I've been thinking that recently too, although it's possible that I'm only now paying attention because I've finally become someone who has enough money to ask "what do I do with my surplus money?". That's not something I had to concern myself with 10 or 20 years ago.

Some folks will rightly point out that there have always been fads, but things feel quite outlandish these days with GME/Wallstreetbets, Bitcoin, NFTs, SPACs. The stock market as a whole has done well over the past year, but it's been outpaced by stuff that feels like people counting on a greater fool. But then here I am on the sidelines, avoiding the riskiest stuff, and of course a bit envious of their returns, so who's really the fool? Shrug

Those same people could always go to an actual casino with only negative expected value games so why spend any thought on it? It seems so incongruent to suddenly care when someone decides to play a positive expected value game.

The only consequence is that people still dont want to give random entrepreneurs their money if they dont have a certain pedigree. Thats the best way for money to circulate in the economy and people dont have the confidence in that to do it. So expect greater market distortions while the government still attempts to get people to do the one thing they dont want to do. People will rather buy bonds at lower and negative yields for capital preservation, or they will rather buy collectibles and crypto for capital growth. The macro trend is clear.

Sigh. The lottery is a tax on stupidity.

This sentiment has been trotted out before but if I get $1 worth of entertainment from a lottery ticket then it's not a tax on anything. Most people don't expect to win the lottery but the thought of "what if" is worth the money they pay. And the money seems to go to good causes in most states so I can't see how anyone could criticize playing the lottery unless you're doing it with money you can't afford to lose. This is all supported by very simple economic principles, as well. You might as well say a $6 Starbucks coffee is a tax on stupidity.

On the other hand, if you do find the lottery entertaining - despite how irrational it is to do so - no amount of lecturing or calling you innumerate will change your mind. So you may as well buy the damn lottery ticket :)

This is the majority of lottery players, you know?

You don't get $400 million jackpots by rich people playing.

You get $400 million jackpots by fleecing a lot of poor people.

Per the US government, which tracks what people in different deciles actually spend on various things in surprising detail, the median US household has ~$1,000 in cash left over every month after all ordinary expenditures.

People consistently overestimate the cost of living in large parts of the US because they only visit the very expensive parts and imagine everyone spends money like they do. I have a long-time friend, a single mother with no outside financial support, who was able to buy a condo in a decent school district in a major midwestern metro on ~$15/hr with prudent planning. It took her a long time and it isn't in a suburb where bougie tech people would want to live but she seems pretty pleased with herself. I will admit to being surprised when she told me but she'd actually figured it all out within her constraints and was able to successfully work toward that goal on that wage. The way most people talk about it, this should be literally impossible.

That’s not necessarily true, since many people around or below the poverty line rely on government assistance to survive.

Also, the federal minimum is so low and our social safety net is so weak (virtually non existent), many people would be instantly screwed by any sort of drastic/expensive event. (Like unexpected illness or the loss of a job or a car accident.) Is a wage livable if you can’t live through times of trouble?

I'm sure there are parts of the US you can get by with less than $3 wage. I think out of the 600000 homeless people a fair share manages to do that without dying either. Doesn't mean you should.

> who was able to buy a condo in a decent school district in a major midwestern metro on ~$15/hr with prudent planning.

ok, sure but a lot of context is missing.

> It took her a long time

Is it paid off? How long will it take her to pay it off? If it is how did that happen? How much was the Condo. If not, what happens if she misses one payment?

Not sure what market that's in but my partner paid $150k in 2004 for a condo just ITP of Atlanta behind a run down shopping center in a gentrified neighborhood, the neighborhood still ain't great but the condo today it's worth around $250k which would require you to make around $40 an hour.

I'm really not trying to be the "citation needed" dick, but I would genuinely love to look at the source for this. What I found from googling was a hodgepodge of unreliable information, or studies that are decades old.

EDIT - just went straight to the source, since articles linking the source couldn't find it.

https://www.bls.gov/cex/tables/calendar-year/mean-item-share...

It roughly lines up, although it seems to be trending down recently.

