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> Why don't I just invest it? You're assuming that investment actually happens. The widening wealth gap refutes that assumption; wealth is accumulating at the

by pdkl95 10y ago

> Why don't I just invest it? You're assuming that investment actually happens. The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. The poor recovery from the last few financial crisis is more evidence, "You can lead a bank to liquidity, but you can't make it lend." > If we give up gold, we can control inflation with maths Giving up the gold standard is orthogonal to the tax rate for capital gains. This is completely off topic. > See, this isn't as simple as you want it to be The economy is fantastically complex. It's also very unpredictable due to the inter-dependencies, even if some people like to pretend otherwise. Hubris doesn't make inherently unstable models[1] into a useful result. [1] "Understanding economics well impedes an understanding the economy." -- Yanis Varoufakis[2] [2] https://www.youtube.com/watch?v=L5AUAIzciLE#t=1355 https://www.youtube.com/watch?v=L5AUAIzciLE#t=1355

geocar 10y ago
> You're assuming that investment actually happens. Of course! I am assuming that investment actually happens because I put money in my savings account and I receive interest.
- Dylan16807 10y ago
  > I put money in my savings account and I receive interest. You do? I think you're an outlier there. Is that rate beating inflation? I count the .15% rate on my savings account as a joke, rather than any sort of meaningful interest.
  - geocar 10y ago
    You should talk to your bank: Mine offers a savings account that just beats inflation if I don't take a withdrawal that I can use for an emergency fund, and once you have an emergency fund set up you can put further savings into fixed-term accounts which actually generate "meaningful interest".
    - pdkl95 10y ago
      As a HN member, there is a high probability that you receive a comfortable salary. Please realize that this probably puts you in a position of (some) privilege when you interact with banks. For much of the country that lives paycheck-to-paycheck, paying rent and buying food/gas take priority over maintaining the minimum balance that is usually required in accounts that pay interest.
yummyfajitas 10y ago
The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. A widening wealth gap can only occur if the wealthy are investing their money and getting good returns on it. If the wealthy were hoarding their money, then it would not be growing and the wealth gap would shrink (since worker's wealth would increase, and the wealthy would consume some of their wealth).
- pdkl95 10y ago
  > A widening wealth gap can only occur if the wealthy are investing their money That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Why do you think interest rates have been kept so low? Regulators (e.g. the Fed, ECB) have been doing everything they can over the last few years to add liquidity into the market in the hope that it get banks to lend again. > If the wealthy were hoarding their money, then it would not be growing Life is rarely black and white. We're talking about people that have more than enough money to both invest as they desire and hoard a lot of money. The ability to do both increases as the wealth gap widens. > since worker's wealth would increase This is pure fantasy. How would worker wealth increase? They don't have enough money to invest, and they don't have the political power they once had. Worker wealth is going down as money accumulates in the hands of the few. > and the wealthy would consume some of their wealth Consumption (even large amounts) costs are insignificant when your wealth is sufficiently large.
  - yummyfajitas 10y ago
    That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Rich guy has wealth X. He invests it all and 1 time period later he has X(1+R). If the poor guy has worse investment opportunities (as Piketty claims), then the poor guy will have wealth only x(1+r). Here x < X is the poor guy's wealth, and r < R is the poor guy's investment growth rate. The gap grows by (1+R)/(1+r). In contrast, if the rich guy hoarded he would only have wealth X, while the poor guy would have x(1+r). The gap would shrink by 1/(1+r). If, as you postulate, the rich guy invests k of his wealth and hoards (1-k) then the gap would change at the rate (1+kR)/(1+r). More hoarding = smaller k = slower growth (or shrinkage) of wealth gap. Life is rarely black and white. Try doing the math and you'll see it sometimes is.

by pdkl95 10y ago

geocar 10y ago

> You're assuming that investment actually happens. Of course! I am assuming that investment actually happens because I put money in my savings account and I receive interest.

Dylan16807 10y ago
> I put money in my savings account and I receive interest. You do? I think you're an outlier there. Is that rate beating inflation? I count the .15% rate on my savings account as a joke, rather than any sort of meaningful interest.
- geocar 10y ago
  You should talk to your bank: Mine offers a savings account that just beats inflation if I don't take a withdrawal that I can use for an emergency fund, and once you have an emergency fund set up you can put further savings into fixed-term accounts which actually generate "meaningful interest".
  - pdkl95 10y ago
    As a HN member, there is a high probability that you receive a comfortable salary. Please realize that this probably puts you in a position of (some) privilege when you interact with banks. For much of the country that lives paycheck-to-paycheck, paying rent and buying food/gas take priority over maintaining the minimum balance that is usually required in accounts that pay interest.

yummyfajitas 10y ago

The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. A widening wealth gap can only occur if the wealthy are investing their money and getting good returns on it. If the wealthy were hoarding their money, then it would not be growing and the wealth gap would shrink (since worker's wealth would increase, and the wealthy would consume some of their wealth).

pdkl95 10y ago
> A widening wealth gap can only occur if the wealthy are investing their money That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Why do you think interest rates have been kept so low? Regulators (e.g. the Fed, ECB) have been doing everything they can over the last few years to add liquidity into the market in the hope that it get banks to lend again. > If the wealthy were hoarding their money, then it would not be growing Life is rarely black and white. We're talking about people that have more than enough money to both invest as they desire and hoard a lot of money. The ability to do both increases as the wealth gap widens. > since worker's wealth would increase This is pure fantasy. How would worker wealth increase? They don't have enough money to invest, and they don't have the political power they once had. Worker wealth is going down as money accumulates in the hands of the few. > and the wealthy would consume some of their wealth Consumption (even large amounts) costs are insignificant when your wealth is sufficiently large.
- yummyfajitas 10y ago
  That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Rich guy has wealth X. He invests it all and 1 time period later he has X(1+R). If the poor guy has worse investment opportunities (as Piketty claims), then the poor guy will have wealth only x(1+r). Here x < X is the poor guy's wealth, and r < R is the poor guy's investment growth rate. The gap grows by (1+R)/(1+r). In contrast, if the rich guy hoarded he would only have wealth X, while the poor guy would have x(1+r). The gap would shrink by 1/(1+r). If, as you postulate, the rich guy invests k of his wealth and hoards (1-k) then the gap would change at the rate (1+kR)/(1+r). More hoarding = smaller k = slower growth (or shrinkage) of wealth gap. Life is rarely black and white. Try doing the math and you'll see it sometimes is.