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Inflation is a tax on idle money. Inflation is generally around 3%, so it costs 3% of your money for it to be "liquid" (idle). This means most people aren't goi

• julienreszka 4y ago
  Even if what you say is true it is probably still interesting to know how much liquidity people keep around at most
  • quickthrower2 4y ago
    It will probably be spikey. Someone gets loads of cash from selling X and before buying Y. Probably people getting out of crypto at the top would be on such a list for a week or two.
  • joshxyz 4y ago
    questions for plato and pablo escobar (at his prime)
• imtringued 4y ago
  The rich keep 10% of their portfolios liquid to react quickly during "fire sales" like right now when house prices fall. The rich have very little cash as a percentage of net worth, they still have higher absolute levels than the not rich. I don't know why this internet meme is so popular. If all the rich people don't have money than who are the people with money if they aren't rich? Did we somehow manage to wealth equality with money? By cash I also include cash equivalents like treasuries with very short durations. Also, as counterproductive as it might sound, banks give more loans to those who already have money, so if you assume that the rich have enormous lines of credit it is precisely because they have liquid cash in case their debt based investments perform less than than they hoped. What you are right about is that central banks want people to use cash as a medium of exchange so 3% inflation is basically a "circulation safeguard". The problem with this inflation is that it only exists because you cannot charge a 3% fee on cash directly. If you could do that then 0% inflation would be optimal.
  • Jabbles 4y ago
    > like right now when house prices fall Please specify which market you're talking about.
    • deleted 4y ago
      [deleted]
    • lostmsu 4y ago
      Anecdotally, there's a 20%+ drop from the highs of last winter in the Greater Seattle Area.
  • nl 4y ago
    > The rich keep 10% of their portfolios liquid While it's true most rich do keep a proportion of their portfolio in liquid assets, this doesn't imply cash: > Cash equivalents are typically investments that have short-term maturities of less than 90 days and are considered liquid assets because they can be readily converted to cash. > Stocks and marketable securities > U.S. Treasuries and bonds > Mutual funds > Money-market funds https://www.investopedia.com/ask/answers/032715/what-items-are-considered-liquid-assets.asp https://www.investopedia.com/ask/answers/032715/what-items-a...
  • whimsicalism 4y ago
    > somehow manage to wealth equality with money Certainly the gini coefficient of actual cash is lower than what it is if you take into account other assets.
  • deleted 4y ago
    [deleted]
  • hayst4ck 4y ago
    > The problem with this inflation is that it only exists because you cannot charge a 3% fee on cash directly. If you could do that then 0% inflation would be optimal. My understanding is that because the US Dollar is the reserve currency of the world we can devalue it via inflation to effectively take value from other countries by reducing the value of what they hold as well as reducing the "cost" of our debt. Since trades are conducted in dollars, dollars will still be purchased, even though they are a "poorly performing" asset? So we can effectively fund the war in Ukraine directly with inflation. A tax was levied in the form of inflation, it was tolerated because it's not a "tax," and that tax is an extremely regressive tax on liquid cash. Inflation has effectively made labor cheaper too, making it even more regressive. I guess what I'm asking is, why is 0 optimal? Isn't it more of a choice with consequences? Isn't optimal inflation probably not 0 if we are the reserve currency? (I'm definitely throwing around some ideas I barely have a grasp of).
• JohnJamesRambo 4y ago
  It makes sense to me because Elon or Bezos couldn’t cash out a fraction of their stock without crashing it. I’d be interested in who is truly wealthy and liquid and diversified.
  • whimsicalism 4y ago
    Wealthy and diversified is different from holding a bunch of cash.
    • JohnJamesRambo 4y ago
      This is true but holding cash while this happens isn’t great either. https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL I guess I’m looking for who is exceeding inflation and still making gains while not exposed to being decimated by a stock crash and definitely not almost all their net worth tied to one stock of a business they own.
      • whimsicalism 4y ago
        Add a chart with monetary velocity next.
  • z3t4 4y ago
    I guess the most wealthy man is the one who can get the biggest loan? The stock market however is an inflated balloon, if you just look at revenue the stock is mostly air/speculation.
  • lupire 4y ago
    It's a good thing to wonder about, but it's like asking the exact position of an electron at a given time. There will never be a single numerical answer.
