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If your money does not make you money, you are losing money. This article neglects inflation and monetary policy completely. There are more banks then ever, be
by maloney 11y ago
If your money does not make you money, you are losing money. This article neglects inflation and monetary policy completely.
There are more banks then ever, because it's more profitable to be a bank than ever before. We have had almost an entire decade of 0% interests rates allowing banks to make incredible sums of money.
- titzer 11y agoInflation is driven by monetary policy and both are symptoms of the exact same systemic problem he is describing. Inflation is a side-effect of increasing the money supply in order to generate more trade. More trade does not equate to more wealth or more goods or a higher standard of living.
- maloney 11y agoNot sure we are in disagreement. The cause is monetary policy. More money equals growth in the economy it also causes inflation, forcing people to protect their money by investing. This was not mentioned in the article. The need to make more money is a symptom not the cause.
- hammock 11y agoAccording to the view generally accepted in economics, more trade absolutely equates to more wealth. "In every voluntary exchange we give up something we value less than what we receive... and so does the person we are trading with. Trade benefits both parties and this benefit is an increase in wealth for both." http://www.fte.org/teacher-resources/lesson-plans/rslessons/the-magic-of-markets-trade-creates-wealth/ http://www.fte.org/teacher-resources/lesson-plans/rslessons/...
- titzer 11y ago1.) There are a whole lot of involuntary transactions in real economies. 2.) The argument only applies to perceived value, not wealth. Wealth is objective and measurable, e.g. the number of houses or cars or widgets in existence.
- titzer 11y ago3.) Not all trades are created equal. Producing durable goods which last longer than nondurable goods creates more long-term wealth. E.g. the difference between a dozen disposable razors versus one high-quality razor blade.
- marcosdumay 11y agoA superset of the trade creates more wealth. That is, for two otherwise equal societies, A and B, where B trades does all the trade that A does, and some extra trade, then B is richer. But merely "more trade" as in a bigger amount of money changing hands does not let one conclude anything.
- lifeformed 11y agoI don't think anyone's disputing the economics of it. It's more about the effects of having a culture driven by the need to accrue more wealth.
- maloney 11y agoI'm disputing the "culture" claim. The vast majority of people don't behave this way. Most people have a day job and live life on the weekend. Inflation forces people to invest (usually in the stock market) to avoid losing the value of their money in the future. Whomever manages their money is going to try to get the best return. This cycle makes available vast amounts of capital to be invested in something. This is a market reaction to inflation, with very little to do with culture.
- debacle 11y agoMost people are also not doing well financially. If you are not making money, you are losing money.
- lifeformed 11y agoI guess I'm not talking so much about the culture of everyday people, but rather the culture of companies and the people who run them. The "culture" aspect is that companies want growth for the sake of growth. Companies reinvest all their money so they can be bigger and get more money for their top stakeholders. What would an alternate culture look like? Maybe one where companies use their profits to enrich their existing employees lives, rather than use it to expand at a rate that keeps employee quality of life at the bare minimum, and executives at a maximum. Also maybe a culture where money is reinvested in the community, so the people and place you live in is enriched, rather than use that money to spread out like a virus and stamp your chain store in the middle of communities around the world (so that you can make more chains).
- eli_gottlieb 11y agoEmpirically-measured inflation has been near zero for almost a decade. It hasn't been high since the 1970s, if you're following the USD.
- tobias3 11y agoWeirdly enough banks don't seem to like 0% interest rates. We'll see if this is true when the bank driven FED raises interest rates with the next session.
- ctdonath 11y ago"Quantitative Easing" has created an enormous amount of value out of thin air. Well, not actually created - more like "teleports" value from all other existing earned money and imputed it upon the QE-created currency. This currency (being nothing more than a $0=-$1+$1 accounting trick) takes on value which wasn't earned, and is then given to the banks to do with as they will. Now with US$trillions being supplied from sources devoid of actual value creation (just imputation), there's a huge pile of money to get at without that pesky problem of actually earning it; banks and their well-connected cohorts proceed to route it into their bank accounts, making a few people fabulously wealthy under the current federal administration's cronyism. Meanwhile, people who actually earn their money see the associated value evaporate. Not substantively different from straight-up classic inflation via over-printing of currency, other than more accounting tricks to replace physical media with digital ledger entries tracking valueless debt.