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20% is 1 of 5, hardly easy to miss. A lot of that money goes toward expenses in HCOL areas, where more people live, and the salaries are higher. A lot goes into

20% is 1 of 5, hardly easy to miss. A lot of that money goes toward expenses in HCOL areas, where more people live, and the salaries are higher. A lot goes into consumer goods. People buy stuff, a lot of it. A lot of the rest is in the stock market in retirement accounts because nobody has pensions anymore. Americans don’t save a lot of money, and are not particularly fiscally responsible, that money is not hiding in slosh it’s being spent. Now start talking the top 1-2% and the story changes dramatically. A few of those people are wage slaves who spend a lot, but the majority are not, and really do live different lives.

Swizec 6y ago
> Now start talking the top 1-2% and the story changes dramatically. Probably the top 5-6%. The numbers are lower but the behavior is similar. You’d be surprised how soon you hit the “More money than I know what to do with” line. Make 150 to 200k/year (not uncommon on HN) and what are you gonna do, buy a new car every year? Rent is paid, food is paid, clothes are good, 1 or 2 vacations per year, go out to eat whenever you want, one-off nice purchases aren’t a big concern ... it’s cushy. Not enough to buy real estate cash or anything like that, but def more slosh than you need.
- flatline 6y ago
  My ex...liked to spend money. We made 300k combined in 2019 in a MCOL area, and I still have no idea where it all went. Mortgage, nice cars, eating out, a couple vacations - all gone! I’ve heard of people making 7 figures and can barely afford their lifestyle. Rule of thumb, people spend what they make. Some spend on saving/investing. I think that’s what sets apart the top percentage with a few exceptions, they make money work for them, not the other way around.
  - eloff 6y ago
    Most people just ramp up their lifestyle when they make more money. I've been petty conservative about doing that and living below my means since the start of my career. In the beginning I was saving 80% of my income. That dropped over time as I got married and had to accept ramping up my expenses, but I've saved enough over the years to be about halfway to financial independence by my mid thirties. I strongly recommend intensely saving as the only fiscally responsible way to live. I don't think it's affected my happiness negatively at all. I couldn't buy everything I wanted, but having that safety net was well worth it in exchange.
    - disgruntledphd2 6y ago
      The trouble with this approach (although rational for an individual) is that if everyone who can does this, we end up with even more of a global savings glut than we already have, and interest rates go even more negative. As an aside, it's very odd to me that we have so much money sloshing around, and yet we're not spending it on infrastructure that would help us get off the fossil fuel treadmill and towards a more sustainable system.
      - ericmay 6y ago
        Eh it’s not really odd. You are mistakenly believing that your goals (and mine here are the same) align with others and that it is an obvious course of action. For most Americans “drive my SUV down the 10 lane highway” is normal and ideal. They don’t give a shit about anything else. Sorry to say.
      - eloff 6y ago
        The biggest predictor of future economic growth is the amount of savings the people have. Not a huge surprise there. So I don't think it's bad even at a societal level.
  - heavyset_go 6y ago
    The top percentage have no idea how to manage money or budget, they have people that do it for them.
- TheOtherHobbes 6y ago
  You'd be amazed how easy it is to spend $10m a year. Real-estate, private jets, yachts, trophy cars, trophy alimony payments, security, art collections, horse breeding, interior design, fashion, private islands, expensive educations for the kids, bequests, public philanthropy, legal fees covering both public and personal disputes, investment management fees, political sponsorship and activism... I'm not suggesting anyone needs this level of spending - just pointing out that the people who operate in that bracket wouldn't necessarily consider themselves completely secure and comfortable, even though they're spending sums that are unimaginably huge for most of the population.
  - Swizec 6y ago
    Oh for sure. But there’s this wide spot in the mid 6-figure range where you can’t afford any of that and have way more than you can spend. Typical middle class trappings aren’t a concern, upper class trappings are inaccessible. So what do you do? Personally I’m dumping it into index funds and business ideas. Maybe thinking about buying a house soonish.
    - egypturnash 6y ago
      All the art of your fursona you could ever want.
- tunesmith 6y ago
