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Most assets, both stocks and fine art, are bought and sold between relatively rich people not from the person or company who originally issued the asset. Consi
by 0xEFF 4y ago
Most assets, both stocks and fine art, are bought and sold between relatively rich people not from the person or company who originally issued the asset.
Consider a house, the builder sells it once, but it gets bought and sold on average every 7 years subsequently.
- WalterBright 4y agoLet's say Richie Rich buys a painting from Willy Wealthy for $100,000. Now Willy has an extra $100,000. What's he going to do with it? There's an entire industry of artists making art to sell to the Richie Riches and Willy Wealthies of the world, and this has been going on since antiquity. Why do you think all that medieval Italian art was created? It was rich Italians patronizing the artists. The same with real estate. In the meantime, while someone owns a house, they gotta pay others for insurance, repairs, maintenance, taxes, etc. Even buying the house will cost you 6% going to the starving real estate agent. Owning a house is very expensive, not counting the purchase price.
- nerdponx 4y agoThe money does flow back into the economy, but it's extremely diluted in that the surplus obtained by any individual "downstream" of great wealth is small. Meanwhile, the people spending all that money are the same people setting things up to ensure that surplus flows back to... themselves. So the wealthy people spend money, the people who manufacture their stuff and provide their services get as little surplus as possible without inciting them to riot, and the remainder goes right back to some other wealthy person, and then the process repeats. There's no guarantee that surplus/welfare/utility flows along with the money, and it should be obvious to any observer that it definitely does not in practice. The tired old argument that wealth accumulation doesn't really exist because the money all eventually goes "back into the economy" has always been an insulting hand-wave that is neither a principled model nor in agreement with basic facts about the economy.
- WalterBright 4y agoWhat is missing from your comment is the wealthy get that way by creating wealth, not by taking it from others. (This is why the economy grows - wealth creation.) The government, on the other hand, gets money by taking it.
- dragonwriter 4y ago> What is missing from your comment is the wealthy get that way by creating wealth, not by taking it from others. Its missing, because it is mostly not true. The wealthy predominantly get wealthy by getting other people to create wealth, and taking it from them via contracts relying on imbalances of power and econonic coercion (in a fairly benign modern capitalist system; is less benign, less modern, emerging (or pre-) capitalist systems, the coercion is often jist direct threat or application of force rather than the economic coercion of the inherent precariousness of the working class in capitalist society.
- WalterBright 4y agoWell, that's definitely the Marxist point of view of things. Everybody in a business is creating the wealth of the business, and they get their share of the created wealth in the form of pay and benefits. Unsurprisingly, their compensation is in proportion to the value they add (i.e. the wealth their contributions create). It is not a system based on forcing anyone. The cooperation is voluntary, with their compensation set by supply+demand.
- aaomidi 4y agoWhen choice for one side is hunger vs giving up labor, and the other side is a tiny bit more profit, or a tiny bit less profit - that’s not a choice. Power imbalance does not make for informed consent.
- WalterBright 4y agoIf you were right, everyone would be working for minimum wage. But they aren't. Only 1.5% work for minimum wage.
- gnicholas 4y agoWhen houses are sold, realtors get a percentage of the gross sale price (not just the gain), staging companies are brought in, painters and handymen are hired, and title companies, mortgage lenders, and assessors all get work. The local government also gets paid, in the form of transfer taxes. These don't apply to all big ticket items, but since you mentioned houses, I thought I'd flesh out the picture on who benefits from buying/selling activity. It's worth noting that all of these people get paid, regardless of whether the home seller made money or lost money on the home (or how much). So in a strong market, they will get a small share of the gains. But in a down market, the seller may make nothing, while these service providers all get paid.
- WalterBright 4y agoBuying existing art means paying vig to the auction houses, appraisers, curators, restorers, insurers, and security people.