Is Passive Income The Answer?
Summary
TLDRIn this episode of Gary's Economics, Gary delves into the concept of passive income, explaining how it's not just about making money without working but is deeply tied to wealth distribution. He discusses the current trend of passive income being marketed heavily, particularly on platforms like TikTok, and how it often involves borrowing from the rich to buy assets and rent them to others. Gary argues that if wealth were more evenly distributed, everyone could enjoy a comfortable life funded by passive income. He concludes by advocating for higher taxes on the rich to redistribute wealth and allow ordinary people to own more, thus achieving a more equitable society.
Takeaways
- 💼 Passive income is a trend where individuals earn money without actively working, allowing their money to work for them.
- 🏭 Most goods and services produced are consumed by society, with some going to workers as payment and some to asset owners as passive income.
- 💰 The concept of passive income is tied to who owns the assets in the economy, as they receive a portion of the annual production as payment for ownership.
- 🏠 Wealth, such as real estate and natural resources, is often owned by a few, leading to a concentration of passive income among the wealthy.
- 📈 There's a form of passive income that involves borrowing money to buy assets like housing and renting them out, effectively managing assets for the rich.
- 🔄 The script suggests a feudal-like system where the rich own everything and pay others to manage their assets, creating a hierarchy based on proximity to wealth.
- 🌐 It's possible for everyone to have passive income if wealth and resources are more equitably distributed, allowing ordinary people to own a share of their country's wealth.
- 💔 The current trend is wealth accumulation by the rich, leading to reduced passive income and increased financial struggles for the middle class and poor.
- 🏦 The script argues for increased taxation on the rich to redistribute wealth and allow ordinary people to own their homes and a portion of the stock market and natural resources.
- 🌟 The ultimate goal is a more equal society where everyone can benefit from passive income, living comfortable lives without excessive labor.
Q & A
What is passive income according to the video?
-Passive income is the money generated without actively working for it, typically from owning assets that produce returns such as rent, interest, and profits.
Why is passive income a trend on the internet?
-Passive income is a trend because it's seen as a smart way to make money without constant work, allowing for financial freedom and flexibility.
How does the speaker describe the distribution of goods and services in society?
-The speaker describes that everything produced is consumed by someone, with some going to workers as payment for their labor and some to people who own assets as passive income.
What role do assets play in generating passive income?
-Assets, such as property, businesses, and natural resources, play a crucial role as they are owned by individuals and generate income for them without requiring additional work.
What does the speaker imply about the current state of wealth ownership?
-The speaker implies that wealth ownership is increasingly concentrated among the rich, leading to a disparity where the majority of people do not own significant assets.
How does the concept of passive income relate to the idea of wealth distribution?
-Passive income is directly related to wealth distribution, as it highlights who owns the assets in an economy and therefore who benefits from the income they generate.
What is the alternative view of passive income presented in the video?
-An alternative view presented is that some people market passive income as borrowing money to buy assets like housing and renting them out, essentially managing assets for the very rich.
What does the speaker suggest about the feasibility of everyone having a passive income?
-The speaker suggests that it's feasible for everyone to have a passive income if wealth and resources are more evenly distributed, allowing people to own assets that generate income.
What does the speaker propose as a solution to increase passive income for ordinary people?
-The speaker proposes increasing taxation on the rich to redistribute wealth and allow ordinary people to own assets, thus generating passive income.
How does the speaker connect passive income to the broader economic and social issues?
-The speaker connects passive income to economic and social issues by discussing wealth distribution, the concentration of assets, and the impact on people's ability to afford basic necessities like food and housing.
What is the potential outcome if wealth distribution shifts further towards the rich, as mentioned in the video?
-If wealth distribution continues to favor the rich, the potential outcome is that ordinary people may struggle to afford basic needs, leading to a situation described as 'passive slavery' where they must work excessively to cover basic living costs.
Outlines
💼 Understanding Passive Income
This paragraph delves into the concept of passive income, which has become a popular trend on the internet. It emphasizes that the smart way to make money is through passive income, which is income generated without active work. The speaker explains that in an economy, goods and services are produced and consumed annually, with some people consuming more luxuriously while others live more modestly. The paragraph highlights that while workers earn income from their labor, there are individuals who earn money passively, primarily through asset ownership. The speaker discusses the importance of wealth and how most people only own their homes, while significant wealth in society is owned by a few. The paragraph concludes by pointing out that passive income is essentially the income that goes to the owners of assets, and it raises the question of who owns the economy and its assets.