  Boy, I don't understand this scenario at all. At 150-200k/year, a lot of people are just going to try and save like crazy. CAPE is high, financial planners are saying that "safe withdrawal rates" are no longer 4% or even 3.25%, but below even 2.5% - even if you're not in the very HCOL areas, you're looking at needing to save more than three million dollars to retire, which can take a very long time when expecting muted market returns in the future.
  - Swizec 6y ago
    > a lot of people are just going to try and save like crazy Exactly. You save the money you don’t know how to meaningfully use right now.
  - gshubert17 6y ago
    I can see using a lower withdrawal rate (approximating the yield on 10-year treasury bonds) if one is investing mostly in bonds. But two caveats: (1) Adding stocks to one's portfolio makes it easier to succeed with a 4% withdrawal rate in very low interest-rate environments: https://thepoorswiss.com/updated-trinity-study/ https://thepoorswiss.com/updated-trinity-study/ (2) Life expectancy. People who retire at a young age, should use a lower withdrawal rate. But a person age 75, expecting to die before age 100, could have a withdrawal rate of roughly 4% (reciprocal of 100-75) in a zero-interest-rate environment.
- dnhz 6y ago
  Kids are expensive, especially if going the private school route.
- fossuser 6y ago
  A Bay Area house that isn’t total trash is easily 3M on the peninsula. Elsewhere, yeah - you’d be fine if you don’t spend stupidly.
  - fossuser 6y ago
    For an example: https://www.redfin.com/CA/Palo-Alto/3785-Park-Blvd-94306/home/1149731 https://www.redfin.com/CA/Palo-Alto/3785-Park-Blvd-94306/hom...
bobthepanda 6y ago
Personally, my issue with the term "sloshing" is that it implies the money is floating around in liquid form ready to tick up inflation. It's not. There are a lot of places where this money has gone that are illiquid though. One would be American property; for most households a good chunk of their wealth is their house. In high-COL, high-property areas the main thing preventing a fall in house price is the lack of supply. Another part of it is China and other countries with large amounts of USD. China has tight capital controls though so none of that money is about to leave suddenly any time soon. but if a big chunk left at once it would probably make the 1998 Asian capital flight look like child's play. Some countries like Saudi Arabia are trying to figure out how to spend it; Vision Fund literally created (and destroyed) very big companies in very short order. When Japan had this problem the hangover lasted for a decade, and depending on your view may even be continuing to this day. Of course, the market can stay irrational longer than you can stay solvent, so these things are mostly theoretical until they're not. But no use holding your breath trying to wait for it.
- headmelted 6y ago
  Exactly all of this. A lot of people (myself included) are just kind of nervously waiting for the other shoe to drop. That the money exists but isn’t moving through the economy means that we’re essentially building more pressure in a system that is already at 0% interest rates. This should be concerning to everyone. The absence of velocity will encourage central banks to print more money in the belief that it will encourage spending when it clearly hasn’t done that. If in the future we start exiting our homes and going on vacations again the velocity could shoot up sharply - at which point a lot more money is moving into the system all at once. By then, there’s a good chance the horse has bolted for capping inflation.
  - throw0101a 6y ago
    > That the money exists but isn’t moving through the economy means that we’re essentially building more pressure in a system that is already at 0% interest rates. You're not wrong, but it's a problem I'd "like" to have: too much economic activity. I'd rather worry about inflation and things running hot, with low unemployment (or high participation rate), than the opposite. Remember late 2019, when the US unemployment rate was 3.5%? * https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE > The absence of velocity will encourage central banks to print more money in the belief that it will encourage spending when it clearly hasn’t done that. When the central bank's rate is zero, they're flooding the market with liquidity, and bond yields are zero (or negative), then that's a signal for governments to open the taps: > I would summarize the Keynesian view in terms of four points: > 1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond. > 2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain. > 3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down. > 4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses. * https://krugman.blogs.nytimes.com/2015/09/15/keynesianism-explained/ https://krugman.blogs.nytimes.com/2015/09/15/keynesianism-ex... When rates are non-zero and bond yields are high(er), then it is dangerous to print money, and government spending could 'crowd out' private economic activity.

