Re:Just Be Rich
by claudiawerner on Tuesday April 13, 2021 @05:19AM
(#26789936)
I'm curious what it means to say that savings must be invested. I have an account with an online broker/trading platform in which I put a portion of my money each month (most goes into stocks, some into ETFs). I think that counts as investing, but I also save money in the bank for paying bills, rent, food, and emergencies. That's not invested, and it makes up a large portion of my 'wealth'.
I think that in that context, investing means putting money back in circulation. For example you invest in a company and that money goes to pay providers, salaries, taxes, etc. It gets back into circulation straight away. But I don't think that's the case with most stocks and ETFs, most of that money just circulates in the stock market for speculation, maybe a small part of it goes back with comissions and brokers and taxes, but it doesn't do that much good in the overall economy.
Re:Just Be Rich
by everybodyknows on Tuesday April 13, 2021 @09:43AM
(#26792007)
>save money in the bank
This money is effectively lent to the bank, which will then re-lend it. A small share to the Federal Reserve, the rest to mortgage holders, businesses trying to meet payroll and so on.
Then the textbook is wrong though. Most sciences operate by postulating models and then verifying experimentally whether their models hold up in practice. Economics is the only science I know of that seems to have almost a disdain for experimental verification, combined with the comically arrogant attitude that if reality doesn't conform to their models, then surely reality must be wrong.
The underlying problem is that the economy is breaking basic macroeconomic equations, namely that savings must be invested. A wealth tax would force such an outcome. This is unpopular for republicans. Government investment would force such an outcome. It's still unpopular for republicans. Building more houses would force such an outcome, it's unpopular for democrats. Deeply negative interest rates for consumers would force such an outcome except that cannot happen because people will just hoard cash.
I can list more and more things. The pattern is clear, all the options are disappearing and we are left with nothing to do. The reason why economics doesn't work isn't that the textbook is wrong, it's that people come up with more and more sophisticated ways to prevent the textbook rules from functioning.