We need to spend to save the economy

[Anonymous]

[quote=briansd1]The main feature of capitalism is money lending or leverage in excess of the funds you actually have to acceralerate (bring forward) consumption and/or investments to create wealth. [/quote]

No, it isn’t.

You were right about the definition of a recession on the other thread. But now you are also making up definitions.

Capitalism doesn’t require leverage. It doesn’t even require debt.

The “main feature” of capitalism is the allocation of resources by private individuals with the goal of private gain.

“Real” capitalists may care about the “wealth for the whole population,” or they may not. But the existence of, or lack of, altruistic motives has nothing to do with whether an economy is capitalist.

[scaredyclassic]

On the other hand I am definitely a rapidly depreciating good.

Also fish oil pills good investment.

[scaredyclassic]

What about investing in a car to get to work .. Isn’t that likely to produce greater wealth than buying shares of ford ?

[scaredyclassic]

Capitalism without debt and leverage is as dull as communism

[briansd1]

pri_dk, the definition you gave of capitalism is the most common definition as we use it in the Western world. It has a social context to distinguish the Western world from the Communist World and the Third World.

I’ve talked to economists. In capitalism there is the word capital. That means that capital should be invested/lent (or placed as the French would call it) for a return.

On the “maximum wealth for the whole population”, I was not clear. I meant aggregate wealth and the maximum utilization of resources for maximum societal wealth. I didn’t mean egalitarian or equitable distrution of wealth.

Supporters have argued that capitalism is superior to other systems in that its maximizes wealth.

From policy standpoint, I believe we should maximize growth and wealth. So we should have policies that encourage capital to move around and fall in the hands of those who can create the most wealth.

I believe that Prof. Livingston is saying that money would given to people in the form of wages so they can spend it and create more wealth.

As he argued, we’ve already tried giving the money to corporations and they have not invested it.

Today, we know that the problem is not that corporations don’t have the money to invest and grow (they do). Corporations don’t invest because they are not forecasting demand growth.

[moneymaker]

If by “we” in the original post it means top 1%, then yes. The top 1% should most definitely spend “their” money. I think history shows if they don’t spend it then it will be taken away via “revolution”. The problem is that the top 1% don’t like to spend money unless it makes them more money (investing) so that leaves a big hole as far as stimulation. If the government would allow me to withdraw my 401K money tax/penalty free or even a 15% capital gains tax I would be more than happy to buy individual stocks that are now paying dividends that I personally think will do well in the future. But alas the pen touch’th not the paper in Congress.

[carlsbadworker]

[quote=briansd1]
But it’s good for society to spend for the general well-being of the population, to spur and encourage investments and innovation.
[/quote]

Why it has to be consumption? Why saving money is not helping the economy? Unless you put your money under the mattress, where do you think the community bank got its core capital allows it to lend and stimulate the economy?

The US has under-saving issue that forces it to have the trade deficit, while China has over-saving issue that forces it to have the trade surplus. Therefore, China helps to lower our treasury rates and in return makes it more attractive to have debt and less saving, and the vicious cycle goes on and on until it is completely unsustainable.

[carlsbadworker]

[quote=walterwhite]
Ultimately my biggest asset is my health and ability to work.

Invest in barbells, mattresses, massages, psychotherapy, and good food.[/quote]

Agree with walter completely.

[scaredyclassic]

Been thinking about weights lately. The ubiquitous complex machines at gyms. They are exprensive and not as good as the simple barbell for many reasons.

Seems like there’s meaning there but I can’t quite tease it out.

I may invest in high grade barbells rather than getting the cheapest just cuz I find them so beautiful.

[scaredyclassic]

Floss also a high yielding investment. $ yield is incredible

[zk]

[quote=walterwhite]Floss also a high yielding investment. $ yield is incredible[/quote]

Maybe. But don’t forget to factor in labor.

[masayako]

Go right ahead and consume more. No one is stopping you from spending your own money.

It’s a free country.

[pencilneck]

To go back to the original article quickly (and a rebuttal? I don’t know):

There’s a little theory about how fractional reserve lending is a money multiplier. To put it simply: Saving money (in a bank) is supposed to create more money in the actual economy than does spending it.

link:
http://en.wikipedia.org/wiki/Fractional_reserve_banking

However, I’ve seen a big push towards active consumption vs. saving (oftentimes endorsed and overtly encouraged by government policy and mainstream economists) for what…about 6 years now?* Does this mean they no longer believe in fractional reserve lending? I’m honestly confused.

*Edit – Maybe it’s only been 4.5 years. George Bush’s stimulus packages first got me thinking about this. One media quote: “Most economists agreed that tax rebates would immediately lift consumer spending.” If one believes in fractional reserve lending (and its hard not to) why focus solely on the spending aspect?

If the banking system is still functioning, saving should theoretically contribute more money to the economy than spending.

[Anonymous]

[quote=carlsbadworker]Why it has to be consumption? Why saving money is not helping the economy? Unless you put your money under the mattress, where do you think the community bank got its core capital allows it to lend and stimulate the economy?[/quote]

I’m surprised that people make these arguments so often without thinking it through.

Capital (savings) goes to a company, the company is in the business of selling stuff.

Somebody has gotta buy that stuff for the cycle to work.

Lots of companies have plenty of cash right now. The economy needs capital, but it also needs demand.

I’d buy something but there’s really nothing that interests me. Flu’s camera suggestion was good, but I’m gonna pass. Too much money for just an upgrade.

[Anonymous]

[quote=pencilneck]However, I’ve seen a big push towards active consumption vs. saving […][/quote]

The distinction isn’t really important.

Money doesn’t just disappear after “consumption.”

The money you use for the TV you buy at Costco goes into Costco’s (fractional reserve) bank account.

[Author]

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