Swizec 6y ago

> Now start talking the top 1-2% and the story changes dramatically. Probably the top 5-6%. The numbers are lower but the behavior is similar. You’d be surprised how soon you hit the “More money than I know what to do with” line. Make 150 to 200k/year (not uncommon on HN) and what are you gonna do, buy a new car every year? Rent is paid, food is paid, clothes are good, 1 or 2 vacations per year, go out to eat whenever you want, one-off nice purchases aren’t a big concern ... it’s cushy. Not enough to buy real estate cash or anything like that, but def more slosh than you need.

flatline 6y ago
My ex...liked to spend money. We made 300k combined in 2019 in a MCOL area, and I still have no idea where it all went. Mortgage, nice cars, eating out, a couple vacations - all gone! I’ve heard of people making 7 figures and can barely afford their lifestyle. Rule of thumb, people spend what they make. Some spend on saving/investing. I think that’s what sets apart the top percentage with a few exceptions, they make money work for them, not the other way around.
- eloff 6y ago
  Most people just ramp up their lifestyle when they make more money. I've been petty conservative about doing that and living below my means since the start of my career. In the beginning I was saving 80% of my income. That dropped over time as I got married and had to accept ramping up my expenses, but I've saved enough over the years to be about halfway to financial independence by my mid thirties. I strongly recommend intensely saving as the only fiscally responsible way to live. I don't think it's affected my happiness negatively at all. I couldn't buy everything I wanted, but having that safety net was well worth it in exchange.
  - disgruntledphd2 6y ago
    The trouble with this approach (although rational for an individual) is that if everyone who can does this, we end up with even more of a global savings glut than we already have, and interest rates go even more negative. As an aside, it's very odd to me that we have so much money sloshing around, and yet we're not spending it on infrastructure that would help us get off the fossil fuel treadmill and towards a more sustainable system.
    - ericmay 6y ago
      Eh it’s not really odd. You are mistakenly believing that your goals (and mine here are the same) align with others and that it is an obvious course of action. For most Americans “drive my SUV down the 10 lane highway” is normal and ideal. They don’t give a shit about anything else. Sorry to say.
    - eloff 6y ago
      The biggest predictor of future economic growth is the amount of savings the people have. Not a huge surprise there. So I don't think it's bad even at a societal level.
- heavyset_go 6y ago
  The top percentage have no idea how to manage money or budget, they have people that do it for them.
TheOtherHobbes 6y ago
You'd be amazed how easy it is to spend $10m a year. Real-estate, private jets, yachts, trophy cars, trophy alimony payments, security, art collections, horse breeding, interior design, fashion, private islands, expensive educations for the kids, bequests, public philanthropy, legal fees covering both public and personal disputes, investment management fees, political sponsorship and activism... I'm not suggesting anyone needs this level of spending - just pointing out that the people who operate in that bracket wouldn't necessarily consider themselves completely secure and comfortable, even though they're spending sums that are unimaginably huge for most of the population.
- Swizec 6y ago
  Oh for sure. But there’s this wide spot in the mid 6-figure range where you can’t afford any of that and have way more than you can spend. Typical middle class trappings aren’t a concern, upper class trappings are inaccessible. So what do you do? Personally I’m dumping it into index funds and business ideas. Maybe thinking about buying a house soonish.
  - egypturnash 6y ago
    All the art of your fursona you could ever want.
tunesmith 6y ago
Boy, I don't understand this scenario at all. At 150-200k/year, a lot of people are just going to try and save like crazy. CAPE is high, financial planners are saying that "safe withdrawal rates" are no longer 4% or even 3.25%, but below even 2.5% - even if you're not in the very HCOL areas, you're looking at needing to save more than three million dollars to retire, which can take a very long time when expecting muted market returns in the future.
- Swizec 6y ago
  > a lot of people are just going to try and save like crazy Exactly. You save the money you don’t know how to meaningfully use right now.
- gshubert17 6y ago
  I can see using a lower withdrawal rate (approximating the yield on 10-year treasury bonds) if one is investing mostly in bonds. But two caveats: (1) Adding stocks to one's portfolio makes it easier to succeed with a 4% withdrawal rate in very low interest-rate environments: https://thepoorswiss.com/updated-trinity-study/ https://thepoorswiss.com/updated-trinity-study/ (2) Life expectancy. People who retire at a young age, should use a lower withdrawal rate. But a person age 75, expecting to die before age 100, could have a withdrawal rate of roughly 4% (reciprocal of 100-75) in a zero-interest-rate environment.
dnhz 6y ago
Kids are expensive, especially if going the private school route.
fossuser 6y ago
A Bay Area house that isn’t total trash is easily 3M on the peninsula. Elsewhere, yeah - you’d be fine if you don’t spend stupidly.
- fossuser 6y ago
  For an example: https://www.redfin.com/CA/Palo-Alto/3785-Park-Blvd-94306/home/1149731 https://www.redfin.com/CA/Palo-Alto/3785-Park-Blvd-94306/hom...

