Trickle up works. You hand rich people money and they sock it away in investments that they sell to other rich assholes. Give that money to poor people and they immediately spend it. Yes, often on stupid shit, but then it ricochets around the economy before it ends up in the hands of the rich where they sock it into investments.
Investments aren't secret caves where you store your treasure for no one else to have. If the investments aren't producing value, they tend to lose value in real terms. The best investments are the ones that benefit the economy. Stupid investments is handing over cash for old artwork.
There is not a dichotomy between "socking it away in investments" and "immediately spending it". The difference is the future value of what was purchased.
I'm not saying that isn't the case but money socked away in stock does VERY little to stimulate the economy. It is cash extended on speculation to someone who most likely is just going to trade it for a different slip of paper.
Spending money does stimulate the economy. Look at what's happening to our economy now. We've adjusted tax and economic policy to benefit the accumulation of wealth for the rich and monopolizing of business power and our economy is starting to grind to a halt because of it.
Wages have stagnated while profits have gone through the roof and the lower class has less and less while the rich gather more and more.
I am absolutely baffled by your assertion that giving money to businesses to grow does very little to stimulate the economy. Do you think the stock market is just a bunch of Rich Uncle Pennybags monopoly men incestuously trading virtual slips of paper back and forth to each other?
I agree with you that growing wealth inequality is a problem, but I don't think we agree on the cause and effect, or even how to measure it. Our economy is certainly not grinding to a halt - quite the opposite. One of the many problems is that the benefits of our strong economy are not put to "equitable" use like it could. For example, by investing your money in growing businesses.
Businesses have to reinvest that money back into their business endeavors to make money invested in them grow the economy. Sometimes that endeavor is a poor choice - look at most investors in the cannabis industry, they lost out after the products the growers made couldn’t get sold because of mishmashed regulation and legalities and logistics and you name it they have problems recouping the investment costs.
Businesses and investments can stimulate the economy the wrong way, too. Trying to commodify and cash in on a Covid vaccine via investing in companies both stimulated tech research AND selfish greed to control it. For profit. Businesses are in it for their own profit, not the economy’s profit. So yes, stock buybacks aren’t meant to “stimulate the economy” they’re meant to put power back in a company’s hands. IF, and I mean IF they decide to sprinkle their windfall on their money makers, aka employees, then we get a feel good news price about it to boost the share price. Where’s that article about Home Depot doing such?
Businesses don’t care about growing the economy, they care about growing their own profits by a margin of increase every quarter.
What’s really baffling is how often I see this “oh you think economics is just monopoly men with top hats and canes” strawman echoed when the person saying it fundamentally misunderstands why we even represent the rich as that in the first place.
I mean I don’t really understand this idea that corporations and the wealthy are this benevolent force that always want to do good by their actions. They want to make more money. That’s it.
I mean seriously, businesses can do whatever the fuck they want, so what do you think they’re gonna pick when faced with the option between more money and morals?
Except here’s the problem, you can point to one or two examples of capitalism working in your favor, and I could easily give you 100 examples of it completely fucking over everyone except the very same capitalists you idolize.
There are relatively few productive investments in general. Real estate, gold etc. are by definition not productive. But investing in, say Apple, doesn’t produce anything either. The money doesn’t go to the company to spend on R&D or a new product. It doesn’t help them make more stuff. It goes to some other investor, who will likely put it in another stock. Just because it’s called a productive asset, doesn’t mean that it functions as one.
The other thing is that trickle up definitely works. Giving money to people who will spend it, over people who will invest it (aka store away for later) is hugely beneficial to the economy as a whole.
It goes to some other investor, who will likely put it in another stock.
You're really underestimating the value of millions of participants in the market in moving resources around to more productive endeavors.
The other thing is that trickle up definitely works.
I don't disagree. It's the same type of market forces, just for a differently scaled "market". Eventually those resources, too, tend to gravitate towards the most productive/valuable usages (e.g., businesses), as valued by the individuals who send resources their way.
Am I underestimating? About 50% of all stocks owned by Americans are owned by the top 1%. About 60 % of Americans own stock. But the bottom 50% of those only own about 1% of the stock. On top of that, the majority of stock owners in the US own stock passively, through some sort of investment vehicle (like a mutual fund) meaning they use the stock market precisely as a form of money storage. In case of, say retirement savings that’s not necessarily bad. But the point still stands, that investments in the stock market are by and large unproductive as far as the real world economy is concerned.