These aren't those exact numbers but they're close enough to make the $1,000 number seem realistic.

The BLS calculates discretionary income by subtracting all ordinary expenditures from income in a given decile. Which is ~$1,000/month for the median household. Some of that leftover money may be spent on non-ordinary expenditures, like the odd expensive hobby or lifestyle flex, which is also captured in this table but is not included in the cost of living an ordinary life. I find this to be an eminently reasonable approach to inductively measuring the cost of an ordinary life without making a judgement if some spending is excessive or luxury. Spending money on a car is an ordinary expense, the BLS doesn't care if it is a Honda or a Ferrari, both are included.

This explains another apparent anomaly as well: ~35% of households have no meaningful discretionary income, yet only about ~15% (per Federal Reserve studies) have difficulty paying their bills. Because there is a substantial amount of luxury spending padding the ordinary costs of living, households in the 15-35% range have significant elasticity in how much they spend in some of these categories.

The calculator is pretty strange, though. A quick glance under the hood reveals that the calculator goes well out of its way to inflate the cost of living which is used to calculate the 'living wage' in a given area. They consider a mobile phone as a basic need, which makes sense. But when they calculated the cost of a mobile phone, they included the price of a new $200 phone every 2 years, and a plan that includes 10GB of mobile data per month! As a result, the expected monthly cost of a phone was ~3x what I pay. When pricing broadband internet, they said $60/mo was the lowest they could find in my area, which again was ~3x my own monthly expense. The transportation allowance was so high as to be roughly equivalent to the payment+insurance on a 1-2 year old Toyota Corolla. For the food allowance, they arbitrarily chose the 'second cheapest' FDA approved balanced meal plan price scheme, which added $60/mo in expenses for no reason whatsoever. That's where I quit investigating, but I would be surprised if those are the only living expenses which were so inflated.

I looked up both my low cost birth county in Montana and my current high cost home county in Washington. Both had a budget of about $5,000 a year for transportation. Which, ignoring all maintenance, fuel and registration costs would leave you with about $300 per month after meeting most state minimum insurance requirements and full coverage. That's the payment on about a $15,000 car financed over 60 months, if you have good credit. Not a beater by any means but honestly that's pretty much the value sweet spot in terms of getting a reliable used car. You could get more car by ditching full coverage but as Dave Ramsey says, "you insure the things you cannot afford to replace." Your sole mode of getting to work seems like a thing you probably can't afford to replace on minimum wage. Again, you can play with the numbers but I already threw your argument the bone of ignoring, fuel, maintenance and licensing costs. A nontrivial sum.

Regardless, I'm not sure why your argument takes as it's premise that a living wage should represent the minimum a person needs to get by in our modern world. Why is that the default standard?

Edit: When I think about it more, isn't that kind of the whole point of a proposing a living wage over a minimum wage? People proposing it believe that we shouldn't peg wages to the minimum a person needs but rather to some fulfilling standard of living?

I think it depends on what we intend on doing with living wage as a measure. Typically I see it called out as a safety net minimum for what people should make. Frequently mentioned as a floor for minimum wage talks.

So if it’s a baseline then it should be the minimum. If It’s some median target then that’s different.

I don’t think it’s useful to have a median target because it’s so arbitrary depending on individual circumstances and desires.

But what’s odd about your argument is that the federal minimum wage ought to be $12-13/hour if it had simply been adjusted for inflation since the late 1960s. So by that measure, we value “unskilled” labor even LESS than we did half a century ago.

If we had adjusted minimum wage for productivity growth, it’d be about $21/hour right now.

So I think we ought to have a nationwide federal minimum wage minimum of $12.50-15/hour, adjust it for inflation continually, but also adjust for local cost of living so that the nationwide average (average of regions) minimum wage is around $21/hour, continually adjusted each year for cost of living.

And I am not worried about automation increasing unemployment over the long term. We should have targeted efforts to increase employment rate if there are periods of disemployment from disruptive automation, but we have more jobs now than we did a century or two ago in spite of two centuries of increased automation and mechanization.

