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Unlike Hanauer and other 1%-ers, middle class people spend almost every penny they make, and this spending becomes revenue for companies started and owned by pe

Unlike Hanauer and other 1%-ers, middle class people spend almost every penny they make, and this spending becomes revenue for companies started and owned by people like Hanauer. The same is true for the rich as well. Much of what they earn is consumed directly. But for anything that's not, it's surely not being hidden under a mattress (they didn't get to be rich by losing out to inflation). Instead, these people are investing it or saving it. If they just save it in a bank account, then the bank is (less the fractional reserve portion) loaning it back out to somebody else, probably providing the means for a non-rich-person to finance a house or a car or a new business. That is, it's being spent by the person taking out the loan. If they invest the money, then it's providing the capital for business, which is even better. That business might spend it (there it is again - spending) to buy new machinery, or they might expand operations and hire more workers, etc. Any way you slice it, other than the part that's held back in fractional reserve, the large incomes of the rich do get spent. Either they spend directly, or they let someone else use it for their own spending.

asgard1024 12y ago
Depending on what you mean by "spending". I see spending as an irreversible process, where someone actually decides how to convert resources to products. You could say the more you do that, the bigger the economy. However, rich people don't engage in this sort of spending as much. Lot of their "spending" is in reality just circulation of money through rent extraction. And it's important for them to do that, because that allows them to keep their power. For instance, if they loan it to a person, that person becomes dependent on them. Your idea is based on flawed premise that one has only two rational options what to do with money - invest (in a narrow sense, to make actual decision how to convert one resource to another) or consume. In reality, there is a third option, which is similar to saving, that is investing money in power grabbing and rent extraction. While saving doesn't give you an advantage to other players, the rent extraction may. This was already explained by Marx long time ago, when he described the capitalist as someone who wants to create more money from money he has through profit from investment. And more recently this was explained by Piketty, that you can have a situation in economy where rich people try to "invest" into rent extraction and not producing more goods or services.
- CWuestefeld 12y ago
  Be that as it may, it's not the claim the article was making. The claim was that rich people don't lead to growth because much of their money sits idle, and thus cannot "trickle down" by being used in the economy. The moral effects that you outline aside, you seem to agree that the portion of their money that the rich don't spend themselves, they're allowing to be spent by another person. Thus while you may dislike the moral implications, you seem to agree with my assessment that the claims of the article are incorrect.
  - asgard1024 12y ago
    > you seem to agree that the portion of their money that the rich don't spend themselves, they're allowing to be spent by another person Not really. If I give you 1000$ it's a different thing than when I just lend you 1000$. In both cases you have discretion to spend it, but in the latter case, you have much less freedom, because you need to return it back (and more). What I am saying is that economy as a whole can store a large portion of money in such contracts, not really producing much of anything (because of the constraints placed to the borrower). Still, it's a rational thing to do for rich people because it allows to keep them power. So in this sense, the money are "idling" - by circulating around in contracts that have to be honored.

asgard1024 12y ago

Depending on what you mean by "spending". I see spending as an irreversible process, where someone actually decides how to convert resources to products. You could say the more you do that, the bigger the economy. However, rich people don't engage in this sort of spending as much. Lot of their "spending" is in reality just circulation of money through rent extraction. And it's important for them to do that, because that allows them to keep their power. For instance, if they loan it to a person, that person becomes dependent on them. Your idea is based on flawed premise that one has only two rational options what to do with money - invest (in a narrow sense, to make actual decision how to convert one resource to another) or consume. In reality, there is a third option, which is similar to saving, that is investing money in power grabbing and rent extraction. While saving doesn't give you an advantage to other players, the rent extraction may. This was already explained by Marx long time ago, when he described the capitalist as someone who wants to create more money from money he has through profit from investment. And more recently this was explained by Piketty, that you can have a situation in economy where rich people try to "invest" into rent extraction and not producing more goods or services.

CWuestefeld 12y ago
Be that as it may, it's not the claim the article was making. The claim was that rich people don't lead to growth because much of their money sits idle, and thus cannot "trickle down" by being used in the economy. The moral effects that you outline aside, you seem to agree that the portion of their money that the rich don't spend themselves, they're allowing to be spent by another person. Thus while you may dislike the moral implications, you seem to agree with my assessment that the claims of the article are incorrect.
- asgard1024 12y ago
  > you seem to agree that the portion of their money that the rich don't spend themselves, they're allowing to be spent by another person Not really. If I give you 1000$ it's a different thing than when I just lend you 1000$. In both cases you have discretion to spend it, but in the latter case, you have much less freedom, because you need to return it back (and more). What I am saying is that economy as a whole can store a large portion of money in such contracts, not really producing much of anything (because of the constraints placed to the borrower). Still, it's a rational thing to do for rich people because it allows to keep them power. So in this sense, the money are "idling" - by circulating around in contracts that have to be honored.