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One point that you are missing here is that some people have stockpiled wealth and power, and have no intentions of using it to stimulate liquidity in the marke

by codexon 17y ago

One point that you are missing here is that some people have stockpiled wealth and power, and have no intentions of using it to stimulate liquidity in the markets. How much money does a billionaire need to live from day to day? The same as any other normal person. Yes, they are likely to consume more luxury goods, but in the end, it does not cover the fact that the more money you have, the easier it is to get even more. For examples of this you need to look no further than your local bank and see what premium rates they offer for people with high balances. Index funds offer ultra low expense rates for people with a lot of money. With a large proportion of money, it becomes possible for you to manipulate the markets by buying out competition, and becoming a monopoly: which is arguably the equilibrium state for any free-market. The monopoly is the most profitable situation for any business, and this is at odds with society. So the more money you acrue, the higher your money/work rate becomes. This is a perverse incentive for the large corporation owners to not work as hard; and also to lay off workers during recessions. What sane company would be hiring when workers/consumers have less money to spend? And the less work that is put into the economy, the worse off the economy is. This cruel cycle is why the economy was in a deflationary spiral and why "Helicopter" Ben is printing money as fast as he can. This has a communist vibe, but in the end there is simply no argument that it is much better for the country to utilize the resources and wealth to stimulate the economy as a whole than letting a few people sit on it so they can get richer by doing nothing with it. The poor and middle class can't just create their own wealth because they don't own "the means of production" or the intellectual property horded by megacorps and protected by megacorp lawyers and lobbyists. It is analogous to not letting DeBeers sit on a stockpile of diamonds, except instead of diamonds, it is money, food, gas, homes, etc...

CWuestefeld 17y ago
I was going to ignore this as a "who cares" until I got to: in the end there is simply no argument that it is much better for the country to utilize the resources and wealth to stimulate the economy as a whole than letting a few people sit on it so they can get richer by doing nothing with it. Not only is it false that there's "no argument", but your statement is completely wrong. If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). But your statement that they're sitting on their wealth doing nothing with it is the biggest demonstration that you're off base. As far as I know, nobody rich is doing this. If they're stashing it under their mattress, I don't think they'd have gotten rich in the first place. If they've got it invested in stocks or bonds or even banks, then it's not idle and doing nothing. It's helping other people finance their businesses, buy houses, whatever. But it's definitely doing something useful. In fact, it's doing something so useful that the people using the money are willing to rent it from them. Contrast this to government spending, which according to Keynesian theory could be used by paying people to dig holes and fill them back in, so long as the government is doing this. In the Keynesian model (that Obama and the rest of the government is using), the money does not get used productively. When the rich guy rents his money to someone willing to pay for it, it's much more likely to find good use.
- codexon 17y ago
  If they're stashing it under their mattress, I don't think they'd have gotten rich in the first place. If they've got it invested in stocks or bonds or even banks, then it's not idle and doing nothing. It's helping other people finance their businesses, buy houses, whatever. But it's definitely doing something useful. In fact, it's doing something so useful that the people using the money are willing to rent it from them. You are absolutely incorrect. They aren't doing this. They are pulling out of the US economy and putting them in Euros, gold, or Chinese factories. Did you somehow forget the complaints of a credit crunch that banks weren't lending any money? Do you really think they are dumb enough to keep investing in the US when dollars are being printed non-stop? If so you are way off base. If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). Then why aren't they the ones making the decisions if they are so correct? And the government doesn't simply just spend money for the sake of spending it. It usually (not always of course) goes into projects that benefit the public for decades such as better roads, power, and homes. And Keynesian model being wrong because of the 70's? That is simply naive. Inflation was due to fears of Opec increasing oil prices and moving off the gold standard. Inflation was already rising when Nixon implemented his limits on wage/price increases. US Debt as a fraction of the GDP was even decreasing during this period. http://g-ecx.images-amazon.com/images/G/01/askville/4889596_8620368_mywrite/us_debt_from_1940.gif http://g-ecx.images-amazon.com/images/G/01/askville/4889596_... Describing this as Keynesian is absolutely inane.
  - CWuestefeld 17y ago
    Inflation was due to fears of Opec increasing oil prices That would depend on your understanding of inflation. The monetarist views, which it seems to me have proven themselves out most successfully in the real world, say that nothing of the sort can happen. Inflation is caused by one thing, and that's an increase in the money supply. http://en.wikipedia.org/wiki/Inflation#Monetarist_view http://en.wikipedia.org/wiki/Inflation#Monetarist_view and moving off the gold standard Well, yes, but that's precisely the point. The end of Bretton Woods was already a done deal by the time we're talking about. We were well into the era that the Keynesians though they could play games "stimulating" the economy by injecting money, bringing down unemployment by so doing. The fact that this didn't achieve their goals is exactly what I was talking about, and one of the reasons you should be listening more to the Monetarists like Friedman, rather than to Keynes.

