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Dow plunges 1000 points

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Re: Dow plunges 1000 points

#301

Post by eli_gottlieb »

vkou wrote: post #245
mtanski wrote: post #218

Earlier quoted context omitted.

>If salaries rise, the expectation is that people will spend more and push inflation higher. Sure sucks to be a worker. When your salary rises your real gains will be inflated away.

If salaries aren't coming out of investor profits, they have to come out of the cost of goods. The only way workers can win is: 1. Productivity gains make goods easier to make. 2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops. #2 will not be happening anytime soon.

>2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops.

>#2 will not be happening anytime soon.

That sound you hear in the distance is a recital of the Internationale.

Re: Dow plunges 1000 points

#302

Post by state_less »

dahart wrote: post #272
state_less wrote: post #193

Earlier quoted context omitted.

I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero. In my view, taxes are like porridge, you don't want it too hot or too cold. The best amount is not too little or too much. I too worry about the deficit and think we need to tax the biggest gainers a bit more and provide safety nets for the economic losers so they can bre…

I quite like your reasonable, balanced approach. I've always been curious about your last point though: > There needs to be an incentive to to do well and I'd be against cutting into that too deeply. I've never understood why any tax rate would be a disincentive to do well. Even if the tax rate was 90%, doing well is doing well. If I make more money, I get to keep more money, even if taxes are high. If we have tax br…

As the tax rate increases, the value you get for increasing your income goes down proportionally.

I think if you take it to the limit, you can see the effect more clearly. As the tax rate approaches 100%, say 99%, then even if I make $100,000 before taxes, I'd only keep $1,000. If I push myself hard to earn $200,000, I'd get to keep $2,000. Yes it is still double, and I am doing better, but not much of interest changes in my life and I personally wouldn't say I'm doing well. I can barely afford to take that second vacation, or see much value for my efforts. My efforts are simply less rewarded, giving me less tangible reason to make the extra effort. I think this would kill off the incentive to create wealth in the economy.

Wealth is needed to take care of basic needs, so it would be self defeating if you were trying to take care of everyones needs and make sure they had a little spending money to participate in the economy.

Somewhat as an aside, I didn't consider what benefits I would receive for paying a 99% tax rate, presumably it would be all the basic needs plus some more, but this would start to feel like a planned economy where individuals, with their small discretionary funds, would't have as much input into what is created in the economy, rather it'd be a course political process which could be slow to meet the needs of the citizens, or fraught with other unforeseen difficulties.

Re: Dow plunges 1000 points

#303

Post by refurb »

megy wrote: post #282
xienze wrote: post #198

Earlier quoted context omitted.

> I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero. So I take it you’ll be paying extra on your federal taxes next year and earmarking the difference for the federal debt or other things you find worthwhile?

Yes, because obviously me paying an extra $10,000 is the same as everyone paying an extra $10,000. Do you think we just hate money?? Is that where you are coming from?

Yes, but if you're ok paying an extra $10,000, why not just do it now?

Re: Dow plunges 1000 points

#304

Post by refurb »

jacobolus wrote: post #220
xienze wrote: post #198

Earlier quoted context omitted.

> I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero. So I take it you’ll be paying extra on your federal taxes next year and earmarking the difference for the federal debt or other things you find worthwhile?

It does not at all follow that because someone thinks that top marginal tax rates should be raised (amounting to hundreds of billions or trillions of dollars), they will unilaterally send a few thousand extra dollars beyond their statutory bill to the IRS with the expectation that that would accomplish anything.

It's not about accomplishing anything. It's about the principle of it.

If someone thinks sending the gov't an extra $10,000 is money well spent, then they do it regardless if others do it.

Re: Dow plunges 1000 points

#305

Post by hedora »

bilkoo wrote: post #294
dahart wrote: post #272

Earlier quoted context omitted.