bobthepanda 6y ago

Personally, my issue with the term "sloshing" is that it implies the money is floating around in liquid form ready to tick up inflation. It's not. There are a lot of places where this money has gone that are illiquid though. One would be American property; for most households a good chunk of their wealth is their house. In high-COL, high-property areas the main thing preventing a fall in house price is the lack of supply. Another part of it is China and other countries with large amounts of USD. China has tight capital controls though so none of that money is about to leave suddenly any time soon. but if a big chunk left at once it would probably make the 1998 Asian capital flight look like child's play. Some countries like Saudi Arabia are trying to figure out how to spend it; Vision Fund literally created (and destroyed) very big companies in very short order. When Japan had this problem the hangover lasted for a decade, and depending on your view may even be continuing to this day. Of course, the market can stay irrational longer than you can stay solvent, so these things are mostly theoretical until they're not. But no use holding your breath trying to wait for it.

headmelted 6y ago
Exactly all of this. A lot of people (myself included) are just kind of nervously waiting for the other shoe to drop. That the money exists but isn’t moving through the economy means that we’re essentially building more pressure in a system that is already at 0% interest rates. This should be concerning to everyone. The absence of velocity will encourage central banks to print more money in the belief that it will encourage spending when it clearly hasn’t done that. If in the future we start exiting our homes and going on vacations again the velocity could shoot up sharply - at which point a lot more money is moving into the system all at once. By then, there’s a good chance the horse has bolted for capping inflation.
- throw0101a 6y ago
  > That the money exists but isn’t moving through the economy means that we’re essentially building more pressure in a system that is already at 0% interest rates. You're not wrong, but it's a problem I'd "like" to have: too much economic activity. I'd rather worry about inflation and things running hot, with low unemployment (or high participation rate), than the opposite. Remember late 2019, when the US unemployment rate was 3.5%? * https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE > The absence of velocity will encourage central banks to print more money in the belief that it will encourage spending when it clearly hasn’t done that. When the central bank's rate is zero, they're flooding the market with liquidity, and bond yields are zero (or negative), then that's a signal for governments to open the taps: > I would summarize the Keynesian view in terms of four points: > 1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond. > 2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain. > 3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down. > 4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses. * https://krugman.blogs.nytimes.com/2015/09/15/keynesianism-explained/ https://krugman.blogs.nytimes.com/2015/09/15/keynesianism-ex... When rates are non-zero and bond yields are high(er), then it is dangerous to print money, and government spending could 'crowd out' private economic activity.