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Too much money and too few places to invest it
- astazangasta 7y agoIronically the best thing they can do to create new investment opportunities is pay their workers more, but they never will because they are too short sighted.
- fastball 7y agoIf you pay your workers more you have less money for investment opportunities...
- Waterluvian 7y agoYour workers buy your cars.
- vkou 7y agoThis only works when everyone pays their workers more. It's in your benefit to defect. And besides, it's just as likely that instead of your employees buying your cars, their landlord/medical insurer/kid's college will take whatever wage gains they make.
- skywhopper 7y agoThis is why there's a minimum wage.
- beamatronic 7y agoPrisoners dilemma vs. velocity of money?
- fastball 7y agoTragedy of the commons.
- CryptoPunk 7y agoCompanies then have to build cars to provide to your workers, instead of building you a factory. We have a limited amount of capital. There's an economic opportunity cost from higher wages and more consumer spending.
- maxxxxx 7y agoWhat kind of messed up thinking is this? More consumer spending has an opportunity cost? What’s a capitalist supposed to do if nobody can afford their stuff?
- CryptoPunk 7y agoThis is basic economics. Consumer spending is not the only kind of spending, and directing all economic output to meeting consumer demand would be disastrous for the economy. >>What’s a capitalist supposed to do if nobody can afford their stuff? Investing in new capital equipment is how you allow more people to afford your stuff. More consumers will afford your stuff in the future when you've built your factory and you can churn out more stuff for more people. Capital investment is why 2.5 billion people can afford smart phones today instead of 50 million people, like 12 years ago.
- maxxxxx 7y agoThat’s totally backwards. If nobody had had any money nobody wouldn’t have bought any phones. You Can’t just invest into things nobody can buy.
- CryptoPunk 7y agoActually you have it backwards. Everything produced is sold at its clearing price. If everyone has half as much money, then the price gets cut in half. Likewise, if the number of goods/services produced is doubled, the price of everything gets cut in half. A little bit of a simplification, but that's generally how it works. Money is not wealth. It's how we measure it. Real wealth is goods/services. And the only way to increase the volume of goods/services produced is to invest in the capital equipment that increases our productivity in producing them. More goods/services means more purchasing power, which means higher wages.
- fastball 7y agoYou're joking right? Tragedy of the commons.
- maxxxxx 7y agoBut you have more opportunities.
- skywhopper 7y agoThis is a reason why increasing the minimum wage or providing health coverage for low-wage workers is a great way to improve everyone's situation. Sure, Walmart has to pay their workers more, but every low-wage worker who works for someone other than Walmart suddenly has a lot more money to spend... at Walmart. On net, companies like Walmart will benefit far more than they lose. But they aren't willing to unilaterally increase wages and benefits, reasonably enough. That's why you do it across the board.
- chris5745 7y agoI imagine raising the cost of labor in the U.S. would only encourage more outsourcing. Maybe entrenched parties with lots of cash need special incentives to spur investment. I don’t know what those would be, but if all this cash is not being used to invest in public projects or new ventures, we may be witnessing the beginning of a huge socioeconomic shift. Remember war bonds? We need road bonds. Bridge bonds. Something.
- komali2 7y agoHow do you outsource a Walmart shelf stocker?
- toast0 7y agoLabor saving devices / robots. If not to do the whole job (because robot shelf stocking is too much right now), then to reduce the amount of people time needed. Better ways to get the goods close to where they need to go and let the workers move it onto the actual shelf. Or outsource to the shoppers: just drop the palette of stuff where it should be and let the customers find what they want.
- fastball 7y agoIs that not Amazon?
- AnthonyMouse 7y ago> This is a reason why increasing the minimum wage or providing health coverage for low-wage workers is a great way to improve everyone's situation. We got here by setting policies based on the bottom rather than the middle. The problem isn't that the bottom 5% needs a modest raise, it's that the middle 50% should be making enough to afford to buy a house and they're not. Price floors don't change that. If anything they make it worse, because most of the new cost of that comes from the middle class in the form of higher prices. What we really need is to do something about the cost of housing, education and healthcare. And not just subsidizing it -- that's how we got into this mess to begin with. Actually reducing the underlying cost. The alternative would be combining significant inflation with high interest rates, so that asset prices don't rise from the inflation because of the high interest rates, but wages do.
- NTDF9 7y ago> If you pay your workers more you have less money for investment opportunities... Why are workers not an investment? Are your workers only encouraged to hit nails with hammer or can you think of ways to incentivizee them to innovate and do better than competition? Oh wait, you must be a short-sighted employer.