One big risk here, or with any cyclically referenced benchmark, is runaway positive feedback. This can be exponential growth, oscillation, or exponentially growing oscillation.

If wages are referenced to CoL, but CoL is affected by wages, you have this risk.

A real example I have encountered: years ago, before an area I was living in experienced hyper demand, rent prices were fairly stable. I was able to get decent places just under $1k. My landlord was pretty chill, but said that they had to raise the rent eventually because they couldn't write off expenses (or maybe it was losses) if they were charging below the area median rent. So every year, landlords would have to increase the rent to the median, which would almost certainly raise the median (unless literally the bottom 50% of prices were exactly the same), and then they have to raise again, etc.

Again, this is just excuse.

You can’t fix a lack of housing issue by keeping wages low.

Secondly, we’re talking about minimum wage, not all wages.

It's math. If f(x)=K * g(x-1), and g(x)=L * f(x-1), you need to be very careful about choosing values for K and L.

There's actual empirical research on minimum wage, and it doesn't support these claims of exponential cost increase: https://noahpinion.substack.com/p/why-15-minimum-wage-is-pre...

If you legally define the minimum wage as a formula instead of an absolute number, and that formula includes cost of living, you can create a runaway situation.

I don’t see why a simple adjustment for inflation or cost of living is bad and risky a priori but allowing it to decline over time is a priori good and not risky.

There is substantial bias in that assumption.

Have we ever witnessed an exponentially growing oscillation in a large scale economic feedback loop like this before? I'd never really considered that concept for macroeconomics.

Maybe the boom/bust business cycle, coupled with inflation, is exactly this phenomenon? Maybe social media frenzy is also a feedback phenomenon.

I also have a lot of family who currently live just fine making less than $15/hr. Their employers (small businesses) would have to raise prices (or go out of business, or both), which would raise costs, which would raise the CoL index, which would raise future minimum wages in a feedback cycle, if there is not some compensating factor in how wages and prices are set.

If the market would bear it and they could increase prices profitably, why wouldn’t they just do it today, regardless of wages?

The federal minimum wage in 1960 was $1.00 [1].

Adjusted for inflation, $1.00 in 1960 is equivalent to $8.86 in 2021 [2].

[1] https://www.cnn.com/interactive/2019/business/us-minimum-wag...

[2] https://www.dollartimes.com/inflation/items/1960-united-stat...

I used to believe this but the reality appears completely the opposite. If the US economy was vastly more productive then we should see capital investment in areas with huge unmet needs. Take healthcare as an example, one of the shining beacons of AI-assisted efficiency, a colossal failure to actually address healthcare needs cheaply and effectively. Real estate is another; here we are in a world of telecommuting and automated brick-laying machines - and prices are sky-rocketing in many areas despite apparent "urban exoduses". We have high quality printing for cheap, yet the art market has reached such peaks that it has spawned a market in owning an exclusive "token" that links you (the purchaser) to an artwork in an essentially ineffective way except as a speculative asset. Exclusivity is the name of the game, and those who afford to pay for it will pay through the nose.

Unskilled labour is cheap because there are a lot of skilled people also competing for it. They are competing for those low wages because the success of monetary policy has led to a situation where there is a greater return selling exclusivity and limitation than there is actually producing products to sell to everyone. Capital investment has become so overrun with cash we treat it as an expense (subscription, everything-as-a-service, etc) or as a bet in the hopes we hit a unicorn (PACS, bitcoin, etc).

The slow march back to fiscal policy will, hopefully, deflate a lot of this inefficiency. One might hope that we end up in the fertile lands between the territories of the fiscal and monetary hawks, but life isn't like that.

I suspect that ultimately, most are just there to out-innovate would be upstarts that might, perhaps, take some of their pie. But this doesn't have to go on forever, there already is the precedent of Google not dying at all from utterly failing with their Facebook counter. And that's just one example. I believe that the "productivity crisis" is actually much deeper than it seems because so many parts are glossed over by zero sum games taking up some of the overcapacity.

