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> Except that savings for tomorrow would probably end up in the stock market. For far lower returns. With reduced demand, there's not much for that extra money
by karatestomp 6y ago
> Except that savings for tomorrow would probably end up in the stock market.
For far lower returns. With reduced demand, there's not much for that extra money to do. To the extent investment drives growth it's when it goes into innovation (R&D) or if businesses have demand but are capital constrained (and I suspect even that's more like speeding up than creating growth, exactly—you just get 5% growth now instead of 2.5% over two years, or whatever). Sure maybe you could spend it on advertising and marketing but all that can do is get us back to "people spend too much".
- bgorman 6y agoHow does one draw the line between necessary marketing/sales expenses and unnecessary ones? Even some of the most "innovative" companies like Apple spend billions on advertising. I don't have an MBA but it seems pretty much impossible to sell new products without an advertising budget.
- karatestomp 6y agoRight but if the premise is “there will be lots of investment because people are spending less and saving more” then all that invested money can’t go into marketing or advertising without getting right back to a low-savings society, unless that spending is ineffective. So that leaves R&D I guess since there’s not much else for that extra money to do. Plus lower returns on equities.