Economics: Rich People and Leverage?

[billdotson]

Ok, here is a hypothetical example:
Say I have millions and millions of dollars and decide that I want to buy all of the housing in a particular area. After I do that, I want to charge very high prices, because my housing is all that is available in the area.

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

 

[nonlnear]

Has your account been hijacked? Your previous posts have been of superb quality, but this thread is on par with Anarchist420.

 

[Zebo]

Leverage works on lots of ways. People with money help each other out. Best way is condemn properties with country commissioner you have elected and get them for pennies on the dollar. If that fails you are rich and can wait anything out. That's why it's so easy to buy low and sell high if you're rich. You don't have mortgage to meet, groceries to buy so it's a simple matter of looking at a historical pricing, buy low, and waiting it out. Never any pressure to sell, time means almost nothing.

While the middle and poor when times get tough have to sell their investments to you cause they need to eat instead.

Some other ways leverage works:
-GWB failed 6x in business and still got multimillion dollar loans to start new ones, having freinds and family running shotty S&Ls helps.
- Insider trading. They all talk to each other on the down low.
- You can have leverage monopoly power, that's how Carnegie got rich - some wannabe steamboat company came in? He just cut prices in half until they were out of business, then raised them 125% to cover his loses.

 

[dmcowen674]

Basically those with money play the world like a Monopoly game

Nothing new here except the stakeholders have shrunk and they own more.

 

[Abwx]

Ok, here is a hypothetical example:
Say I have millions and millions of dollars and decide that I want to buy all of the housing in a particular area. After I do that, I want to charge very high prices, because my housing is all that is available in the area.

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

I live in France, and it s currently what s happening here..
The taxing scheme has been made in a way that if you have
one million $ , creating an industrial buziness will yield way less
profit than investing in real estate.
This has led to a progressive decline of the real economy,
and the GDP is, like the US, no more a measure of the real
wealth, but an addition of all added values.

A good exemple : China produce a good that is sold to
the US for 1$, and as such the chinese count 1$ of GDP.
This good is then sold 10$ in the US , and this latter consider
that it has produced 10 - 1 = 9$ of GDP...

 

[Doppel]

Ok, here is a hypothetical example:
Say I have millions and millions of dollars and decide that I want to buy all of the housing in a particular area. After I do that, I want to charge very high prices, because my housing is all that is available in the area.

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

Yes, this is a great example. Although this one may technically be illegal there are plenty of similar ways in which money makes money. "You gotta spend money to make money." it is why since the dawn of time the rich have gotten richer. They have the money to invest and it builds upon itself. If you borrow money from me because I'm rich and you're poor you pay me an interest rate but I make one.

And look at the Walmart model. Huge stores that _leverage_ their incredible volumes of product purchases to encourage/force sellers of product to give at a better price than any little store can do. Thus the Walmart comes in and the smaller merchants are priced out of the market and crumble. And the Walmart profits go to its heads, the rest of the jobs filled by $9/hour greeters and cashiers.

Money is simply the non-violent equivalent to military. With a large military you can conquer and annex.

 

[bamacre]

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

Feet.

 

[Macamus Prime]

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

Nada.

And, if anyone complains about it, they are:
- an enemy of the USA
- a terrorist
- a socialist
- lazy
- a liberal
- an anarchist
- the devil
- someone who should die

 

[the DRIZZLE]

Yes, this is a great example. Although this one may technically be illegal there are plenty of similar ways in which money makes money. "You gotta spend money to make money." it is why since the dawn of time the rich have gotten richer. They have the money to invest and it builds upon itself. If you borrow money from me because I'm rich and you're poor you pay me an interest rate but I make one.

And look at the Walmart model. Huge stores that _leverage_ their incredible volumes of product purchases to encourage/force sellers of product to give at a better price than any little store can do. Thus the Walmart comes in and the smaller merchants are priced out of the market and crumble. And the Walmart profits go to its heads, the rest of the jobs filled by $9/hour greeters and cashiers.

Money is simply the non-violent equivalent to military. With a large military you can conquer and annex.

To be fair to Walmart, they also have an incredibly efficient distribution system. Not all of their profitability is the result of pricing power.

 

[rudder]

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

Smart consumers. But people would be lazy and go ahead and pay the higher prices and just bitch about it.

 

[PeshakJang]

Ok, here is a hypothetical example:
Say I have millions and millions of dollars and decide that I want to buy all of the housing in a particular area. After I do that, I want to charge very high prices, because my housing is all that is available in the area.

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

What would prevent me from buying your house, and charging you twice as much to live there?

 

[QuantumPion]

Ok, here is a hypothetical example:
Say I have millions and millions of dollars and decide that I want to buy all of the housing in a particular area. After I do that, I want to charge very high prices, because my housing is all that is available in the area.

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

Hey guess what, you just described the way the government leverages its power to make its political allies wealthy at the expense of the world economy (FNMA/FHLMC, etc).