I won’t venture a head count figure for google without R&D but it’s probably a tiny fraction of current head count.

This story is a sign that I'm not the only one I guess that feels that way. The r/wallstreetbets story another example.

I think it's still middle class at best if the assets have to be sold to realize the gains. Full upperclass (IMO) means the ability to leverage assets to acquire even more assets (especially in down markets) without risk of catastrophic loss while funding a lavish lifestyle.

It's an important distinction because short of total economic or societal collapse, productive assets held as collateral continue to generate capital. One can raise large amounts of capital almost on demand with extremely favorable terms using those assets, essentially multiplying the wealth that the upperclass has at its disposal. Once they hit a certain scale, it's almost trivially easy to make modest but consistent returns on borrowed capital because investing is a lot like farming: being a farmer and owning a single farm is really risky due to unpredictable stuff like droughts, but being Tyson and owning farms all over the world is really low risk unless the entire planet is hit by a drought simultaneously, in which case everyone will get bailed out.

Imagine you own a hundred million dollars worth of Blockbuster franchises free and clear that generates a "paltry" $2 mil a year in profit. What do you do when your investment is threatened and Netflix IPOs at around a dollar in 2002? You go to the bank and get a $25 million loan to buy Netflix stock. Then in 2008 when it's at $5/share and the stores are barely generating enough money to cover the loan payments, you firesale the remaining Blockbuster assets to pay off the rest of the loan and laugh yourself to the bank after selling $125 million worth of Netflix stock for an annualized return of around 3% in a recession. That's a very contrived example but it illustrates the point: with productive assets, you can use the proceeds to pay the cost of hedging those assets. When you do that across a large, diverse portfolio, you have to try not to make money.

The way I see it: the underclass has to work hard to move upwards, the middle class has to work hard to stay where they are, and the upper class has to work hard to move downwards.

Not to get too soap boxy, but that's exactly how the upperclasses have used divide and conquer to hold onto disproportional political power. It seems "wrong" to you, but imagine we went back to the tax rates set in the Revenue Act of 1942 with brackets adjusted for inflation: a family with a single tech exec or engineer making 6 or 7 figures a year can live well within their means and still have to drastically cut back on their quality of life under those tax rates. Someone with a hundred million dollars of productive assets probably wouldn't notice a change in QoL at all, unless they measure it by yacht-foot or jet-seat.

Almost all of us are N paychecks away from bankruptcy. The only difference between us is what number N is.

There are people who do nothing and dividends from their assets pay for their lifestyle and grow their net worth forever without labor. Those are the few actual upper (economic) class people!

As returns on capital and assets start to vastly outperform returns on labor, you should be focusing not on what work you can do, but rather on what assets you can acquire and capitalize on.

>And a million dollars ain’t even what it used to be.

is a result of

>Yup, feels good when you cross the million dollar mark ASAP rather than building it up toward some distant future where you retire. Feels like I have more cushion for changing times....Feels like there’s more and more millionaires these days.

It used to be that you had to do something extraordinary to become a millionaire. Now all you need to do is have a high paying job and invest heavily in the right stocks for a few years to get there.

It is not because people are optimizing for becoming millionaires. Everyone has always been optimizing for more power.

It is because the federal government, which controls the currency, decided to increase the supply of currency, which shows up as increased asset values.

this is literally the labor/capital class divide Marx described.

So, you know... Happy May Day

Sensible? Different states and different parts of states have vastly different costs of living. The average wage in San Francisco is going to be different than rural Alabama. The non partisan Congressional Budget Office estimated that the proposed 2021 increase to $15 would have caused a loss of 1.4 million jobs. (And obviously would have been even a bigger effect 10 years ago.)

>...online inflation calculators say the modern number would be $18.22.

No, that is wrong.

The minimum wage started at .25 in 1938. If it had followed inflation it would be at $4.70.

The last time it was adjusted was 2009. If it had been adjusted for inflation since then, it would be about $8.95.

A more productive conversation would be to define the minimum quality of life that one should have, then calculate the cost of it, then divide by how many hours one “should” work to achieve that quality of life.

