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Much of the money isn't going to startups. It goes to savings. The top 1% save ~40% of their income. The bottom 90% save 4% of their income. The problem with g

Much of the money isn't going to startups. It goes to savings. The top 1% save ~40% of their income. The bottom 90% save 4% of their income. The problem with giving money to the wealthy is that it doesn't go to startups, it leaves the economy and increases a number on someone's terminal. The best way to spur economic growth is to give money to people who will spend it quickly whether rich or poor. In general, it turns out most very wealthy people have little incentive to spend money quickly. Instead, they save to hedge against and profit from recessions. I really don't understand how people still push some version of trickle-down economics. Corporate buybacks are exactly this. Using taxpayer money to fund it only hurts the long term value of the economy.

perl4ever 7y ago
I don't understand what you mean, because you say "the best way to spur economic growth is to give money to people who will spend it quickly". That is "trickle down economics" as I understand what people mean by the phrase, and I agree(?) that it makes no sense. Broken windows, etc.
- danmaz74 7y ago
  Trickle down is associated with supply side economics; giving money for people to spend means increasing aggregate demand, which is the opposite.
  - perl4ever 7y ago
    "Giving money for people to spend", what does that mean though? You write a note on it? "Plz spend on chzburger, kthxbye" Or is it like you use body language? Giving money for people to spend is done like this, while giving money for people to save is done like this. Every time someone buys an investment, they're buying it from someone who is cashing out, quite possibly to buy a cheeseburger. It makes no sense to call this a "trickle", of course, because it's not a small fraction of the money.
cortesoft 7y ago
When you say 'save', what do you mean? They aren't putting it in a mattress in their house... they are 'saving' it in investments that fund the economy.
- perl4ever 7y ago
  There's a quote from It's a Wonderful Life that I always think of in this context: "You're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?" The whole point of finance, the social purpose, is that it prevents everyone (rich or not so rich) with assets from letting them sit idle.
  - dumbfoundded 7y ago
    Money does sit idle. It's used to hedge against recessions and acquire assets when their price is the lowest. Have you ever heard of liquidity? The whole point of finance is to maximize returns on investment. One strong strategy is to build liquidity before economic (or industry) downturns to cheaply acquire assets. This idleness happens at a much greater rate for the wealthy than the poor. And by poor, I mean the bottom 90% of society. They don't have the luxury of savings. This means it's of greater value to give them money because they spend it quickly . The economy doesn't grow when companies buy back stock, it grows when someone has enough money to pay for medical treatments or to buy a new car.
knowaveragejoe 7y ago
The money they're talking about isn't peoples income, it's companies buying stock. The people they buy it from turn around and invest it elsewhere. Likewise, the "40%" saved isn't sitting in a vault somewhere, it's also invested.
- pixl97 7y ago
  Unless that company is also sitting on billions in cash reserves.
  - nightski 7y ago
    Maybe that should be the focus of attention vs stock buybacks.
  - edoceo 7y ago
    Not literal cash, it's in accounts, accounts that pay interest, interest earned from investment
  - XorNot 7y ago
    Or in shell companies in the Cayman's waiting for the next payroll tax holiday.
  - compiler-guy 7y ago
    Even cash reserves end up loaned to others. Unless the company puts it under a mattress. Those reserves typically end up I low risk short term bonds and the like. Low risk, but not just sitting.
    - tomatocracy 7y ago
      The only 'saved money actually doing nothing' scenario I can think if is when it gets deposited in a bank who then turns around and hold those funds at the central bank because they have nothing else to do with it. Central banks in many currencies these days offer negative deposit rates to discourage that behaviour and thus to the extent it happens it tends to only be over a very short period of time. Of course it doesn't mean that investors/banks who receive the money reinvest it in the same country - if there is a dearth of opportunities in eg the US and Europe then this type of activity may result in increased investment in emerging markets.
conanbatt 7y ago
> The best way to spur economic growth is to give money to people who will spend it quickly whether rich or poor. In general, it turns out most very wealthy people have little incentive to spend money quickly. Instead, they save to hedge against and profit from recessions. This is plain incorrect. Spending on the value-less services and goods makes the economy as a whole poorer, and the more you spend the more you impoverish.

perl4ever 7y ago

I don't understand what you mean, because you say "the best way to spur economic growth is to give money to people who will spend it quickly". That is "trickle down economics" as I understand what people mean by the phrase, and I agree(?) that it makes no sense. Broken windows, etc.

danmaz74 7y ago
Trickle down is associated with supply side economics; giving money for people to spend means increasing aggregate demand, which is the opposite.
- perl4ever 7y ago
  "Giving money for people to spend", what does that mean though? You write a note on it? "Plz spend on chzburger, kthxbye" Or is it like you use body language? Giving money for people to spend is done like this, while giving money for people to save is done like this. Every time someone buys an investment, they're buying it from someone who is cashing out, quite possibly to buy a cheeseburger. It makes no sense to call this a "trickle", of course, because it's not a small fraction of the money.

cortesoft 7y ago

When you say 'save', what do you mean? They aren't putting it in a mattress in their house... they are 'saving' it in investments that fund the economy.

perl4ever 7y ago
There's a quote from It's a Wonderful Life that I always think of in this context: "You're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?" The whole point of finance, the social purpose, is that it prevents everyone (rich or not so rich) with assets from letting them sit idle.
- dumbfoundded 7y ago
  Money does sit idle. It's used to hedge against recessions and acquire assets when their price is the lowest. Have you ever heard of liquidity? The whole point of finance is to maximize returns on investment. One strong strategy is to build liquidity before economic (or industry) downturns to cheaply acquire assets. This idleness happens at a much greater rate for the wealthy than the poor. And by poor, I mean the bottom 90% of society. They don't have the luxury of savings. This means it's of greater value to give them money because they spend it quickly . The economy doesn't grow when companies buy back stock, it grows when someone has enough money to pay for medical treatments or to buy a new car.

knowaveragejoe 7y ago

The money they're talking about isn't peoples income, it's companies buying stock. The people they buy it from turn around and invest it elsewhere. Likewise, the "40%" saved isn't sitting in a vault somewhere, it's also invested.

pixl97 7y ago
Unless that company is also sitting on billions in cash reserves.
- nightski 7y ago
  Maybe that should be the focus of attention vs stock buybacks.
- edoceo 7y ago
  Not literal cash, it's in accounts, accounts that pay interest, interest earned from investment
- XorNot 7y ago
  Or in shell companies in the Cayman's waiting for the next payroll tax holiday.
- compiler-guy 7y ago
  Even cash reserves end up loaned to others. Unless the company puts it under a mattress. Those reserves typically end up I low risk short term bonds and the like. Low risk, but not just sitting.
  - tomatocracy 7y ago
    The only 'saved money actually doing nothing' scenario I can think if is when it gets deposited in a bank who then turns around and hold those funds at the central bank because they have nothing else to do with it. Central banks in many currencies these days offer negative deposit rates to discourage that behaviour and thus to the extent it happens it tends to only be over a very short period of time. Of course it doesn't mean that investors/banks who receive the money reinvest it in the same country - if there is a dearth of opportunities in eg the US and Europe then this type of activity may result in increased investment in emerging markets.

conanbatt 7y ago

> The best way to spur economic growth is to give money to people who will spend it quickly whether rich or poor. In general, it turns out most very wealthy people have little incentive to spend money quickly. Instead, they save to hedge against and profit from recessions. This is plain incorrect. Spending on the value-less services and goods makes the economy as a whole poorer, and the more you spend the more you impoverish.