by codexon 17y ago

CWuestefeld 17y ago

I was going to ignore this as a "who cares" until I got to: in the end there is simply no argument that it is much better for the country to utilize the resources and wealth to stimulate the economy as a whole than letting a few people sit on it so they can get richer by doing nothing with it. Not only is it false that there's "no argument", but your statement is completely wrong. If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). But your statement that they're sitting on their wealth doing nothing with it is the biggest demonstration that you're off base. As far as I know, nobody rich is doing this. If they're stashing it under their mattress, I don't think they'd have gotten rich in the first place. If they've got it invested in stocks or bonds or even banks, then it's not idle and doing nothing. It's helping other people finance their businesses, buy houses, whatever. But it's definitely doing something useful. In fact, it's doing something so useful that the people using the money are willing to rent it from them. Contrast this to government spending, which according to Keynesian theory could be used by paying people to dig holes and fill them back in, so long as the government is doing this. In the Keynesian model (that Obama and the rest of the government is using), the money does not get used productively. When the rich guy rents his money to someone willing to pay for it, it's much more likely to find good use.

codexon 17y ago
If they're stashing it under their mattress, I don't think they'd have gotten rich in the first place. If they've got it invested in stocks or bonds or even banks, then it's not idle and doing nothing. It's helping other people finance their businesses, buy houses, whatever. But it's definitely doing something useful. In fact, it's doing something so useful that the people using the money are willing to rent it from them. You are absolutely incorrect. They aren't doing this. They are pulling out of the US economy and putting them in Euros, gold, or Chinese factories. Did you somehow forget the complaints of a credit crunch that banks weren't lending any money? Do you really think they are dumb enough to keep investing in the US when dollars are being printed non-stop? If so you are way off base. If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). Then why aren't they the ones making the decisions if they are so correct? And the government doesn't simply just spend money for the sake of spending it. It usually (not always of course) goes into projects that benefit the public for decades such as better roads, power, and homes. And Keynesian model being wrong because of the 70's? That is simply naive. Inflation was due to fears of Opec increasing oil prices and moving off the gold standard. Inflation was already rising when Nixon implemented his limits on wage/price increases. US Debt as a fraction of the GDP was even decreasing during this period. http://g-ecx.images-amazon.com/images/G/01/askville/4889596_8620368_mywrite/us_debt_from_1940.gif http://g-ecx.images-amazon.com/images/G/01/askville/4889596_... Describing this as Keynesian is absolutely inane.
- CWuestefeld 17y ago
  Inflation was due to fears of Opec increasing oil prices That would depend on your understanding of inflation. The monetarist views, which it seems to me have proven themselves out most successfully in the real world, say that nothing of the sort can happen. Inflation is caused by one thing, and that's an increase in the money supply. http://en.wikipedia.org/wiki/Inflation#Monetarist_view http://en.wikipedia.org/wiki/Inflation#Monetarist_view and moving off the gold standard Well, yes, but that's precisely the point. The end of Bretton Woods was already a done deal by the time we're talking about. We were well into the era that the Keynesians though they could play games "stimulating" the economy by injecting money, bringing down unemployment by so doing. The fact that this didn't achieve their goals is exactly what I was talking about, and one of the reasons you should be listening more to the Monetarists like Friedman, rather than to Keynes.