Should a person be able to own land in a tier 1/2/3 urban/suburban area? Should a person be entitled to healthcare with a certain out of pocket maximums(gold/silver/bronze)? Should someone be able to afford daycare for infants? How much should one have saved up by retirement date (which brings up its own cost calculation for expenses during retirement)?

That's not productive at all for the simple fact that you cannot legislate people into wealth.

The real minimum wage is and will always be zero, because that is how much workers who are less productive than the legal minimum will get.

Let's be clear as to what a minimum wage actually is, it's simply and exclusively making employing unproductive people illegal.

It does not, and can not ever help low value added workers for the simple reason that all it does is prohibit them from working.

It also gives raises to those whose productivity exceeds their negotiating power.

This assumes that everyone is in a similar situation in terms of trying to support a particular kind of lifestyle on whatever is deemed to be the minimum wage (or maybe two of them).

Should those same considerations apply to teenagers who are not trying to support that lifestyle themselves? What about the ones who _are_, including emancipated minors?

What about retirees who are working part time because they like to feel useful but generally not expecting to live off that money?

It feels to me that the right solution to the problem of us feeling that people in a certain situation (e.g. supporting kids) should have a certain minimum income is probably better solved via solutions like the EITC (which can be much more tailored based on overall financial situation), not a minimum wage.

Of course that gets some people arguing about the dignity of work and how receiving handouts rots people's souls. But I would argue that taxes are opaque enough that people receiving EITC don't perceive it as a "handout" anyway....

I think you've misunderstood egypturnash's comment here. They're saying that if the $15 dollar minimum wage proposed in 2010 had been adjusted for inflation since then, it would now be equivalent to $18.22. If you check an inflation calculator, $15 in 2010 is equivalent in purchasing power to $18.22 in 2021. The argument is not that the actual minimum wage of 2010 would now be equivalent to $18.22 today.

Workers that lived off the “trickle down” effect of the economy lost their jobs. The govt injected money and created policy to help keep those workers with food and shelter rather than let everything crash a year ago.

If you were a high skilled worker you never lost your job and you no longer had the same outlets to spend your money. You probably saved money and now have a surplus of cash. So a year later everything is frothy and real asset prices are on the rise. The Fed still doesn’t think we’re back to ‘normal’ yet so low interest rates and cash injection will continue.

And if you did things like proper art collectables or vintage rolex's. I did vaguely think about watches even looked at actual antique katanas or wood block print auctions.

This is less like Beanie Babies and more like the rare Magic the Gathering card economy. (Which is also a thing.)

The demographics are different too. Beanie Babies was mostly a suburban mom thing that came and went, whereas Pokemon cards appeal to computer nerds - many of whom have high paying engineer salaries.

There is something seriously broken for years now: unsustainably low interest rates drive a lot of money in desperate search for the most minuscule interest rates.

Venture capital in institutional form beyond former founders who got rich and want to return the favor would not exist - certainly not millions of dollars for a company called Yo. Real estate prices both for buy and rent worldwide are only affordable for those who are mega-rich as investors are the only ones who can put up the cash, and it's beginning to go the same way in agricultural land. Stock prices, despite a disastrous raging pandemic, are at all-time highs.

It's madness.

Why should the minimum wage be livable on its own? The minimum income obviously should, but why should people who can’t currently provide labor worth a “livable” wage in the market be excluded from productive engagement in the economy?

The minimum wage is a crude hack to prevent economic coercion of low-negotiating-power labor by capital, but a UBI funded by progressive income taxes which treat capital income similarly to other income, would serve that purpose more effectively.

I’d suspect that the owner values labor in multiples of the minimum, if the minimum wage were cut in half I’d expect the managers rate to similarly fall.

For low-bargaining power labor, having a progression from the minimum is probably a factor; OTOH, UBI eliminates the economic coercion that is a major contributor to low end labor having low bargaining power.

For labor what the combination of oversupply and economic coercion doesn't overwhelm normal market factors, competition among purchasers should result in wages @ the marginal value to the employer added.

