According to Forbes “real time” billionaire tracker, Elon Musk is currently the world’s richest man at $244 billion, and that has probably changed from the last time I checked it a few minutes ago. So what is a measly $44 billion to him? He will still top the richest list even if he dumps all that money into a dumpster. But according to Bloomberg, the deal to purchase Twitter requires Musk pay nearly half the amount in equity financing; which means, basically, hard cash. The rest can be paid through debt financing, which basically means borrowing the money. To raise the cash, Musk has sold $8.5 billion of his Tesla stock, and convinced various investment groups to throw in another $7.1 billion.
Musk is about $6 billion short, and although Bloomberg observes that the deal could still fall apart, as “it seems Musk is struggling to get the money he needs to make this Twitter deal a reality,” but “Of course, this is Elon Musk we’re talking about, and he could surprise us all and announce the remaining funding before you finish reading this newsletter.” It is another question as to why Musk wants to “own” Twitter at all, since its potential for profit is somewhat on the low side compared to other social media platforms. Advertisers, notes The Economic Times last week, see “The fleeting nature of tweets has meant that marketing messages in posts may not spend much time in the spotlight for Twitter users to see.”
Well, “so what” you say; this is just another super-rich guy with too much time and money on his hands. He’s got so much “cash” that he doesn’t know what to do with it. But the fact Musk is having trouble raising “cash”—even if the amount seems “manageable” relative to what the rest of us are used to—points to certain realities; not all the “super-rich” have $100 million in cash in the checking account like we are told makes up 25 percent of Tucker Carlson’s wealth, since Fox News pays him $35 million a year (presumably in cash), and what to do with all that money when he can live off the interest from the inheritance that his father (and ex-mother) left him?
Actually, the super-rich have very little of their wealth in cash or liquid assets that can be quickly converted to cash to “live” on. Spare cash laying around doesn’t “work,” so it must be put to use. If need be, interest payment from stocks or selling a few stocks should be sufficient to pay for daily expenses, and if something “big” needs paying for, selling more stock or taking out a loan always works.
The following graph shows us the vast difference in how wealth is distributed in this country, even if the super-rich seem to have “less” cash compared to poorer people relative to their total assets.
The graph is instructive of how even during a pandemic where many people lose their jobs and sink into poverty, others can still get even richer: what it tells us is that the poorer you are, the more your “wealth” is tied up in two basic assets: your house and your car. Of course if you don’t have a house or a car, your “assets” are basically what you have in your in bank account, or if you are fortunate, a retirement fund you invested money in. It isn’t until you reach the $1 million in assets stage where this equation starts to change; you may own a business, own real estate, have large investments in stock, own government bonds that pay out a “fixed” interest rate, or have money invested in mutual funds—which are “managed” investments involving the money of many individual investors
This is income inequality in action. If you are an entrepreneur who started a business and it was successful—Jeff Bezos literally began Amazon working out of his garage—most of your money is in “the business.” But if you are in the “middle rich” pack, the major part of excess asset accumulation is in investments, including those earmarked for retirement. That means that people with excess cash laying around can use it to accumulate wealth by investing in various money-making schemes. In the last 20 years stock prices have tripled, but if you had money to invest on March 6, 2009—the lowest point in the Great Recession, when the Stock Market hit bottom at 6,469 points—you probably would have benefited handsomely since as the Dow Jones average is now five times that amount.
Of course if you live from paycheck to paycheck, investing in the markets isn’t really an option. Your principle assets are as likely to depreciate in value as increase, so it is easy to see that all things being “equal,” people with money have far greater opportunities to expand their wealth over time. Even if that wealth is subject to the vagaries of stock prices—see how Elizabeth Holmes went from multi-billions to nothing seemingly overnight—the game is still heavily in favor of those who have excess money with nothing to do but be gambled with.
And of course if you are Tucker Carlson, you don’t even have to be “creative” to build anything constructive to rake in undeserved wealth; you can just say the things that corporate America wants you to say while still claiming to be a “populist” fighting for “working people,” when in fact your “job”—even if you are too hypocritical to come out and admit it—is to insure that working people barely making ends meet have their attention drawn into “culture wars” and racial scapegoating while the income disparities in this country grow wider and wider.
No comments:
Post a Comment