🏛️ Wealth Distribution and Passive Income
The second paragraph expands on the idea that passive income is tied to wealth distribution. It suggests that everyone could potentially have a passive income if wealth were more evenly distributed. The speaker argues that we live in a wealthy world with abundant resources, and it's possible for ordinary people to own a share of these resources. The paragraph critiques the current trend of wealth being concentrated in the hands of the rich, leading to a decrease in passive income for the majority. It discusses the negative consequences of this concentration, such as reduced homeownership and increased debt. The speaker advocates for higher taxation on the rich to redistribute wealth and enable everyone to have a comfortable life with passive income. The paragraph concludes with a call to action to reclaim wealth and create a more equal society where everyone can live a good life.
Mindmap
Keywords
💡Passive Income
💡Assets
💡Wealth Distribution
💡Ownership
💡Economic Inequality
💡Debt
💡Taxation
💡Middle Class
💡Privatization
💡Feudal System
Highlights
Passive income is a trend that suggests making money without actively working.
Passive income is consumed by people who own assets, rather than those who work for their income.
The concept of passive income raises questions about who owns the economy and its assets.
Rent, interest, and profits are forms of passive income that go to asset owners.
A type of passive income involves borrowing money to buy assets and rent them out.
Landlords often act as estate agents for the rich, managing assets for them.
Passive income is tied to the idea of wealth distribution and who owns the country's resources.
It's possible for everyone to have passive income if resources are owned collectively.
Debt and debt interest are zero-sum forms of passive income, with payments between individuals.
The ownership of wealth is increasingly concentrated among the very rich.
Reduced homeownership and increased mortgage debt indicate wealth is moving away from the middle class.
Governments are losing assets and falling into debt, which affects citizens' passive income potential.
If everyone owned a fair share of the country's wealth, a comfortable life with passive income could be possible.
The current trend is towards wealth concentration, leading to potential 'passive slavery' for the non-wealthy.
To achieve passive income for all, wealth needs to be redistributed through increased taxation on the rich.
The speaker advocates for wealth redistribution to allow ordinary people to live comfortable lives.
Transcripts
Okay. Welcome back to Gary's Economics.
Today we are going to talk about passive income.
Okay. So passive income
is a big sort of trend on the internet.
The smart way to make money is to have passive income.
Don't work for your money. Generate passive income.
And I thought it would be nice to open up a little bit
and explain
what actually passive income
is from a broad economic perspective.
So the first thing to say is
we live in an economy and most of us work,
and a lot of stuff is produced every year.
A lot of goods and services are produced every year.
When I work, when you work,
we produce stuff, we make stuff.
And every year that stuff is consumed
by different people in society.
So some people consume an awful lot,
spend a lot of money, consume
a lot of goods and services, have a very luxurious life
and other people live very basic,
barebones, essential lives
where they live almost lives of poverty.
So what is produced and who consumes it?
Well, basically everything that is produced
every year is consumed by somebody.
And some of it goes to workers.
You know, you probably work a job
and you consume things.
For example, you live in a house and you will eat food,
and if you're lucky, you might get a holiday or two.
You might go to the pub, you might go to a restaurant.
Some of the stuff goes to workers, but a lot of people
get a lot of money that they don't work for.
This is their passive income, and they get to consume
more, basically.
And this passive income essentially
goes to the people who own the assets.
So we talk a lot on this channel about what is wealth.
If you don't watch that video, I strongly recommend it.
Most people never get to own
significant amounts of wealth
other than the house they live in.
Most people are quite preoccupied
to own the house
they live in because it's very difficult to do,
and they never get to own
a lot of the other forms of wealth
that exist in society.
But there are huge amounts of wealth
assets involved in our economy
and the production of the things we produce.
So most obviously
there are the shops on the high street,
there are the office blocks.
There's a lot of skyscrapers here,
office blocks people live in.
There's also the natural resources.
There's the supermarket,
there's all of these buildings
that are involved in producing things.
There's factories, there's farms,
and all of these are owned by somebody.
And basically every year
the things we produce,
some of it goes to
people who work as payment for their work,
and some of it goes to people who own
as payment for ownership. So
behind this concept of passive income
is basically the question of who owns our economy?
And whoever owns our economy,
whoever owns our assets,
they will receive a massive chunk
of what we produce as a society each year.
So here
we have the basic concept of passive income,
and it's related to a video
we did a few weeks ago
saying that rent, interest
and profits are all the same thing,
which is
there's a set of cash flows which go to owners
every single year.
And these owners,
they get cash flows from you
and that's their passive income.