 

[QuantumPion]

What would prevent me from buying your house, and charging you twice as much to live there?

I don't have to sell you my house?

 

[PeshakJang]

I don't have to sell you my house?

<Borat>Whaaaaaaaaattt???!!</Borat>

 

[Tom]

Ok, here is a hypothetical example:
Say I have millions and millions of dollars and decide that I want to buy all of the housing in a particular area. After I do that, I want to charge very high prices, because my housing is all that is available in the area.

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

Everybody moves away and you lose all your money.

 

[silverpig]

Just move one neighbourhood over.

Why would anyone pay a 30&#37; premium to live on one side of the street, when equivalent houses are selling for less on the other side? What's more, is there may be better houses selling for cheaper.

A real estate developer will generally buy up a bunch of land, subdivide it, build a bunch of houses, and then sell them. This is the same situation as you outlined, yet these houses go for the market rate.

 

[wuliheron]

Ok, here is a hypothetical example:
Say I have millions and millions of dollars and decide that I want to buy all of the housing in a particular area. After I do that, I want to charge very high prices, because my housing is all that is available in the area.

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

That's a simplistic and trivial example. Reminds me of the child's nursery rhyme "All Around the Mulberry Bush". The poem is about how in England during the early industrial revolution monopolies over the sawing needle and thread businesses drove the masses into poverty.

Today monopolies are regulated and the wealthy exert leverage in countless other ways that aren't nearly so simple or obvious. Its the difference between the brute force approach and the stage magician with all his hand waving, smoke, and mirrors. For example, companies can change hands so fast it makes your head spin and by the time people figure out one way they are getting ripped off the same people just come at them from another direction.

 

[Atreus21]

How would you force people to buy your overpriced product?

 

[wuliheron]

How would you force people to buy your overpriced product?

A gun in the face is pretty effective. Works for the government all the time. You either buy their products or they stick a gun in your face and take you away to jail. Of course, just to make people feel better they usually give you a choice of overpriced product A, B, or C and try to make it look like the money is getting spread around.

 

[PeshakJang]

A gun in the face is pretty effective. Works for the government all the time. You either buy their products or they stick a gun in your face and take you away to jail. Of course, just to make people feel better they usually give you a choice of overpriced product A, B, or C and try to make it look like the money is getting spread around.

Or, as Obama is doing now, they force you to pay for the product you don't want, even though you haven't purchased it or taken ownership.

Case in point: GM and the Volt

 

[lord_emperor]

Just move one neighbourhood over.

In some cases a "neighbourhood" might be an entire city, like Vancouver, Canada.

 

[wuliheron]

Or, as Obama is doing now, they force you to pay for the product you don't want, even though you haven't purchased it or taken ownership.

Case in point: GM and the Volt

I don't want a B2 Bomber either, so what else is new.

 

[soccerballtux]

I live in France, and it s currently what s happening here..
The taxing scheme has been made in a way that if you have
one million $ , creating an industrial buziness will yield way less
profit than investing in real estate.
This has led to a progressive decline of the real economy,
and the GDP is, like the US, no more a measure of the real
wealth, but an addition of all added values.

A good exemple : China produce a good that is sold to
the US for 1$, and as such the chinese count 1$ of GDP.
This good is then sold 10$ in the US , and this latter consider
that it has produced 10 - 1 = 9$ of GDP...

good post, also you have good english sir.

 

[soccerballtux]

Or, as Obama is doing now, they force you to pay for the product you don't want, even though you haven't purchased it or taken ownership.

Case in point: GM and the Volt

at least we still don't have to buy it, judging by the fact that they've only sold 300 or so all together.
joke: GM should be required to list themselves as d.b.a. Obama Administration.

 

[Fern]

Ok, here is a hypothetical example:
Say I have millions and millions of dollars and decide that I want to buy all of the housing in a particular area. After I do that, I want to charge very high prices, because my housing is all that is available in the area.

What would prevent someone from doing something like this? Isn't that a perfect example of how wealthier people have more leverage over "normal" people?

The term "leverage" is arguably not the apporpriate one to use under your example.

You speak of "cornering the market". This is when you acquire sufficient amounts of an item to gain control of the supply. When you control supply, you can control price.

However, this also touches on 'competition'. Those trying to control the supply of a certain item may have competition from a provider of a similar or competing item. If a similar or competing item exists, this hampers your ability to control prices. In your example, if you purchased all the houses for sale you may still have competition from those who own rental units. People would likely rent instead of buying from you at a high price.

But this all leads into other related concepts such as 'barrier to entry'.

So, theoretically great wealth could allow someone to profit greatly by 'cornering the market' in the supply of some good. However, in the real world this is very difficult to do in the USA. Poeple have lost great amounts of money trying to do it. E.g., Nelson and Bunker Hunt and their attempt to corner the silver market; they went bankrupt.

Fern