4 ms·

But rich people often save in the form of investments in companies, which leads to further growth.

by mortehu 10y ago

ricardobeat 10y ago
Those investments are usually a very small proportion of their wealth and very much the opposite of savings.
crdoconnor 10y ago
Not when there's no demand for the results of that investment they don't. They just pile it into existing capital assets instead (ever wondered why SF/NYC property is so expensive?).
coldtea 10y ago
Only if those companies can sell their stuff. And the majority of customers are not other rich people. It the middle/working class are getting a smaller share of the pie, then the market shrinks compared to what it could be with a more uniform distribution -- and everybody suffers.
e40 10y ago
Wow, I thought "trickle down" had been exposed for the BS it was, what, 20+ years ago?
- ende 10y ago
  You seem to not understand what 'trickle down' disparagingly refers to. The common contention with supply side economics isn't that savings == investment == growth, rather it is in regards to the implications of marginal tax rates on tax revenues.
  - TheOtherHobbes 10y ago
    If taxes are collected effectively, and offshore loopholes are closed aggressively, trickle down stops having any relationship to reality at all.
cheriot 10y ago
Not any more. 1. The market value of money available to invest is its price. 2. The price of money is the interest rate. 3. Interest rates have been extremely low for a very long time. Conclusion: the value of additional money available to invest is extremely low. That same money in the hands of the working poor will be thrown right back into the economy.
antisthenes 10y ago
Even if your statement were true (that you can pour money into something and magically achieve growth that is beneficial for both parties - I'd really like to see statistics on this or any sort of source really), the stock market is, for the large part, a zero sum game, unless an IPO is made. Rich people also invest in many other things that do not further sustainable growth and, as we can see from many corporations, many of them actually hoard cash or invest in bonds (which just fuel unsustainable consumption - hardly the growth that seems beneficial long term)
- mcguire 10y ago
  "...the stock market is, for the large part, a zero sum game, unless an IPO is made." An IPO takes some money out of the market, to the pre-IPO investors in the company, but a much bigger impact is made by dividends. Here's a thought experiment for you: A company, A[1], IPO's. It's investors take some cash, the rest goes into A. A is a fantastic success and eventually grows to be the largest company in the world, market-capitalization-wise. Then, like all things mortal, it begins to slide into obsolescence, obscurity, and eventually bankruptcy and dissolution. Throughout its lifetime, following the best advice of economists[2], it never pays a dividend. Anyone investing in A's stock is playing a quintessential zero-sum game: they're betting A will go up before it goes down permanently. [1] No offense to Agilent. [2] The goofy "double taxation" argument. The "it's no longer a growth company" argument (causing an immediate collapse in A's stock price). Etc.
- cloverich 10y ago
  > Even if your statement were true (that you can pour money into something and magically achieve growth that is beneficial for both parties - I'd really like to see statistics on this or any sort of source really) It feels like your calling the idea of economy in general a zero sum game. Can you elaborate?

But rich people often save in the form of investments in companies, which leads to further growth.

by mortehu 10y ago

But rich people often save in the form of investments in companies, which leads to further growth.

ricardobeat 10y ago

Those investments are usually a very small proportion of their wealth and very much the opposite of savings.

crdoconnor 10y ago

Not when there's no demand for the results of that investment they don't. They just pile it into existing capital assets instead (ever wondered why SF/NYC property is so expensive?).

coldtea 10y ago

Only if those companies can sell their stuff. And the majority of customers are not other rich people. It the middle/working class are getting a smaller share of the pie, then the market shrinks compared to what it could be with a more uniform distribution -- and everybody suffers.

e40 10y ago

Wow, I thought "trickle down" had been exposed for the BS it was, what, 20+ years ago?

ende 10y ago
You seem to not understand what 'trickle down' disparagingly refers to. The common contention with supply side economics isn't that savings == investment == growth, rather it is in regards to the implications of marginal tax rates on tax revenues.
- TheOtherHobbes 10y ago
  If taxes are collected effectively, and offshore loopholes are closed aggressively, trickle down stops having any relationship to reality at all.

cheriot 10y ago

Not any more. 1. The market value of money available to invest is its price. 2. The price of money is the interest rate. 3. Interest rates have been extremely low for a very long time. Conclusion: the value of additional money available to invest is extremely low. That same money in the hands of the working poor will be thrown right back into the economy.

antisthenes 10y ago

Even if your statement were true (that you can pour money into something and magically achieve growth that is beneficial for both parties - I'd really like to see statistics on this or any sort of source really), the stock market is, for the large part, a zero sum game, unless an IPO is made. Rich people also invest in many other things that do not further sustainable growth and, as we can see from many corporations, many of them actually hoard cash or invest in bonds (which just fuel unsustainable consumption - hardly the growth that seems beneficial long term)

mcguire 10y ago
"...the stock market is, for the large part, a zero sum game, unless an IPO is made." An IPO takes some money out of the market, to the pre-IPO investors in the company, but a much bigger impact is made by dividends. Here's a thought experiment for you: A company, A[1], IPO's. It's investors take some cash, the rest goes into A. A is a fantastic success and eventually grows to be the largest company in the world, market-capitalization-wise. Then, like all things mortal, it begins to slide into obsolescence, obscurity, and eventually bankruptcy and dissolution. Throughout its lifetime, following the best advice of economists[2], it never pays a dividend. Anyone investing in A's stock is playing a quintessential zero-sum game: they're betting A will go up before it goes down permanently. [1] No offense to Agilent. [2] The goofy "double taxation" argument. The "it's no longer a growth company" argument (causing an immediate collapse in A's stock price). Etc.
cloverich 10y ago
> Even if your statement were true (that you can pour money into something and magically achieve growth that is beneficial for both parties - I'd really like to see statistics on this or any sort of source really) It feels like your calling the idea of economy in general a zero sum game. Can you elaborate?