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If Charity Is Their Goal, Bill Gates And Warren Buffett Should Hoard Their Wealth
Forbes ^ | 06/18/2010 | John Tamny

Posted on 06/18/2010 8:32:06 AM PDT by SeekAndFind

The two billionaires' request that the rich give 50% of their net worth to charity is misguided.

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In its latest issue, Fortune magazine reports that "Bill Gates, Melinda Gates and Warren Buffett are asking the nation's billionaires to pledge at least half their net worth to charity, in their lifetime or at death." Gates told Fortune that 50% of one's wealth would constitute the "low bar" for giving, while Buffett has pledged to give 99% of his wealth away.

At first glance this is something to celebrate, for it rightly confirms that capitalism is, at its core, quite compassionate. The charitable ways of Gates and Buffett also provide living proof that the "trickle-down theory" is in fact reality.

And when we consider that the greedy hand of government will help itself to half of Gates' and Buffett's money upon death anyway, the idea of them depriving our federal masters while supporting good causes becomes even more appealing.

But while it's exciting to contemplate the giving nature of Gates and Buffett, if their true desire is to help their fellow man, they should hoard every penny of their significant wealth. For the two richest men in the U.S. to monetize their wealth in order to support charities is for them to oversee the conversion of production goods to consumption goods. Some will no doubt benefit in the near term, but the removal of limited capital from the productive parts of the economy will ultimately reduce our standard of living, drive up unemployment and make individuals more--as opposed to less--needful of charity.

Conversely, money saved and invested constitutes capital offered to today's and tomorrow's businesses. When individuals save, they're by definition providing capital to entrepreneurs, and the capital formation that results from saving naturally stimulates job creation.

(Excerpt) Read more at forbes.com ...


TOPICS: Business/Economy; Culture/Society; News/Current Events; Philosophy
KEYWORDS: billgates; charity; gatesfoundation; microsoft; warrenbuffet; warrenbuffett; wealth; windows
Considered in this light, savers and investors are conferring the ultimate benefit on others by virtue of their financial means supporting individuals eager to work.

There are no jobs without investment, and given the billions that Gates and Buffett control, if they were to hoard their wealth rather than give it away, their wealth-creation motive would boost the job market.

1 posted on 06/18/2010 8:32:07 AM PDT by SeekAndFind
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To: SeekAndFind

Or better yet, buy guns and communications equipment for the Iranian dissidents.

That would save the world.


2 posted on 06/18/2010 8:34:51 AM PDT by Only1choice____Freedom (FDR had the New Deal. President 0bama has the Raw Deal.)
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To: SeekAndFind

This article has a fatal flaw in it.

Suppose you own 1,000,000 shares of corporation X, and want to give away money. The only thing you can do is sell some of your shares to someone, and give away the resulting cash. The shares don’t just vanish in the air, they just belong to someone else now.

Of course, if many billionaires tried to sell all their shares, they might not find that many buyers and have to take a discounted price. That merely shows that their great wealth is not entirely real, and that the shares they own would not be worth as much if more of the total outstanding shares were trading regularly.

If they give the money they take out to poor people, then it will be spent immediately, and return to its rightful owners, the rich people who own the capital. It may be new rich people rather than old billionaires, but it will still be rich people.


3 posted on 06/18/2010 8:37:40 AM PDT by proxy_user
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To: SeekAndFind

4 posted on 06/18/2010 8:38:27 AM PDT by epithermal
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To: SeekAndFind

Even if they all did this, which I doubt, it would all wind up in the hands of radical, progressive foundations to be used to further the destruction of the economic and political freedom that permitted these fortunes to be amassed in the first place.


5 posted on 06/18/2010 8:43:08 AM PDT by Paine in the Neck (Napolean fries the idea powder.)
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To: Paine in the Neck

Warren Buffet plans to give away over 90% of his wealth to the Gates Foundation. Is this a radical, progressive foundation ?


6 posted on 06/18/2010 8:45:33 AM PDT by SeekAndFind
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To: proxy_user

I agree; but their goal is control of the world and it’s people on every level of life.


7 posted on 06/18/2010 8:45:52 AM PDT by freekitty (Give me back my conservative vote; then find me a real conservative to vote for)
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To: SeekAndFind

If they wanted to help out, they should both go on wild spending sprees, and buy the kind of things, and do the kind of things which create jobs and payrolls.


8 posted on 06/18/2010 8:48:28 AM PDT by Paradox (Socialism - trickle up poverty.)
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To: proxy_user

“The shares don’t just vanish in the air, they just belong to someone else now.”

If opportunities for capital investment were limited, you would be right. Then ownership of capital would be a zero-sum game and society would be indifferent whether the shares were owned by Gates/Buffett or anyone else. What you’re ignoring is that in a free society, opportunities for capital investment are not limited.

