## Wednesday, September 7, 2011

### Day 15 - Mathematics for the Rich and Poor

So, there is a whole mess of economic woes and travesty about the world.  Threats of the USPS shutting down, the Euro falling apart, and many nations unable to sustain their economies plague the news.  I have been thinking alot about the US however because our situation seems relativitly stupid (for lack of a better term).

We have a lot of people with wealth in this country and we have a pretty robust system of business and enterprise and such.  However, it just appears that the situation keeps getting worse.  It is quite clear that businesses are hurting strictly because their are not enough people buying their merchandise.  This is happening because not enough people have money to buy their merchandise.

Now, we can argue about what is fair and what is right and not right and so on, but that is useless.  The main point is that we have to have a sustainable economy.  Let's be real, if the global market collapses, and businesses shut down, all the money in the world won't matter if there isn't any value to it.  Additionally, people with more money need people with less money in order to make the world go round, it isn't rocket science so I won't go into it too much.

I have decided however, to explain it a little bit.  The mathematics are simple and hopefully will help knock some sense around.  Right now, it appears to be the common number that 1% control 99% of the wealth in the country.  I am also using relatively simple numbers to get the point across since the exact numbers are not relavent and approximations will do.

{This section has been revised below in the updated area}
So, let us say we have a country US with 100 people in it.  US makes exactly \$100 in total wealth a day.  By our numbers before.  This would mean that there is 1 person that has \$99.01 a day and 99 people that each have .01 per day.  Now, let's say there are 10 businesses in US.  In order to survive each business needs \$1 a day.

By our current logic, it is unsustainable.  There is no reason for the 1 person to shop at all 10 stores a day, they would go to 1 store a day give them their dollar, remain rich and the store survives.  Even if the other 99 people shop at the same exact store, it would eventually be unable to sustain itself since it would only take in .99 a day.  Therefore the other 9 stores die out, the other 99 people have nowhere to shop, etc etc, economic collapse...

Let us readjust some of these numbers.  If we take 5% of that 1 person's wealth and redistribute it to the other 99 people.  These are our new numbers.  1 person has ~ \$80 a day.  99 people have ~ .20 each.  Now, we can simply take all 100 people and divide it by 10 (stores), that is 10 people per store.
1 store will have the 1 rich person and 9 "other people" and the other stores will have 10 "other people".  At 10 people spending .20 at the store per day, that is 2.00 a day.  More than enough to sustain each store, perhaps each person spends .19 a day and keep .01 in the bank for the future... Economy stable, life moves on wonderfully, businesses have extra money, they hire more people, etc etc etc.
{end of revision}

It is very simple mathematics, it doesn't matter about what is yours and this and that.  It is irrelevant, there are very very few people in this world that earned every dollar they have by blood, sweat, and tears.  In order for this entire system to work correctly, more money needs to be redistributed to the majority of people, bottom line.

UPDATE:  9/7/2011 1215

I am updating my logic because it was flawed.  The numbers I got were wrong, as I misread my source.  In any event, I have redone the math here.

So, continue on the idea that we have 100 people in the country of US.  US makes exactly \$100.00 a day.  According to source A, 1 person will have \$34.60, 19 people will each have \$2.66, and 80 people will have \$.15, per day.

According to source B, minus the housing expense at 32.9%, and 9.9% for savings,  I am attributing all others to expenditures as various business, therefore, about 57% of each person's total will go towards a business of some sort.  For the 1 person, they will spend \$19.72, 19 people will spend \$1.52, and 80 people will spend \$.11 per day (in our case since our people get paid daily in this scenario).

Now, as in our scenario, we have 10 businesses evenly distribute throughout US and it works out that each store recieves business from the same 10% of our population.  Therefore, 1 store will recieve \$21.35 (the 1 rich guy, 1 upper guy, and 8 poor people), 9 stores will receive \$3.92 (2 upper guys, and 8 poor people each).  This gives 9 stores a \$2.92 profit margin and 1 store a \$20.35 profit margin.  It also lets the 1 rich guy save \$14.88, the 19 upper guys save \$1.14, and the 80 poor people save \$.08.

If we redistribute the wealth from the rich guy to the poor guys by 15%, and upper to poor by 2%  we get:
1 person has \$20.00, 19 people have \$2.52, and 80 people get \$.40.

Using our same logic from above with the stores.  We take 57% of each person's total, rich = \$11.4 each, upper = \$1.44, poor = \$.23.

Each store gets this now: 1 store gets \$14.67 , 9 stores get \$4.74.  Poor people now save \$.17, double what they saved before.  Rich save \$8.6 (drastically less) and uppers save \$1.08 (about the same).  The other 9 stores get almost a dollar more than they were before too, which boosts jobs and so forth.

SOURCES:
A: http://sociology.ucsc.edu/whorulesamerica/power/wealth.html