- fastball 7y agoThat is obviously not what is being discussed here.
- rhizome 7y agoIf you pay your workers more they can start new companies to invest in.
- jayd16 7y agoPaying your workers is the whole trickle down part of this ridiculous system. If you skip that part, why should we tolerate an investment class?
- astazangasta 7y agoTo repeat the basic premise of the article, the lack of money is not the problem, the lack of investment opportunities is. That lack is due to insufficient demand in the economy. You can stimulate that demand most easily by increasing the income of the lowest paid workers, who spend money the fastest. It also would produce productivity growth which would boost profits.
- imtringued 7y agoThere are no investment opportunities. Otherwise you would have invested in those and wouldn't complain about not knowing what to do with the money.
- internet_user 7y agoI feel sympathetic to this argument, but running of money just short of take off/finding market fit/etc would lower workers pay to zero. The real issue is that we live in such uncertain times it's very difficult to plan ahead, both employees and employers have become quite risk-averse.
- chiefalchemist 7y ago> "How we got here: The Fed's quantitative easing program pushed the cost of borrowing money to next to nothing for nearly a decade, allowing companies to splurge on debt for mergers and acquisitions and to boost revenue." Put another way, the Fed made the rich richer, and the lack of significant "trickle down" has created a socio-political Charlie Foxtrot; of which the Fed is not accountable for.
- cstrat 7y agoI can't see how the continued erosion of the middle-class is not going to have huge impacts on the livelihood of everyone else.
- dev_dull 7y agoPrecisely why I’m a big fan of tariffs and America-first foreign policy. We need a way to restore manufacturing industry to the US, the loss of which played a large role in the erosion of the middle class. Protecting manufacturing and factory jobs used to be a selling point for Democrats but things have been a little turned upside down lately.
- komali2 7y agoIf only tariffs caused manufacturing facilities to return to the USA. They don't, though. Here's a great map of the net negative effects tariffs have on the state of your choosing: https://www.uschamber.com/tariffs https://www.uschamber.com/tariffs
- dev_dull 7y agoI realize that tariffs are controversial given the current political climate, but they really are one of the best ways to claw back money from large corporations and reward unskilled labor in the US. We need to bring manufacturing jobs back to the US. The loss of those jobs disproportionately affected minorities. Increases in corporate tax is easily avoided by domicile changes. Tariffs are a simple way to restore balance. Build it here. Hire here. No tariffs.
- internet_user 7y agoand literally every asset class exploded. Isn't this the very definition of inflation...? Another view would be that money is simply losing value. a million is not what it used to be.
- repsilat 7y agoThat holds for houses, but most inflation measures index housing on rent, not house price, possibly to account for the sensitivity of house prices to interest rates. From another angle, look at consumer goods a year ago compared to today. This year you can get a better car/tv/phone/computer for the same price, or the same one for less. Isn't that the very definition of deflation? Another view is that money is simply gaining in value -- a thousand bucks is worth a lot more than it once was :-). (Funnily enough, I'd agree with you at a million because of house prices, and at a hundred because of food, haircuts, clothing etc. 1k-100k is weirdly different though.)
- internet_user 7y agoprices of "houses" is really mostly land. the replacement of the building itself is a very small fraction in most in-demand locations. So yes, land went up. All other examples you are citing are depreciating, non-scare items. It's not that it's "better" or anything, but we can make way more of iphones/etc. However, there is only one Switzerland and only one Manhattan.
- jakelazaroff 7y agoIf people and companies have so much money that they literally don't know what to do with it… is giving it away so ridiculous? There are so many worthy causes in the world. Is there really a point to acquiring more wealth if you're that rich?
- conanbatt 7y agoGiving it away for them would be to pay out dividends. I'm guessing its too tax disadvantaged to do that.
- bitxbit 7y agoThe biggest consequence of easy money is market concentration afforded by stock repurchases of the past decade. I don’t know if we will ever be able to return to anything even close to normalized ten-year rate. People couldn’t “deal” with 3% and this goes back to the fact that corporate America simply do not develop high-risk high-return businesses because the hurdle rate is so low. These two factors will lead to a dramatic decrease in innovations.
- quickthrower2 7y agoWhat about investing it in the planet. Fund lobby groups. Fund companies working on alternative energy tech. There was a (YC funded?) startup on here recently looking to turn air and water into fuel in an efficient enough way. That sort of stuff. Unless the goal is purely to maximise gains of course. Announce "I am investing 10Bn in climate change startups over 50 years", so that people can plan their career around this.
