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This is inline with my reasoning. Certain circles say that the affluent are causation for capital markets operating efficiently. More specifically, that the pur

This is inline with my reasoning. Certain circles say that the affluent are causation for capital markets operating efficiently. More specifically, that the purchasing power of the affluent are the source or "spring" from which economic activity is generated. It's just not true. Economic activity is generated by the act of expenditure. The act is a threshold behavior relative to the an economic agent's ratio of liquid assets to fixed costs. "Hey, the rich spend a lot of the cash and pump the economy!". "Hey, conversely, the debt to income ratio of Bob will always disincentivize him against market participation!". Back to your point. The financial system favors the wealthy because it's capitalism. Capital is power and power is influence. That influence has systemically skewed political and financial institutions to favor those with aggregations of wealth. This is also true in free enterprise markets where consolidation is a natural result of the economic cycle and economies of scale. But, I wholeheartedly disagree with posing personal wealth inequality as a core driver of economic inequality in the US. I honestly see this as a symptom of vast market consolidation occurring since the 1950's. Bigger business structures eliminate structural redundancies in a market which can reduce costs for the consumer. But, the side effect is income hierarchies are stratified and flattened at a market level creating economic caste systems. And, being a vibrant and faithful patron of the free market system becomes a lot harder for normal guys like Bob.

CryptoPunk 6y ago
>>Economic activity is generated by the act of expenditure. The tendency toward expending money for products is not a scarce economic resource. It is always abundant, and leads to almost everything produced being consumed, as it reaches its market clearing price. What's scarce is capital and production, and only the profit-motivated investment that emerges when people are secure in their right to their private property has been shown to rapidly make it less scarce. Witness China before and after its market reforms.
- Meandering 6y ago
  The facet I'm viewing economic activity from is the magnitude, distribution, and probability of expenditure based on the differential between an individual's cost of living and luxury purchases. The aggregation of wealth in a subset of individuals, with respect to the cost of living, will leave them more free or willing to make nonessential purchases which generate an expansion in economic activity. I'm getting at the point that distributing those liquid assets across more individuals will lead to an increase in the magnitude, distribution, and frequency of aggregate economic expenditure (i.e. monetary velocity). It's tricky because, as you referenced, there are markets for fixed resources which could be negatively impacted if that debt to income ratio gets too large for the majority of market participants. Although I think the trajectory of consumer markets further favors my view point as purchases are transitioning from physical goods to services and digital goods. In that same vein, I believe profit-motivated investment is only reinforced by a greater diffusion of economic expenditure. The diffusion only increases the frequency of opportunity available for firms to enter an arbitrary market.

CryptoPunk 6y ago

>>Economic activity is generated by the act of expenditure. The tendency toward expending money for products is not a scarce economic resource. It is always abundant, and leads to almost everything produced being consumed, as it reaches its market clearing price. What's scarce is capital and production, and only the profit-motivated investment that emerges when people are secure in their right to their private property has been shown to rapidly make it less scarce. Witness China before and after its market reforms.

Meandering 6y ago
The facet I'm viewing economic activity from is the magnitude, distribution, and probability of expenditure based on the differential between an individual's cost of living and luxury purchases. The aggregation of wealth in a subset of individuals, with respect to the cost of living, will leave them more free or willing to make nonessential purchases which generate an expansion in economic activity. I'm getting at the point that distributing those liquid assets across more individuals will lead to an increase in the magnitude, distribution, and frequency of aggregate economic expenditure (i.e. monetary velocity). It's tricky because, as you referenced, there are markets for fixed resources which could be negatively impacted if that debt to income ratio gets too large for the majority of market participants. Although I think the trajectory of consumer markets further favors my view point as purchases are transitioning from physical goods to services and digital goods. In that same vein, I believe profit-motivated investment is only reinforced by a greater diffusion of economic expenditure. The diffusion only increases the frequency of opportunity available for firms to enter an arbitrary market.