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It seems self-evident there is an excess of capital seeking yield at the moment. Productivity is way up but wages haven't kept pace. That's the whole problem:

It seems self-evident there is an excess of capital seeking yield at the moment. Productivity is way up but wages haven't kept pace. That's the whole problem: if everything is just labor arbitrage and owners take all the surplus we wind up in a world with excess capital (which encourages malinvestment) and consumers without money to spend. Business don't hire or expand as a result of tax cuts. They hire when the marginal return is positive - aka when you have more customers with money to spend so hiring another employee leads to more sales or more profit. A billionaire isn't going to buy more widgets if they pay $200m less in taxes this year. They don't need the capital to expand or hire either - money is extremely cheap right now. That $200m will be invested in capital markets already awash with cheap money. I wonder if paradoxically we'd all be better off if wages were higher (and offshoring / labor arbitrage were mitigated). Labor would certainly have more dollars to spend across the board. That would give businesses more dollars to spend in turn.

xupybd 6y ago
From Wikipedia: "Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments" So in theory those people are hiring? Yes inequality ii's something that needs to be kept low but I don't think we have hit the point that we will see our current economic system fail.
- karpierz 6y ago
  His point is that there aren't long-term productive investments to be making. Hence why interest rates are so low; no one to loan to.
imtringued 6y ago
>I wonder if paradoxically we'd all be better off if wages were higher (and offshoring / labor arbitrage were mitigated). Labor would certainly have more dollars to spend across the board. That would give businesses more dollars to spend in turn. People hate on CPI inflation because they simply don't understand supply and demand in the labor market. CPI inflation low = low demand for workers CPI inflation high = high demand for workers You want CPI inflation to be at least 2% and a small 5% spike for a year doesn't hurt if you have been stuck in a liquidity trap. Runaway inflation is extremely unlikely because we have spent a decade perfecting our economic deflation skills. CPI inflation generally reduces inequality because the price of goods is rising faster than the value of assets because the money is arriving in consumer goods first and only businesses that are productively investing into providing more goods or services are actually getting the inflation money. At current valuations you are hard pressed to find companies that can justify their current market cap let alone further growth that would track CPI inflation. If your wages rise from $15/hr to $30/hr the only one who is hurting is someone who owns a million dollars in stocks because their purchasing power just dropped by half. The answer? Demand side stimulus. This is nothing new. Just get your government to spend money on domestic industries. Renewables, electric cars, road maintenance, electric grid upgrades are the new Keynesian gold digging. No one is losing money except those who have too much of it already.

xupybd 6y ago

From Wikipedia: "Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments" So in theory those people are hiring? Yes inequality ii's something that needs to be kept low but I don't think we have hit the point that we will see our current economic system fail.

karpierz 6y ago
His point is that there aren't long-term productive investments to be making. Hence why interest rates are so low; no one to loan to.

imtringued 6y ago

>I wonder if paradoxically we'd all be better off if wages were higher (and offshoring / labor arbitrage were mitigated). Labor would certainly have more dollars to spend across the board. That would give businesses more dollars to spend in turn. People hate on CPI inflation because they simply don't understand supply and demand in the labor market. CPI inflation low = low demand for workers CPI inflation high = high demand for workers You want CPI inflation to be at least 2% and a small 5% spike for a year doesn't hurt if you have been stuck in a liquidity trap. Runaway inflation is extremely unlikely because we have spent a decade perfecting our economic deflation skills. CPI inflation generally reduces inequality because the price of goods is rising faster than the value of assets because the money is arriving in consumer goods first and only businesses that are productively investing into providing more goods or services are actually getting the inflation money. At current valuations you are hard pressed to find companies that can justify their current market cap let alone further growth that would track CPI inflation. If your wages rise from $15/hr to $30/hr the only one who is hurting is someone who owns a million dollars in stocks because their purchasing power just dropped by half. The answer? Demand side stimulus. This is nothing new. Just get your government to spend money on domestic industries. Renewables, electric cars, road maintenance, electric grid upgrades are the new Keynesian gold digging. No one is losing money except those who have too much of it already.