  • thrill 4y ago
    Sure they could cash out without going through the public market. It's "easy enough" to arrange sales of large numbers of shares in private transactions. For Musk levels of money there's have to be more than a few such arrangements. Depending on the buyer's desire for that stock, it can even be profitable, as they similarly couldn't publicly buy such a large quantity without wild market swings.
• JoshTriplett 4y ago
  In particular, even if you don't have stock in your own company, you'd still likely want to invest most of your assets. I would guess that a list of people holding large quantities of cash would, roughly speaking, contain two groups: people who don't manage their wealth very well, and currency traders/speculators who are holding cash itself as an asset.
• NewEntryHN 4y ago
  Doesn't Warren Buffett have like $60 billions in cash?
  • known 4y ago
  • em500 4y ago
    Who knows? Seriously, think about this for a moment. Who could have such information, and why would they divulge it?
    • kwhitefoot 4y ago
      The bank, the government, the tax authorities. In this country, Norway, the last of those does indeed divulge it because anyone can access anyone else's tax return.
      • em500 4y ago
        1. Even if he'd be mad enough to put 60B in one bank(-account), it's strictly forbidden for anyone who could access such information to divulge it. In reality, people who need to hold very large sums of liquidity (which is a very rare requirement if you really think about it) use short term treasuries and/or the money market. 2. What's the relevance of Norways idiosyncratic laws in this discussion? In almost every other country in the world (including the most of Europe) the government / tax authorities consider such information strictly private.
        • kwhitefoot 4y ago
          The relevance is making people aware that secrecy is a choice not a natural law. And while it is not common it is not only Norway that does this, it's a Nordic thing, with the exception of Denmark (which has had tax scandals that would have been found out sooner had the records been public!).
  • lupire 4y ago
• instagraham 4y ago
  It's still more complicated than this though, isn't it. Our inflation numbers are essentially polled perceptions of how much average prices rise. Depending on your lifestyle and what you spend on, you may not necessarily spend as much more per month as inflation percentages suggest. A family living cheque to cheque will feel the burn a lot more since the majority of their purchases go to groceries and things that do go up with inflation. But a billionaire whose cash expense is marginal compared to their worth probably wouldn't notice - or have cause to care. For example, if your liquid cash is going to pay things that are not rising in price, but your other cash is in a savings account earning interest, wouldn't you be relatively less affected by inflation?
• voisin 4y ago
  > Inflation is a tax on idle money. Inflation is generally around 3%, so it costs 3% of your money for it to be "liquid" (idle). I hear this all the time. Inflation measured by CPI is not a tax on the cash held by the rich. The basket measured by CPI is a rounding error to that level of wealth. If you held even $1 million in cash, you need to look at the things you buy with that cash as investments and compare how those values have been changing. For example, if you were a tech investor, you’ve seen far greater than CPI level inflation in the assets you buy over the last 5 years, so holding as cash wasn’t very smart. But if you blindly dumped cash into tech this year to avoid “inflation tax” then you missed out on massive deflation in the asset you buy. Zooming out to the wealthy, consider commodities, real estate, bonds, stocks, etc. most asset classes have crashed, so holding cash isn’t necessarily a bad idea (at least, it certainly isn’t a bad idea because “inflation is running hot”).
  • benj111 4y ago
    Over time stocks tend to beat inflation. Looking at one small window of time is just wrong. Plus if you just look at liquid assets you miss how these people actually made their money. Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns?
    • voisin 4y ago
      > Over time stocks tend to beat inflation. Looking at one small window of time is just wrong. It is wrong only if someone is sitting in cash for long periods of time. A poor person needing to buy groceries every week is seriously affected by CPI inflation. A rich person holding onto significant cash because they view asset prices to decline is actually experiencing deflation in the thing they want to buy and CPI for that person is utterly irrelevant. The long term return of stocks is irrelevant to this discussion. > Plus if you just look at liquid assets you miss how these people actually made their money. Not sure what you are getting at here, but it is beside the point I am making that CPI is not relevant to the wealthy holding cash. > Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns? Again, this isn’t something that affects the wealthy. If a wealthy person wanted to buy META a year ago, the price has declined 70% since then, so the asset you wanted to buy has experienced deflation giving you a better entry point, regardless of CPI inflation. Replace META with almost any other asset and the same statement is true over the last year or so.
• moralestapia 4y ago
  Huh? Is this stack overflow? OP asked a very specific thing, not for this (very) amateurish lesson on "rich people and taxes".