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Unlike corporations, people don't hoard their money. They spend it. So this is a good thing for everyone long-term.
by rcarrigan87 10y ago
Unlike corporations, people don't hoard their money. They spend it. So this is a good thing for everyone long-term.
- deciplex 10y agoI like how the report talks about political instability and risk as though this is a thing that "just happens". I guess it didn't occur to anyone working on that report, that maybe the piss-poor situation the middle and working classes find themselves in might contribute somewhat to that political instability? I mean, I know people who work in research in finance - they aren't this stupid. I don't know any that work at Credit Suisse, though. Yeah, of course a more equitable distribution of resources will be better for everyone long term. If you work in research at Credit Suisse and are too stupid to grasp the purely economic case, at least try working out how a Reign of Terror will impact corporate profits, maybe.
- nickff 10y agoUnless someone is literally putting their money under the mattress, the money is in a bank which is loaning most of it out, so the money is almost never actually "hoarded".
- deleted 10y ago[deleted]
- jackvalentine 10y agoOr its in a non-productive asset like being parked in vacant real estate in a world city or any number of other non-productive assets that remove it from circulation.
- nickff 10y agoThe money is not "parked" in the real estate, it has been transferred to the seller.
- nitrogen 10y agoBut the ongoing value derived from use of the real estate is lost. If someone were living there, both the seller and the local economy would benefit -- the seller got paid for the real estate, and the local economy benefits from the resident's own economic activity.
- prostoalex 10y agoAs long as property taxes are paid on time, the local economy has probably extracted bulk of renumeration from that property. In the age of giant corporate retail chains and Amazon, how much of the locals' spending goes towards their local butcher, seamstress, blacksmith, cobbler, milkman and vacuum repairmen anyways?
- jackvalentine 10y agoThat's true and I chose a poor example.
- sharemywin 10y agoincluding the trillion dollars the top 5 firms are holding offshore?
- ojbyrne 10y agoWhich is in a foreign bank, many of which have U.S. subsidiaries. What's your point?
- tobltobs 10y agoThat they are hoarding money, not loaning it.
- prostoalex 10y agoMost US-traded companies prefer to limit their foreign currency exposure and keep their offshore assets in USD by buying short-term US government debt, so in effect they are loaning it.
- sharemywin 10y agoexcept since 2008 business loans have only go up 400b and consumer loans are flat or have gone down some. The problem with the idea that banks loan out what isn't spent is wrong because they have underwriting and can't just loan it to credit unworthy borrowers. don't get me wrong it would have caused inflation and a bigger stock bubble if more money flowed into the US. But it's my theory why we haven't seen the massive inflation predicted from quantitative easing.
- rcarrigan87 10y agoGreat, so the banks can loan more money to people who can't afford anything.
- joobus 10y agoExcess reserves are near a record high: https://research.stlouisfed.org/fred2/series/EXCSRESNS https://research.stlouisfed.org/fred2/series/EXCSRESNS Banks are just sitting on their cash. Also, the Fed is paying the banks not to loan out this money, currently 0.5%.
- toomuchtodo 10y agoThe solution is negative interest rates for banks and corporations, positive interest rates for individuals. Forces business investment (or dividends), but promotes savings for individuals.
- orian 10y agowhat if us-corps keep most money offshore?
- toomuchtodo 10y agoAren't most first world central banks going negative interest rates already? I guess they could always try to park cash in Venezuela.
- skylan_q 10y agoIt's actually higher prime interest rates. Sure, people can borrow at 3% interest (or whatever is provided) but why would banks want to necessarily want to loan out at such a low interest rate?
- toomuchtodo 10y agoI don't understand the question. Are you asking why would banks use negative rates?
- skylan_q 10y agoPretty much. What's in it for the banks to loan out at incredibly low rates? Remember that there isn't only an aversion to high interest rates for people trying to secure loans. The banks want higher interest rates to make loaning worthwhile.
- prostoalex 10y agoThat is one of the economic maxims (Phillips curve is another one) that used to be true, but are no longer axiomatic. Availability of cheap revolving credit (ironically) distorts the spending cycle - people spend when times are tough and deleverage their debt when their wallets get fatter, e.g. http://www.usatoday.com/story/money/markets/2016/04/16/why-low-oil-hasnt-helped-economy/83035110/ http://www.usatoday.com/story/money/markets/2016/04/16/why-l...
- rcarrigan87 10y agoAs with all economic data, hard to tell what is what. Coming out of a horrible recession, I have to think a lot of people are still trying to get their head above water, which could be preventing more discretionary spending.