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We could give everyone a million making everyone a millionaire. But the value of that million will be pretty low or, put in another way, this will generate a lo
by LukaAl 10y ago
We could give everyone a million making everyone a millionaire. But the value of that million will be pretty low or, put in another way, this will generate a lot of inflation basically returning at the starting point.
The thing is that the dollar as no value by itself, its value derives from what it could buy. If the economic activity increases generating more value, the value of the dollar will increase. And that's not just theory, that's what happened in the last 20 years were a large number of population in developing countries were raised out of poverty. Check the Milanovic chart for seeing it [1].
The second problem is that it is not necessary that a society that has an unequal wealth distribution is also unjust. Suppose to have a society where everybody between 20 and 60 years old works for 1K a month. Before 20 years old the could use debt to leave, after 60 years old to their death (let's say 80 years old) they live with the savings. You would agree that this society is just, everybody makes the same amount of money. And yet there is inequality in wealth distribution. Youngs just before turning 20 will have a huge debt, people turning 60 will be, conversely, in the top 1%.
This example could sound naïve, replace it with student loan and pension funds and you will see that is pretty much the status of US economy.
[1] http://blogs.ft.com/off-message/files/2013/10/Change-in-real-income-between-1988-and-2008-at-various-percentiles-of-global-income-distribution-calculated-in-2005-international-dollars-Branko-Milanovic.jpg http://blogs.ft.com/off-message/files/2013/10/Change-in-real...
- kashkhan 10y agoYes there will be inflation but it will hurt the rich much more than the poor. Assuming the real world value of dollar goes down by 10x due to inflation, the median would still be the equivalent of $100k, while the top guys will go from $100B to $10B. As opposed to today's $2k median and $100B top.
- JLK_121416 10y agoIf bread becomes 10x as expensive, who will be hurt more?
- kashkhan 10y agoThe homeless guy has no money to buy a $3 loaf today. After he gets a million dollars he will have money to buy a $30 loaf of bread.
- JLK_121416 10y agoOk, but if the homeless guy gets $1.000.000, inflation will be much higher than 10-fold... Actually, I guess, the real losers would be middle class...
- bbcbasic 10y agoThe real losers will be those who can't manage their money.
- kashkhan 10y agoNo it won't. Assuming the stuff we have in US is the same, increasing the amount of money 10 fold will increase prices 10 fold. The difference will be that the ratio between the median and the top 0.1% will become more equitable.
- marcofloriano 10y agoI think that's why poor countries suffer so much. Our rulers don't understand basic economy and money. Look at Venezuela right now or Brazil. Our rulers think they can just print money and distribute it. But the truth is: money is just a tool, a way to get something. In your example, there's no point in giving a million dollars to the homeless, it would make much more sense to make the $3 loaf cost 0,3 cents. Now everybody can buy it. But if you just drop money in the lap of somebody that doesn't know how to produce value and change this value for money, those who produce the real value and owns the means to produce it will still making more money from those who can't produce. To solve that: take the homeless, provide basic care and opportunities for him start to produce value. Then the money will come.
- kashkhan 10y ago
- bbcbasic 10y agono. The rich have assets and usually leverage. Inflation will help them.get richer. People relying on cash lose out e.g. salaried employees
- kashkhan 10y agorich actually hold financial assets. the middle class owns houses, often half their wealth or more. Bill Gates doesn't live in a $40B house.
- bbcbasic 10y agoHe doesn't have $40B in cash.
- marcofloriano 10y agoNo, but he "lives" in a $40B company. Money is not an asset in it very essence. The financial instruments you put money in are. Money for money is pretty much useless if you can't convert it onto assets.
- robotresearcher 10y agoThat is totally crazy. If a billionaire becomes merely a millionaire, was he hurt more than the person who went from 50K to 5K and can no longer afford shelter and food?
- kashkhan 10y agoeverybody gets a million dollars. The person who had $50k, now has more than $105k assuming a 10x inflation. Everyone who had less than $100k would be richer.
- robotresearcher 10y agoSince rent and food becomes 10X more expensive, in the steady state anyone who makes less than the new cost of rent+food is worse off in the long term. The million dollar windfall gradually accretes to the people who charge rent and sell food.
- kashkhan 10y agoyes and we can adjust the crossover point as we see fit. that's how helicopter money works. In the limit you could give everyone a trillion dollars, and we'd all be equal. This is a thought experiment. My point is that wealth is real and meaningful and can be adjusted.
- LukaAl 10y agoI think you don't understand how money works. Probably in the short term, you are right even though empirical evidence suggests that in hyperinflation scenarios luxury good price increases less than other normal and necessity goods. In the medium term, you have to ask yourself who is able to capture this money. Not for sure the homeless that has no means to start with. Probably will be captured by the people that control directly or indirectly the manufacturing means. So the rich will be the one capturing most of the helicopter money. The reason is that money is not capital. Money by itself does not produce value. One of the most effective ways to increase social mobility is by investing in education because allows people to acquire social capital that they could invest to generate real capital and then money.
- deleted 10y ago[deleted]