Thus, every dollar of investment used to purchase shares sold by Gates or Buffett is a dollar that didn’t get invested in some other venture capital fund or shares of stock in another company.

Consequently, the loss of jobs arising from the reduction in downstream innovation is just as real (albeit invisible since the government only counts jobs actually created as opposed to jobs that could have been created).


9 posted on 06/18/2010 8:48:49 AM PDT by DrC
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To: SeekAndFind
Who is going to go to?

The UN?

Tin-horn African dictaors?

Nameless, faceless, clueless bureaucracies?

The people who know how to earn it are the people who know best how to use it.

10 posted on 06/18/2010 8:58:41 AM PDT by E. Pluribus Unum ("The only stable state is the one in which all men are equal before the law." -- Aristotle)
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To: SeekAndFind
to pledge at least half their net worth to charity,

instead of giving it to charity, they should divide their capital among all adults in the U. S. so that in the end, every adult could be a capitalist.

11 posted on 06/18/2010 8:58:54 AM PDT by mjp (pro-{God, reality, reason, egoism, individualism, independence, limited government, capitalism})
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To: mjp

Pay down the national debt.


12 posted on 06/18/2010 9:02:57 AM PDT by Paladin2
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To: DrC
If opportunities for capital investment were limited, you would be right. Then ownership of capital would be a zero-sum game and society would be indifferent whether the shares were owned by Gates/Buffett or anyone else. What you’re ignoring is that in a free society, opportunities for capital investment are not limited.

Thus, every dollar of investment used to purchase shares sold by Gates or Buffett is a dollar that didn’t get invested in some other venture capital fund or shares of stock in another company.

Consequently, the loss of jobs arising from the reduction in downstream innovation is just as real (albeit invisible since the government only counts jobs actually created as opposed to jobs that could have been created).

Sorry, DrC, but I don't follow you.

Let's assume that, e.g., Bill Gates' total assets amounted to 2 billion shares of common stock in Microsoft. That is equivalent to approx. $50 billion (at $25 per share). Now suppose that he took those 2 billion shares and simply gave one share to each of 2 billion people. Unless they immediately attempted to sell those shares (or the market feared that they might), it would have no discernible effect upon share price.

Instead of one person owning 2 billion shares, 2 billion persons would own one share each.

They would collect their quarterly dividends. Some of them would divest themselves of their share eventually. Others might acquire more shares.

Now, of course, there are second-order effects here that I have not touched upon, but on the face of it, I believe that my logic is sound.

What am I missing?

Regards,

13 posted on 06/18/2010 9:06:11 AM PDT by alexander_busek
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To: mjp
instead of giving it to charity, they should divide their capital among all adults in the U. S. so that in the end, every adult could be a capitalist.

Every adult U.S. citizen is already free to be a capitalist, if he wants.

Regards,

14 posted on 06/18/2010 9:07:33 AM PDT by alexander_busek
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To: DrC

See the second part of my reply.

The people who receive the money distributed spend it right away. It is received back by the owners of capital, who re-invest it.


15 posted on 06/18/2010 9:08:46 AM PDT by proxy_user
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To: SeekAndFind
These two are the very definition of hypocrites. They come out in support of the estate tax for everyone else then they escape the tax by giving most of their money to charity.

If they wanted to be good citizens, they'd open an account with me and I'd make sure they invested in good, job-producing endeavors...like making sure every f-ing Democrat in public office is replaced by a conservative.

16 posted on 06/18/2010 9:08:47 AM PDT by Snardius
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To: proxy_user

No the article does not have a flaw. Your reasoning is flawed. In your example you start with TWO People with a billion dollars each (billion A just has his in stock). After billion A gives the money away that he received from billion B buying his shares you now have only ONE person with a billion dollars. Billion A is gone. It’s been spent on charity and is no longer available for investment and generation of more wealth.


17 posted on 06/18/2010 9:13:26 AM PDT by precisionshootist
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To: Paladin2
Pay down the national debt.

Not without Constitutional restraints on deficit spending. Lowering the debt now just gives the Big Spenders more headroom in which to work.

We are thisssssClose to actually achieving a major slowdown in the eternal creep toward ever-larger government. That is occurring because the US government, and every other government, is running out of debt capacity. When the world's investors finally get spooked (and it's not far away) and they start demanding 8-10 per cent annual yields on Treasury bills because they smell oncoming default, that will finally put the brake on government spending. Nothing else seems to work.


18 posted on 06/18/2010 9:16:48 AM PDT by Nick Danger (Pin the fail on the donkey)
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To: precisionshootist

See the second part of my reply. What do the charities do with the money? They go out and spend it!

Some businessman receives the money they spend almost immediately, and the capital value of his business grows through retained earnings. The charities who received the money are left with nothing.