- weddpros 7y agoI don't think there's too much money: there are not enough GOOD ways to spend it. Investors don't refuse to fund ethical businesses or finance saving the planet, if it can make them money. It's just that there's no good opportunity on the market. When investors can make more money saving the planet that destroying it, the planet will be saved.
- internet_user 7y agoMaybe there is just too many paper bills (or more like 0 and 1s) chasing relatively slower growing amount of value?
- weddpros 7y agoI don't think the glass is too big: I think it's only half full
- qwerty456127 7y agoWhy not invest in R&D to invent what to invest in then?
- tryptophan 7y agoUgh. These sort of pseudo-intellectual articles that mix economics and politics are my least favorite things to see on this site. They are super misleading and play towards people's biases about how they view the world while selectively interpreting the sparse data they present to do so. An example: If there was too much money, you would think that bond yields would go down. Look here: https://www.cnbc.com/quotes/?symbol=US30Y https://www.cnbc.com/quotes/?symbol=US30Y -- looks like they are! Guess we can all go blame the fed and "trickle down". But oh wait, scroll out to a longer time-span. Looks like yields have been falling ~linearly from 1989 till today, 2019. Show me where QE/ZIRP started based on the chart. You can't, because the trend didn't change at 2008/9. All this "blame the fed, im smarter than them and would've not done QE" nonsense maybe isn't as supported by evidence as some would like. The world is a little more nuanced than that. On the surface level, the data seems to agree, but you look a little deeper and it quickly becomes apparent it's all bullshit trying to spin a narrative.
- weirdstuff 7y agoI urge you to look at this chart: https://www.financialsamurai.com/wp-content/uploads/2015/07/SP500-10Year-FFR.png https://www.financialsamurai.com/wp-content/uploads/2015/07/... There's a strong correlation there. Fed funds rate seems to lead a bit. I agree with you about the all the bad writing. It's pernicious.
- internet_user 7y agoAt which point these charts become entirely meaningless? When the fed owns 50%+ of sp500? The fed, BOJ and ECB are already busy painting yield curves full time, the market has become so distorted it's not trivial to even orient yourself, nevermind to develop conclusions.
- SteveGregory 7y agoI've wondered if, in this context that we are in, it actually starts to make sense to both raise interest rates and simultaneously monetize government debt. We want some inflation, but we also do not want a late-1980s-style Japanese asset price bubble. I cannot find a real answer to this question anywhere - would this plan produce any negative effect? The plan would, as far as I can tell, help the long-term outlook of our currency and economy while incentivizing wealthy people to stay invested. I might be missing something obvious. Maybe this would lead to businesses having a harder time employing because of the higher borrowing cost (but we are at full employment now), or maybe the effect is just too uncertain on the money supply. Either way, I really want to know the answer, so I'm asking it here. To be clear, I am not suggesting that politicians have direct control over monetizing debt, but rather that the central bank deems this to be best for the economy in the long term.
- lostmsu 7y agoCompanies with money can definitely invest into/buy my deep learning startup at any time. :) It enables .NET developers to use full TensorFlow and some other Python frameworks. $1.5M e-checks can be forwarded to email: contact AT losttech.software :-D
- fallenfallacy 7y agoHow misleading.. There are a ton of places to invest money. My personal favourite are businesses and real estate. There's two things in common with businesses and real estates as a form of investment: 1. They build equity for you in two ways: cash flows and appreciation 2. Businesses & real estate are some of the most transparent vehicles when it comes to doing research on whether it's a good investment or not. This is in comparison to investments like stocks where information might not be as transparent or as easily accessible as doing research for a real estate or a business. Not only that but when it comes to an investment like real estate, some people are unknowingly leveraging in an environment where real estate has consistently appreciated 4% per annum for the past hundred years. Consider this: If you purchase a $100,000 house at fair market value for 10% down, you borrow $90,000 and drop $10,000 as down payment. If it appreciates at the historical average rate of 4% per annum, your house is worth $104,000 next year. You sell your house at $104,000, and paying off your mortgage ($90,000), you pocket $14,000, a 25% return on investment ($4000/$10,000). Obviously this excludes variables like rent, interest, or mortgage but the illustration shows how a simple real estate investment can turn out to be a far better investment than it would otherwise show on paper (4%). If there are 'too few places' to invest your money, there's always businesses or real estate. There's a compelling article here that further suggests why real estate might be the most consistent way of building wealth: https://digitalyse.io/why-real-estate-investing-is-the-most-consistent-way-of-building-wealth/ https://digitalyse.io/why-real-estate-investing-is-the-most-...