39 ms·

I don't understand the last sentence, can you expound on what you mean?

Guvante 3y ago
By most metrics used to measure economic success the economy as a whole is most "healthy" (aka productive) with little if any saving going on. Obviously that isn't true on smaller scales, living paycheck to paycheck isn't considered a good thing. It just means it is nuanced to discuss these problems from a Macroeconomic perspective. On the one hand saving a little is good for individuals on the other spending is better for the "economy".
anonporridge 3y ago
I think they mean that traditional economic wisdom is that high savings slows economic growth while high spending accelerates it. So, from the perspective of economic growth, we want people to spend as much as possible, not save. Beyond the money itself that is spent that spurs growth, you also can add on the fact that people with minimal savings are forced to work to survive. People with lots of savings are more inclined to lounge around and be unproductive. Of course, one could also argue that people with minimal savings are less creative, because they're in constant survival mode and grinding out the style of work they've always done.
- erikerikson 3y ago
  > we want people to spend as much as possible, That feels like a perversion of the credit industry. We can clarify that we want people to have as much excess income as possible, spending a fair percentage of it. If they're spending more than a sustainable amount, they are incurring excess and efficiencies and/or deficit spending which will have a suppressive effect on spending over the long term.
yndoendo 3y ago
Spending $5 on coffee is an economic transaction that lets that business use money to pay their employees, service their infrastructure, or re-invest in a new brewer; business to business transactions. Holding that $5 prevents any business to business transactions and possibly causes the company to constrict employees economy mobility or requires laying people off. By making the 1% richer through reduced taxation is actually economically harmful in the long run and reduces economic mobility. Same as politicians supporting budget cuts.
- creer 3y ago
  "Holding that $5" means invested in ownership of the busines, investing in its future (including better machines, more locations, more employees), and incentives all around to keep it productive and healthy. If money simply rotates between customer and employee, that business never existed in the first place - because somebody had to invest in the first machine, coffee, location, etc.
  - godelski 3y ago
    > "Holding that $5" means invested in ownership of the busines, investing in its future (including better machines, more locations, more employees), and incentives all around to keep it productive and healthy. 1) That's not what the parent meant by "holding that $5." They didn't mean investing it, they meant electing not to spend it. It isn't used to buy coffee, not is it put in the bank, it is put under the mattress (per say). 2) That is not how modern investing works. If you invest $5 into a company, that company does not get $5 to grow their business. Modern investing is quite different than the idea many of us were taught as a kid. Angel and seed investing are more related to this concept you are implying, but not the type of investing most people do: i.e. buying something on the NYSE. That kind of investing has extremely different metrics for success that do not necessarily rely on generating better products or even a "better business." (different metrics are often used to define this -- state yours and you'll start a hot thread -- so quotes)
    - creer 3y ago
      I think several of us in here were responding to @yndoendo's view of economics. The "coffee shop" was just their chosen example and we were not trying for an exhaustive treaty on economics. I don't have statistics on how much money is "under the mattress". I expect little enough that I don't need it. All the more so when our oh-so diligent govt mostly doesn't care either and navigates based on "money supply" actually in circulation. Happy to be corrected if someone has data.
      - yndoendo 3y ago
deleted 3y ago
[deleted]
badcppdev 3y ago
To paraphrase (and fix a typo) If the economy is a car then people saving extra is the equivalent of hitting the brake pedal and people spending more is the equivalent of hitting the accelerator (or gas) pedal. So the huge cash reserves of large companies are a brake on the economy which is why all the politicians are so keen to increase corporation tax /s
- parineum 3y ago
  > So the huge cash reserves of large companies are a brake on the economy which is why all the politicians are so keen to increase corporation tax /s I don't really understand how increasing corporate tax could encourage corporate spending. It seems to me the opposite is the obvious mechanism. The more money that goes to the government, the less money a corporation has to put into the economy. If the corporation is in a "save" mode, they're more likely to spend less if they are taxed more than they are to continue the same spending and save less. Maybe that's not what you're saying or maybe the effect is different than I'd expect (economics is weird sometimes) but I don't get your point there.
  - _huayra_ 3y ago
    IANAA, but my understanding is that corporate profits are taxed, but there are many deductions available for business expenses. If you tax profits more, businesses would be less inclined to take profits, and more inclined to reinvest that in additional steps to expand the business (e.g. buying more equipment). These expenses have a multiplier expense, increasing money velocity and "pushing the gas pedal" on the economy.
    - parineum 3y ago
      Ah, I guess that makes sense but I still don't see how taking more deductions (spending) could lead to the goal of saving unless that spending was and investment like real estate.
      - _huayra_ 3y ago