Man, I really don't get it. Skeptics of capitalism want to seize the means of production, yet you don't have to seize them, because they're right here for sale and anyone with spare dollars can afford a slice of them. But here I'm being told that owning the means of production isn't good enough, because some people own more, and those who own less don't actively trade them.
Those investment vehicles like mutual funds are managed to a greater or lesser degree in such a way to reallocate resources to more productivity. Index funds have the feature that the allocation is based on what the rest of the market thinks, so you can think of it as passively leveraging the capital-maximizing decisions of those wealthy stock owners.
These actions are both helpful for the health of the economy as well as a great way to increase your own wealth.
Is the real problem that some people are richer than others? Do you see that as a critical flaw of "the system"?
I'm going to hedge this comment and tell you that I agree ahead of time with you that growing wealth inequality is a serious problem. I'm going to disagree ahead of time with you and guess that your proposal for making life fair will surely backfire and bring more problems than what it intends to fix.
Look, I am not arguing for or against capitalism. I like capitalism, I enjoy the perks of capitalism. It’s a flawed system but as far as i am concerned it’s the best we have. I am lucky enough to live in a place where wealth inequality is not yet that great, and market regulations are robust enough for the markets to work mostly properly. The point was that giving money to people who will primarily invest it, is in general not as useful for the economy as giving it to people who will have to spend it, because most investments, dispite their name are not as such productive and there are economically better things that money could be doing, as those “investments” are more akin to savings. So maybe I was unclear in my word choice.
As for my general solution to wealth inequality, I think a small wealth tax( probably about 0.5- 1% for the very rich (>100 mio $ in current asset value) and taxation of all capital gains as income (and therefore progressively) would go a fair way. I am sure there are other things you could do. Raising the top tax rate is probably not as effective, but countries like Germany or the UK had significantly higher top tax rates during their most equitable eras in the 60ies and 70ies. So there is some historical precedent. Inheritance tax could also be a reasonable. As for the US, I would also think something should be done about the cost of education and healthcare that are disproportionately high and potentially caused by regulatory failure.
Did you really say stupid investments is handing over cash for old artwork?
Are you referring to NFT bullshit or actual historical artwork? Artwork is unique. Stock shares aren’t. Artwork is generally complete once it’s made. Companies get bought out and gutted all the time.
Also, money spent is back in the economy, trading hands. Money tied up in stocks is unavailable for growth elsewhere. Future value means shit when trillions of dolllars is being sat on and people are broke and companies would rather sit on those dollars to see them rise vs create the items of value people need without a rabidly bloodthirsty capitalistic mindset, ala gun manufacturers.
This is the part I don't understand. Some other commenters in this thread made similar statements.
Money can be tied up for an individual, but not for where that money lands. If you buy a stock, that money is tied up for you, but is now available for the seller. If you sell your stock, you have money available, but for the buyer it's now tied up. When you put your money in a bank, part of your money is loaned out. When a company sells stock, they now have money to uses for the business to do businessy things. Money doesn't sit still. If you stuff dollars under a mattress, you're losing value on it.
It doesn't change the argument, but the artwork I was referring to was real, physical, actual artwork, not NFT scams. Some people like to "invest" in artwork. It's dumb for a few reasons, but that doesn't matter here. The money is still not tied up, because now it has a new owner.
Mmm, I disagree. Money is absolutely sitting still; its being offloaded to offshore tax havens where it needs to not be utilized lest it re-enters the taxable income world.
Artwork doesn’t have an intrinsic value like a company’s numbers do. Art value is subjective, and it’s the end goal for many with wealth beyond their needs. You could even argue our society is art driven, particularly if you look back in eras where we had actual gold coinage in circulation. Entire societies were built because a king or prince wanted to impress a love. Entire nations have been destroyed over the metal resources required to mint currency for business, and each new ruler would fashion their own likeness into their currency. The history of money is fascinating enough a subject that it should be taught in school, as it has, along with geographical accessibility and control, largely shaped our society’s physical locations and purpose of production as a whole.
Probably the same economic advisor Brandon Johnson listens to with when he used "helping the black owned-economy" to justify spending $30k annually on hair-styling and make-up.
huge swaths of the population have been conditioned to simp against their own best interests. it's directly responsible for the situation we find ourselves in.
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u/getMeSomeDunkin 5d ago
"but this helps the economy!"
Man this thread is all fucked up. Where did these people come from.