When this many people feel that NFTs or Pokemon cards might be a better store of value than, say, the USD, it probably should be giving us some kind of shock, no?

And at this rate, we'll probably get that $15/hr wage soon enough. As you pointed out, the real question will be whether it actually buys more than the existing minimum wage once did.

we need to stop looking at simplistic crutches like the minimum wage (ubi too) as wins, as they further entrench systemic biases rather than alleviate them. don’t let moneyed interests buy us off in favor of these biases for pennies on the dollar.

This is because the Fed, as well as the entire US legislature, knows deep down that wages are the final "finger in the dyke" of the whole system collapsing. For wages to truly begin rising would send inflation spiraling out of control. It's only under check now because the asset owning class is reaping the benefits; not the vast majority of wage earning lower/middle class which is keeping consumer prices in check. Our entire monetary policy is now pinned on the fact that wages will lag gains of productivity and inflation, so that the almighty CPI rate can be held up as evidence for low inflation and the free money gravy train keeps rolling for the monied elite.

https://benjaminstudebaker.com/2015/07/23/misconceptions-rai...

For amusement value: the median house price in Jan 1968 was $163K in 2020 dollars. The median house price in 2020 was $300K. So really, minimum wage should be $24 an hour to bring you into Property Purchasing Power Parity™ with 1968.

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

“Why doesn’t the CPI include the cost of buying and financing houses as well as property taxes and home maintenance and improvement?

Houses and other residential structures are not consumption items and, therefore, should not be CPI items. All buildings and structures are capital goods, which are items that provide a service. In the case of houses and other residential structures, that service is shelter.

Buildings and structures are also investment items, things that are bought and resold in organized markets with a potential for gain. House prices frequently appreciate; in this respect they differ from consumer durables such as vehicles.”

Edit:

Downvoted for stating facts. From above:

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

“Why doesn’t the CPI include the cost of buying and financing houses as well as property taxes and home maintenance and improvement?

Houses and other residential structures are not consumption items and, therefore, should not be CPI items. All buildings and structures are capital goods, which are items that provide a service. In the case of houses and other residential structures, that service is shelter.

Buildings and structures are also investment items, things that are bought and resold in organized markets with a potential for gain. House prices frequently appreciate; in this respect they differ from consumer durables such as vehicles.”

This isn't so much a "fact" as it is a "position." In other words, the fact that the BLS uses this position in its definition does not make that definition the best possible definition, nor does it mean people have to accept that definition when they use the word "inflation" in a conversation.

There are loads of reasons why one might argue that house prices should be considered necessary expenses rather than investments. A particular area may have only houses for sale and very few rentals. Ownership provides things that cannot be achieved by renting. The appreciated value of a house is largely meaningless or even detrimental for people who just want to keep living where they live when their wages are not increasing. Etc.

Also, generally, quoting definitions unprompted isn't well received in most conversations :).

I believe we should focus on relieving the burden of the massive regulatory state on the poor. I.e. relax zoning and lower regressive taxes.

Signed, child and grandchild of union workers from Michigan

But they can't dig ditches in Korea and export them to the U.S.

The idea that employees are paid according to their value is entirely wrong. Employees are paid according to the labor market. The price of labor on the market is significantly controlled by supply, not the value to the employer of employing someone. Besides that, employers have much more power in the employment relationship. This is true even in tech. For example, the FAANGs got caught colluding with one another to suppress salaries via secret anti-poaching agreements a few years back.

https://www.cnn.com/2021/02/21/politics/minimum-wage-inflati...

https://www.cnn.com/2021/02/21/politics/minimum-wage-inflati...

Although, most think it was not over the 'past year'. It just became more visible lately, as the 'trust' in USD was overextended by a decade or two.

48K $USD for a post by an 'influencer' can be added to your list. [1]

Basically, the monetary value of perception appears to be orders of magnitude higher than the value of traditional things that were valued before, up-to-say, early 90s.