By most metrics used to measure economic success the economy as a whole is most "healthy" (aka productive) with little if any saving going on. Obviously that isn't true on smaller scales, living paycheck to paycheck isn't considered a good thing. It just means it is nuanced to discuss these problems from a Macroeconomic perspective. On the one hand saving a little is good for individuals on the other spending is better for the "economy".

anonporridge 3y ago

I think they mean that traditional economic wisdom is that high savings slows economic growth while high spending accelerates it. So, from the perspective of economic growth, we want people to spend as much as possible, not save. Beyond the money itself that is spent that spurs growth, you also can add on the fact that people with minimal savings are forced to work to survive. People with lots of savings are more inclined to lounge around and be unproductive. Of course, one could also argue that people with minimal savings are less creative, because they're in constant survival mode and grinding out the style of work they've always done.

erikerikson 3y ago
> we want people to spend as much as possible, That feels like a perversion of the credit industry. We can clarify that we want people to have as much excess income as possible, spending a fair percentage of it. If they're spending more than a sustainable amount, they are incurring excess and efficiencies and/or deficit spending which will have a suppressive effect on spending over the long term.

yndoendo 3y ago

Spending $5 on coffee is an economic transaction that lets that business use money to pay their employees, service their infrastructure, or re-invest in a new brewer; business to business transactions. Holding that $5 prevents any business to business transactions and possibly causes the company to constrict employees economy mobility or requires laying people off. By making the 1% richer through reduced taxation is actually economically harmful in the long run and reduces economic mobility. Same as politicians supporting budget cuts.

creer 3y ago
"Holding that $5" means invested in ownership of the busines, investing in its future (including better machines, more locations, more employees), and incentives all around to keep it productive and healthy. If money simply rotates between customer and employee, that business never existed in the first place - because somebody had to invest in the first machine, coffee, location, etc.
- godelski 3y ago
  > "Holding that $5" means invested in ownership of the busines, investing in its future (including better machines, more locations, more employees), and incentives all around to keep it productive and healthy. 1) That's not what the parent meant by "holding that $5." They didn't mean investing it, they meant electing not to spend it. It isn't used to buy coffee, not is it put in the bank, it is put under the mattress (per say). 2) That is not how modern investing works. If you invest $5 into a company, that company does not get $5 to grow their business. Modern investing is quite different than the idea many of us were taught as a kid. Angel and seed investing are more related to this concept you are implying, but not the type of investing most people do: i.e. buying something on the NYSE. That kind of investing has extremely different metrics for success that do not necessarily rely on generating better products or even a "better business." (different metrics are often used to define this -- state yours and you'll start a hot thread -- so quotes)
  - creer 3y ago
    I think several of us in here were responding to @yndoendo's view of economics. The "coffee shop" was just their chosen example and we were not trying for an exhaustive treaty on economics. I don't have statistics on how much money is "under the mattress". I expect little enough that I don't need it. All the more so when our oh-so diligent govt mostly doesn't care either and navigates based on "money supply" actually in circulation. Happy to be corrected if someone has data.
    - yndoendo 3y ago

deleted 3y ago

[deleted]

badcppdev 3y ago

To paraphrase (and fix a typo) If the economy is a car then people saving extra is the equivalent of hitting the brake pedal and people spending more is the equivalent of hitting the accelerator (or gas) pedal. So the huge cash reserves of large companies are a brake on the economy which is why all the politicians are so keen to increase corporation tax /s

parineum 3y ago
> So the huge cash reserves of large companies are a brake on the economy which is why all the politicians are so keen to increase corporation tax /s I don't really understand how increasing corporate tax could encourage corporate spending. It seems to me the opposite is the obvious mechanism. The more money that goes to the government, the less money a corporation has to put into the economy. If the corporation is in a "save" mode, they're more likely to spend less if they are taxed more than they are to continue the same spending and save less. Maybe that's not what you're saying or maybe the effect is different than I'd expect (economics is weird sometimes) but I don't get your point there.
- _huayra_ 3y ago
  IANAA, but my understanding is that corporate profits are taxed, but there are many deductions available for business expenses. If you tax profits more, businesses would be less inclined to take profits, and more inclined to reinvest that in additional steps to expand the business (e.g. buying more equipment). These expenses have a multiplier expense, increasing money velocity and "pushing the gas pedal" on the economy.
  - parineum 3y ago
    Ah, I guess that makes sense but I still don't see how taking more deductions (spending) could lead to the goal of saving unless that spending was and investment like real estate.
    - _huayra_ 3y ago