But there is another type of passive income
which is very
heavily marketed, especially on things like TikTok,
especially American TikTok,
which is basically saying borrow a ton of money
buy assets, normally housing, and rent them out,
and then you can make a passive income.
So this is quite interesting, right?
You're actually making a passive
income by borrowing money from the rich
so that you can buy assets
and then rent them out to poorer people.
And I think this kind of exposes a little bit
how our economy works,
because here you have people who might themselves
not particularly be rich,
who are basically paying
to, kind of,
manage the assets of the very rich kind
of standing between the very rich and the rest of us.
And if you look at these landlords,
they're often themselves not extremely rich people,
but they're essentially basically,
they're working as estate agents for the rich.
And I think it kind of shows you
the kind of society we've built
where really the rich own increasingly everything.
And you basically get paid
based on your proximity to the rich.
So, for example, I was working for a large bank
and I was basically managing
huge amounts of money for the rich,
and I got paid a lot of money.
And then I can pay people to work for me.
In a sense,
you're kind of recreating this kind of feudal system
with the rich own everything,
and they pay a group below them to manage stuff
for them, who pay a group
below them to manage stuff for them.
But it all comes down basically to the same point
that passive income is about who owns the resources.
Which brings us to the question of is it possible
for everyone to get a passive income?
Well, in a sense, yes,
because these resources really exist.
So there are some kinds of passive incomes
which are inherently zero sum in society.
So for example, debt and debt interest.
This is about who is in debt and who's in credit.
It's payment from one person to another.
But these resources they do really exist.
You know,
there is an enormous amount of productive capital.
You know, there's a massive stock
market out there which you could own some of.
And they're all of these buildings and properties
which you could own somehow. So
I think in reality,
the thing to realise is we live in a very rich country,
in a very rich world with a lot of real resources,
and you could own some of that.
I think people sometimes see me
calling for taxation of the rich
and think that I'm
some kind of communist,
but what I want is for you to own your own house
without a massive mortgage.
And also I want you to own
a big chunk of the stock market.
I want you to own
a big chunk of the farmland or the natural resources.
I want you,
the ordinary
working people of this country, Britain or whatever
country you’re in, to own the wealth of your country.
And if you do that,
then we can all have a passive income.
We can all live lives like, you know,
I am somebody who has a lot of wealth
and I live off my passive income.
And if I chose to stop working, I could stop working.
I could live off of that.
If we all had the passive income,
then we wouldn't have to work so hard
because we own the properties we're in and we’d
own some of the wealth of our countries.
And we’d live relatively comfortable lives.
But if you look at what's actually happening
to the ownership of wealth,
it's aggressively
being sucked away from the middle class.
You can see that in terms
of reduced homeownership rates,
much higher levels of mortgage debt,
it's being pulled away from the government.
You can see that in terms of government
loss of assets, privatisation of government assets
and the government falling into debt,
and it's being held by the very rich.
What that means is
you're losing a wealth, government's losing a wealth,
and you are losing your passive income,
and you end up in kind of this situation
of the opposite of passive income,
which is not only do you not have a passive
income and ownership of the stock market,
you don't even own enough
to live in a house and to eat food.
You end up in a kind of
passive slavery as you will,
which is you don't own anything
and you need to work your tits off
just to live in a house and eat food.
So, passive income, it could be great.
You know, we could all own
a fair share of the country we live in,
and we could all live nice, comfortable lives where we
generate money just for getting out of bed
like Rishi Sunak does.
And I'm not saying we could all stop working,
but we could live much more comfortable lives.
And the only way that would happen
is if you own the wealth.
But the direction of travel, of wealth
is away from you and towards the rich,
which means not only will
you not have a passive income,
you will not have wealth.
You will not even be able to,
in many cases afford food, housing and energy.
So the end message is passive
income is about wealth distribution.
Passive income is about who owns the wealth.
Do you own it or do the rich own it?
If we get wealth into the hands of ordinary people,
you can live a very comfortable life
just like the rich do now.
If we push wealth in the other direction,
like we are doing,
then increasingly ordinary people will struggle
to feed their kids and turn the heating on.
So passive income, it's great.
The only way to do it is to get wealth into your hands.
The only way to get wealth into your hands
is to significantly increase taxation on the rich,
because they've got it,
and they're not going to give it to you any other way.
So passive income, let's get it.
Let's take the wealth back.
Let's live in a more equal country
where people can live good lives.
I'm going to push through it on this channel.
Keep supporting.
Tell your friends, tell your mum. Take care.
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