6 ms·

This article is all kinds of wrong. It does not make an appreciable difference between savings, investing, and speculation. There is not a glut in savings but t

by zeahfj 10y ago

This article is all kinds of wrong. It does not make an appreciable difference between savings, investing, and speculation. There is not a glut in savings but there is a glut in speculation. This is due to a global war on savers. Savers are punished by artificially low interest rates, inflation of money supply, high taxes on earned income, and subsidies to speculators (e.g. various housing subsidies).

krona 10y ago
There is a colossal glut in savings at the global level. There are books which cover the topic in depth (e.g. The End of Alchemy) but instead I'll just link to the relevant Wikipedia article: https://en.wikipedia.org/wiki/Global_saving_glut https://en.wikipedia.org/wiki/Global_saving_glut
- zeahfj 10y ago
  Firstly, savings are not currency although they are used interchangeably with the assumption that currency is safe. This is not guaranteed to hold. Secondly, with rehypothecation the same currency is counted at least 9 times (M2 money supply). I'd contest that it's 50 to 100 times due mechanisms to get around the 10% reserve requirement - but this is difficult to explain. Thirdly, the increase in savings is dwarfed by speculation that the savings is backing and the resulting mix or risk reward when combined is still speculation. As in this is not unencumbered savings. And finally, the wikipedia link has a long list of references from people who are wrong about everything.
neolefty 10y ago
> artificially low interest rates I'm pretty sure this is market forces. Glut of savings --> low rates. Sure there are local exceptions and regulatory impacts, but those generally can't stand against the tide, so I'd say it's 95% natural. > inflation of money supply Depends on the currency, but in the case of USD, increasing the supply is necessary to avoid deflation, which would seem superficially good for savers, but would be disastrous for economic productivity. > high taxes on earned income ??? > subsidies to speculators (housing subsidies) I don't know much about this one, but I think most subsidies are homestead-y (to owner-occupiers and first-time buyers).
- zeahfj 10y ago
  Not market forces, see reserve bank interventions. Deflation is not disastrous for economic productivity but it is a side effect of economic productivity. Taxes on earned income vs capital is a regressive tax system on the working class and a subsidy to the upper class. Owner-occupiers and first-time buyer subsidies are subsidies to the speculators. Increase in house prices happen the moment such policies are implemented to capture the entire benefit. The policies are only implemented after speculators have invested and drive up housing prices. This only benefits speculators (who can also be first-time buyers).
  - neolefty 10y ago
    I should have read the article before replying! Indeed, the article seems blind to capital taxes, focusing instead on income tax. Wealth tax is a pretty alien concept in the US -- I think it would face strong cultural resistance, and cause even more wealth flight to tax havens. And yet, I can see how it would tackle a big part of the problems described here. It may need to be implemented in a coordinated global fashion to avoid cheating. You'd need the rich nations to do it, with a working enforcement mechanism that spans international borders. That, combined with cultural resistance, sounds hard.
    - zeahfj 10y ago
      No need for a global system in taxes to reduce wealth disparity. Just need to stop subsidising speculation. Due to agency costs (information asymmetry etc.) it's harder to make large returns on large amounts so the wealth levels off. The problem with a global system in taxes is that the taxes will just be used to subsidise more speculation.
- sullenpaladin 10y ago
  Interest rates are all directly or indirectly based on rates set by the Federal Reserve (in the US). Market forces have no say in interest rates.
  - 10y ago
Someone 10y ago
"There is a glut in speculation. [...] Savers are punished by artificially low interest rates" I thought interest rates were kept low to entice those having money to, rather than put it in the bank, invest it, that is: speculate. Problem seems to be that that's not what households did. In many countries, they paid back on their mortgages and put more money in the bank, despite the low interest rates. The science of psychological economics isn't that well developed, it seems.
- zeahfj 10y ago
  That is it's intent but ironically it increased the amount of savings required to retire so ordinary people couldn't participate in the speculation but still have to pay tax to subsidise it. It's huge wealth transfer from ordinary people to the finance industry.

by zeahfj 10y ago

krona 10y ago

There is a colossal glut in savings at the global level. There are books which cover the topic in depth (e.g. The End of Alchemy) but instead I'll just link to the relevant Wikipedia article: https://en.wikipedia.org/wiki/Global_saving_glut https://en.wikipedia.org/wiki/Global_saving_glut

zeahfj 10y ago
Firstly, savings are not currency although they are used interchangeably with the assumption that currency is safe. This is not guaranteed to hold. Secondly, with rehypothecation the same currency is counted at least 9 times (M2 money supply). I'd contest that it's 50 to 100 times due mechanisms to get around the 10% reserve requirement - but this is difficult to explain. Thirdly, the increase in savings is dwarfed by speculation that the savings is backing and the resulting mix or risk reward when combined is still speculation. As in this is not unencumbered savings. And finally, the wikipedia link has a long list of references from people who are wrong about everything.

neolefty 10y ago

> artificially low interest rates I'm pretty sure this is market forces. Glut of savings --> low rates. Sure there are local exceptions and regulatory impacts, but those generally can't stand against the tide, so I'd say it's 95% natural. > inflation of money supply Depends on the currency, but in the case of USD, increasing the supply is necessary to avoid deflation, which would seem superficially good for savers, but would be disastrous for economic productivity. > high taxes on earned income ??? > subsidies to speculators (housing subsidies) I don't know much about this one, but I think most subsidies are homestead-y (to owner-occupiers and first-time buyers).

zeahfj 10y ago
Not market forces, see reserve bank interventions. Deflation is not disastrous for economic productivity but it is a side effect of economic productivity. Taxes on earned income vs capital is a regressive tax system on the working class and a subsidy to the upper class. Owner-occupiers and first-time buyer subsidies are subsidies to the speculators. Increase in house prices happen the moment such policies are implemented to capture the entire benefit. The policies are only implemented after speculators have invested and drive up housing prices. This only benefits speculators (who can also be first-time buyers).
- neolefty 10y ago
  I should have read the article before replying! Indeed, the article seems blind to capital taxes, focusing instead on income tax. Wealth tax is a pretty alien concept in the US -- I think it would face strong cultural resistance, and cause even more wealth flight to tax havens. And yet, I can see how it would tackle a big part of the problems described here. It may need to be implemented in a coordinated global fashion to avoid cheating. You'd need the rich nations to do it, with a working enforcement mechanism that spans international borders. That, combined with cultural resistance, sounds hard.
  - zeahfj 10y ago
    No need for a global system in taxes to reduce wealth disparity. Just need to stop subsidising speculation. Due to agency costs (information asymmetry etc.) it's harder to make large returns on large amounts so the wealth levels off. The problem with a global system in taxes is that the taxes will just be used to subsidise more speculation.
sullenpaladin 10y ago
Interest rates are all directly or indirectly based on rates set by the Federal Reserve (in the US). Market forces have no say in interest rates.
- 10y ago

Someone 10y ago

"There is a glut in speculation. [...] Savers are punished by artificially low interest rates" I thought interest rates were kept low to entice those having money to, rather than put it in the bank, invest it, that is: speculate. Problem seems to be that that's not what households did. In many countries, they paid back on their mortgages and put more money in the bank, despite the low interest rates. The science of psychological economics isn't that well developed, it seems.

zeahfj 10y ago
That is it's intent but ironically it increased the amount of savings required to retire so ordinary people couldn't participate in the speculation but still have to pay tax to subsidise it. It's huge wealth transfer from ordinary people to the finance industry.