I have heard of a view, that overall - what we are seeing today are just symptoms of the imploding trust in USD as a reserve currency of the world. And in US as a trusted guardian of that status (suggesting that there is really no better alternative, apparently, no longer enough...)

There is really nothing to back up that reserver currency status of USD anymore:

-- not by technical means (no Gold standard),

-- not by economic superiority means ( subtract 'perception-based' & 'middleman' economy from US's contributions: financial services, ad-tech, sports & entertainment, from the economic 'booms').

-- not by superior political system (instead, a lot of money laundering, bribery to politicians by means 'book & documentary deals', stock tips, real-estate gifts, relatives on boards of directors for businesses, etc)

-- not by superior law enforcement system (instead, using federal agencies to entrap opposition)

-- not by superior judicial system (instead, US Supreme court choosing what standards to use for which issues)

I guess, we will see if that view is right or not. May be we will be the generation that will oversee the unwinding of the empire, may be not.

[1] https://insiderpaper.com/top-10-tiktok-influencers-with-high...

I have developed the same intuition about the economy.

My thought process is this: basically, any time dependent system can be modeled with a set of ODEs, no matter how many parts of the system, no matter how many feedback loops and inputs and outputs, you can still develop a reasonable model that is fundamentally just a gigantic vector of poles and zeros. When you have such a system, there is a region of stability: if there are are any positive real parts, one or more of the outputs will begin to climb exponentially towards infinity, until the whole thing comes crashing down.

Pokemon Cards, houses, stocks, bitcoins, NFTs, microchips, used cars... every single output is looking like an exponential response curve to an unstable system. We are doing something fundamentally wrong, in a critical part of the system.

I mean, yeah, take a look at this FRED chart: https://fred.stlouisfed.org/series/M1SL

It would be more astounding if the economy didn't break.

Edit. Looks like they changed the meaning of what an asset is and included the word liquid. 12000 billion could account for the worth of the stock markets.

We are reaping the success of monetary policy pushed to the point of absurdity. Interest rates have been pushed too low for too long - far beyond the point at which they have any real effect beyond flooding the world with more money.

Excess savings are simply dollars that are sitting around doing nothing, employing no one, investing into nothing. There are lots of sources of excess savings. Right now one of the fastest growing source is the house hold savings rate but for the last 20 years it was mostly foreign exchange reserves and corporate savings.

These excess savings are almost equivalent to a contraction of the monetary supply with the caveat that in theory they could come back at any time and nobody knows when, however it's been 20 years and no sign of stopping. The Fed is conservative and only increases the money supply in a mostly reversible way either by issuing debt or buying assets which are then put on its balance sheet. Debt must be paid back, eventually the money that was issued via debt disappears and only the interest payments is freshly minted, QE (buying assets) works under the assumption that inflation will cause asset prices to go up and therefore if the Fed sells assets it will end up with a profit and the returned money is then destroyed to contract the money supply.

However, interest rates aren't powerful enough to steer the economy. At some point they will hit the 0% lower bound. At 0% people will switch to cash and cash equivalents (usually treasury bonds) and therefore it becomes impossible to charge negative interest.

If 0% interest rates are not enough to force people to invest their money themselves then there must be a barrier that is impeding investments to be made. The total investment rate and the total savings rate are just convenient numbers that summarize an entire economy. Surely there must be a crucial piece of information missing that explains the discrepancy. E.g. the type of savings that is currently in abundance is incompatible with the type of investments that are possible and profitable.

As with all things in life this is merely something I am figuring out as I go.

My first clue is venture capital and the Softbank Vision fund. VCs are chasing unicorns simply because their huge scale of capital requires a huge scale of investments. Softbank doesn't even bother with anything less than $100 million. Surely there are startups out there that need $10 million in funding to get started and can double their money in 10 years but have no growth potential beyond say $30 million revenue per year. These companies would do productive work and employ people along the way and everything would be fine but they simply don't fit into the VC model. The most famous case of a over funded company I know is Juicero. I'm sure there would have been a way to keep it running even if it takes a dozen revisions to the original juicer, but at $120 million you knew it was going to shut down before it made any money.