19 posted on 06/18/2010 9:22:55 AM PDT by proxy_user
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To: Nick Danger
When the world's investors finally get spooked (and it's not far away) and they start demanding 8-10 per cent annual yields on Treasury bills because they smell oncoming default,

If the bond vigilantes get even a whiff of default, you'd be praying that it's only as low as 8-10%.

20 posted on 06/18/2010 9:26:20 AM PDT by Snardius
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To: Nick Danger

There are two ways out of this crisis for the Fed. Inflate our way out or Default. Prices are still falling. Soooo....
I’m betting on ‘default’. It will not be pretty but just consider the amount of taxes that will be necessary just to service the debt. ($20T by 2015 -CBO)
What seems to be overlooked by DC is that the ‘small people’ out here know what happens when the party’s over. The bill is due. You cannot continually put the balance on another credit card.
Our taxes have already gone up without any action from DC.
There’s no such thing as a free lunch.


21 posted on 06/18/2010 9:31:24 AM PDT by griswold3 (Barack Obama’s First Law of Leadership: “I just work here.”)
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To: proxy_user

“See the second part of my reply. What do the charities do with the money? They go out and spend it!”

Buying a billion dollars worth of food or consumer goods does not have the same effect as using the billion dollars in a capital investment which in turn generates MORE wealth.

There is a big differance between the two. One is spending the other is saving just as the article says.


22 posted on 06/18/2010 9:38:27 AM PDT by precisionshootist
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To: DrC
(albeit invisible since the government only counts jobs actually created as opposed to jobs that could have been created).

No, they count jobs actually created PLUS imaginary phantom jobs saved when they need to.

23 posted on 06/18/2010 9:41:10 AM PDT by VRWCmember
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To: Paine in the Neck

The disposition of Gates’ and Buffet’s wealth should be entirely at the discretion of Gates and Buffet. It’s really none of my business — or that of Forbes magazine — what they do with it.

From what I’ve read, Gates’ money is dedicated to proposition that “the principle that every human life has equal worth” and most is directed at education and 3rd world disease treatment and prevention.. This doesn’t seem so bad to me. He’s also reportedly set up the Gates Foundation to liquidate so that it does not become a perpetual foundation run by effete dilettantes.

Buffet is a pro-abortion and is giving much of his wealth to the Gates Foundation. This almost certainly influences the Foundation’s activiities. I’m not happy about this, but it’s their money and none of my business.


24 posted on 06/18/2010 9:58:39 AM PDT by Skepolitic
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To: alexander_busek

“Instead of one person owning 2 billion shares, 2 billion persons would own one share each.”

If Bill Gates wants to give away his shares, I have no problem with that. But that’s not what he’s doing. Instead, he’s essentially taking $50B that he COULD have used to provide capital to Microsoft or any other firm he wanted and instead giving that money away to save lives in Africa and elsewhere.

Someone else pointed out that when Gates sells his stock, someone else purchases it, so there’s no net capital loss to Microsoft. I was merely pointing out that there IS a capital loss to the economy overall because a dollar spent on consumption is not the same as a dollar invested in innovation etc. ESPECIALLY if the consumption being subsidized is overseas.

The essential point of the original article is that from the standpoint of improving welfare, Bill Gates would be wiser to invest his $50B in capital (either in U.S. or other countries), as this will grow the economy/create jobs/raise living standards far more than the temporary boost that comes from feeding today’s hungry children. Capitalism has repeatedly been demonstrated to be the single most potent approach to poverty reduction ever devised. It’s too bad that people like Gates feel the need to apologize for their wealth or “atone” for it by giving it away. Investing it back into the economy is arguably the best possible use of his wealth in terms of welfare improvement.


25 posted on 06/18/2010 10:05:58 AM PDT by DrC
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To: DrC

I Agree.

This discussion is very much like the old saying. Give a man a fish, you feed him for a day. Teach a man to fish, you feed him for life.

Warren and Bill are giving a bunch of men a fish, not teaching them.


26 posted on 06/18/2010 11:06:48 AM PDT by precisionshootist
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To: proxy_user
"It may be new rich people rather than old billionaires, but it will still be rich people."

That is a very good point that many people miss.

But you too miss a point, I think. The above millionaires have not just stakes but very major stakes in their companies. It is their vision that has built those companies. When the shares go to "regular" "rich" people, that vision may no longer be there. In sum, it is better when capital is controlled by visionaries rather than government or less visionary private owners. That is exactly their problem: they may be visionaries in their respective fields but remain quite myopic when it come to social issues.

A side note: how much do Buffet's and Gates' charities spend in the U.S. -- one hundred dollars or two hundred?

27 posted on 06/19/2010 5:49:34 PM PDT by TopQuark
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