4 ms·
Money doesn't have high velocity in the upper echelons of society compared to in the bottom half. One dollar will pass through many hands if paid to a person in
by allana 7y ago
Money doesn't have high velocity in the upper echelons of society compared to in the bottom half. One dollar will pass through many hands if paid to a person in the lower half of our economy, while in the top 10% this same dollar barely makes it into one other person's hands, let alone multiple.
The economically disadvantaged chunk of society has grown as middle wage jobs have disappeared, while their wages have effectively dropped. This is terrible for economic growth IMO.
- thdxr 7y agoDo you have a source for your money velocity claim? Intuition implies it would be the opposite
- remarkEon 7y agoHow so? It checks with my intuition quite fine. Do you mean as a total volume of dollars earned?
- refurb 7y agoWealthy people are likely to invest any cash received immediately which would be invested or loaned out to businesses that purchase things and pay salaries. They don't take their extra $100K and stick it under a mattress.
- atq2119 7y agoInvestment is a problematic word because it has so many subtly different meanings. Let's say you "invest" in the stock market. Does that actually cause any business to "invest" more? The answer is likely no. It'll drive up the stock prices of the company whose shares you buy, yes, but companies don't tend to make investment decisions based on their share price. Conversely, companies do make investment decisions based on the demand for their products, so giving money to poor people who immediately spend it is likely to cause more (real world) investment than giving it to rich people who merely "invest" it.
- anon9001 7y ago> companies don't tend to make investment decisions based on their share price Isn't the whole point of a company to increase share price?
- imtringued 7y agoEven if you transferred the money directly into the bank account of those corporations they would just merely pay it out as a dividend or give the CEO a bonus. What then? "Invest" again? A corporation doesn't need a third factory if no one is buying their products. Because of deflation it may even want to get rid of it's second factory.
- aalleavitch 7y agoIt’s like that comic with the dog holding the ball going “no take, only throw!” “No purchase, only invest!” At the end of the day the economy only works because it’s extracting profit from consumers, if the profit you’re extracting is money you lent them in the first place...where is the profit coming from? Hence the negative interest rates: you NEED them to take on more debt so they can even buy things from you to begin with. It’s the market itself saying “you need to give them more money”.
- ptah 7y agothe trend is for corporations to keep large cash reserves, essentially they are "extreme hoarders" in the financial sense. it comes with all the negatives that physical hoarding comes with
- qroshan 7y agoHuh? Give 10 bucks to Bill Gates and 10 bucks to the homeless person that you just saw and tell me who would spend it immediately?
- nootka 7y agoAnother request if you have a paper or other source; not because I doubt it though! I'm interested in how velocity of money would properly be modeled and observed as a function of the Lorenz curve. I'm pretty amateur when it comes to math, but I'm working on it.