthy remain unscathed from financial crisis. It doesn't even make sense at face value considering they have a large percentage of their wealth in the market and likely have a higher risk tolerance. In fact financial crisis reduces wealth inequality precisely because it affects the wealthy capital owner more
https://www.stlouisfed.org/publications/regional-economist/j...
mean while, all their existing investments plummets. Unless you see them pull out of their investments prior to the crisis, there's very little evidence to support this claim that a financial crisis is good for the wealthy.
If the wealthy has any choice, they would overwhelmingly choose not to have a financial crisis.
That's not a huge problem if you can cut expenses and live off the dividend income and your other assets for a few years.
> The top 1% had an average income of $1.26 million in 2014, a 19.1% decrease compared to $1.56 million in 2007, according to an analysis of tax data from researchers at the University of California, Berkeley, and the Paris School of Economics. It’s even worse news for the top 0.01%, whose average income fell to 27.4% from 2007 to a mere $29 million in 2014.
http://money.com/money/4264052/great-recession-impact-rich-1...
Saying "you should google ..." is not a source. If you want to provide a source for your claim about some group, back it up. You're not making meaningful contribution to the discussion.
Yes, the very wealthy have a variety of sources of income (e.g. stocks) and those dropped greatly in value. Unemployment peaked at maybe 10% during the crisis. So some percentage of people lost jobs while the wealthiest who have most their wealth in capital that dropped 30%.
Ironically, having tax exempt investments hurts when your portfolio drops in value as you won't be able to write those off.
"Randal Quarles, who oversees Wall Street supervision and regulation at the Federal Reserve ...takes comfort from the fact that Wall Street banks are offloading risky loans to investors."
If those "investors" are pension funds or even 401ks, isn't this just a clever way of looting them disguised as a market phenomenon?
Also:
"That’s not the way the markets are supposed to work."
Forgive me, but, lol.
When the market bounces back four years later, I'm now 1.5x wealthier than I was before the crash (thanks to all the cheap investments), and all I had to do was move some money around.
There's a big difference between "no longer richest person in the world" and "lost everything".
Edit: I’m not going to search through this book to find sources that fit some criteria you’re looking for. Get off HN comments, read a book, and learn some financial history lessons.
Edit: I've now read a few reviews and summaries of Devil Take The Hindmost. Its subtitle is "A History Of Financial Speculation," and it appears that its subject matter is not focused on ultra-wealthy persons with diversified portfolios being ruined by market corrections, but specifically speculators and frauds. At a glance, it doesn't look particularly relevant to this conversation.
I'd prefer an example that isn't somebody who wound up in prison.
They can declare bankruptcy and be free from all debt whereas your average college student cant escape.
Should we expect to see students jumping off of buildings soon ?
Yes, but the implication of OP is that these ultra-wealthy are crashing the system so they can then buy up everything around them. Where is the data to support this? The rich suffer during a recession too; no one is claiming they end up on the streets.
Have you checked the Oxfam reports? When you take a look at the last years, there is very clear trend. If it continues like this probably in few decades the richest one percent will own as much as the rest 99%.
I believe we're thinking of different definitions of the word "suffer." The qualitative difference to which I refer is that for one class of people, the "suffering" is restricted to numbers on ledgers going down, and for another class of people, said suffering can literally involve ending up on the streets.
Furthermore, someone else in these very comments is claiming the ultra-wealthy can wind up on the streets as a result of market forces.
So, no, you sell at a stable rate to buy at a discount rate.
Investing is easy in hindsight, but the only “stable” asset is cash, and waiting for the entry point can be costly.
Exit: to be clear, I’m a huge diversification advocate. But each crisis (and each bull market) is different and rebalancing is not always helpful.
Funny, I would say the same about your comment
When there's a recession, if you're wealthy and have diversified assets you can buy everything at a discount rate during a stock crash and sell when the recession recovers. Meanwhile, the poor and middle class often find themselves unemployed, their savings accounts massively depleted and in a constant crush for cash.
If you're wealthy AND you have the ability to create risk in the market, then even better. You can actually help trigger more "stock discounting" events, and dominate any emerging technology company with your bootstrapped companies while everyone is dying for credit.