I quite like your reasonable, balanced approach. I've always been curious about your last point though: > There needs to be an incentive to to do well and I'd be against cutting into that too deeply. I've never understood why any tax rate would be a disincentive to do well. Even if the tax rate was 90%, doing well is doing well. If I make more money, I get to keep more money, even if taxes are high. If we have tax br…

Marginal return. If working an extra hour per day will give me $100 pre-tax, tax rate being 10% and 90% will largely determine whether I'd do the extra work, versus spending that hour with family etc. Everyone has different threshold for pay/fun ratios but overall society will be less productive as tax rates go up at least in the static sense (not considering tax money being put into productivity-increasing use).

If people make enough to retire every three years at a 0% tax rate, then most people will retire or switch to a less productive hobby job, because the marginal utility of more money approaches zero after three years.

Tax those same people 90%, and they’ll work for 30 years.

There is evidence of this phenomenon from the early days of the automobile: Craftsmen building cars by hand could and did retire after a few dozen cars, further inflating wages by constricting demand of labor. In contrast, Ford’s screw-turning factory workers worked for decades.

I don’t buy that lowering effective wages decreases the number of hours most people will be willing to work.

Re: Dow plunges 1000 points

#306

Post by Mikeb85 »

It's also just coming off an all-time high. The worst performer this session was the index's top performer in the run-up, which strongly suggests this drop was fueled by profit taking. One thing to realize is that the market sometimes just moves because of traders trading...

Re: Dow plunges 1000 points

#307

Post by vkou »

cmontella wrote: post #283
vkou wrote: post #245

Earlier quoted context omitted.

If salaries aren't coming out of investor profits, they have to come out of the cost of goods. The only way workers can win is: 1. Productivity gains make goods easier to make. 2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops. #2 will not be happening anytime soon.

And #1 has been happening for decades, yet wages have stagnated. So the conclusion is workers can't win?

1. Many of those productivity gains happen via outsourcing work to countries where wages are much lower.

2. Many consumer goods have become cheaper as a result. The biggest ones, though (Rent, education, healthcare) have not. Incidentally, none of them can benefit from 'productivity gains.' Well, healthcare can, but...

Re: Dow plunges 1000 points

#308

Post by vkou »

sokoloff wrote: post #260
vkou wrote: post #245

Earlier quoted context omitted.

If salaries aren't coming out of investor profits, they have to come out of the cost of goods. The only way workers can win is: 1. Productivity gains make goods easier to make. 2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops. #2 will not be happening anytime soon.

[Some] Workers can individually win by forcing themselves to spend less than they earn and investing the surplus. In other words, another way that workers can win is by becoming investors/owners.

That's a great idea. Let's all quit our day jobs, and buy into the S&P 500.

At the end of the day, someone has to 'waste' money, in order for companies to earn money. A quarter saved is a quarter that doesn't end up on a revenue sheet.

Re: Dow plunges 1000 points

#309

Post by refurb »

cinquemb wrote: post #295
exolymph wrote: post #262

Earlier quoted context omitted.

If you're a normal person, not a day-trader, the time horizon your investments should be on the order of years, not months. If you're a day-trader, then this is just one of the risks of that choice.

If you're a normal person, who had a decently sized/exposed market retirement account in 2007, it took you about a decade to get back to the same level, inflation adjusted. That's a lot of risk for chasing inflation adjusted returns… Not to mention, there are a couple short volitilty ETFs that will be terminated soon, hope some long term ETF buyers won't be exposed to them or any big names they are holding who were e…

If you're a normal person, who had a decently sized/exposed market retirement account in 2007, it took you about a decade to get back to the same level, inflation adjusted.

Jesus! What was this average person invested in? From the bottom of the market to back to the prior peak was 3 years for me. And I was so heavy in equities I lost 1/3 of my portfolio's value.

Where does this "decade" come from? The DJIA is nearly 90% higher than the peak pre-2008.

And I know you said inflation, but that has been 1-2% per year since then.

Re: Dow plunges 1000 points

#310

Post by graeme »

prepend wrote: post #181
graeme wrote: post #121

Earlier quoted context omitted.

You can't eat an asset. You can only eat what someone else produces, and then only if you can convince them to give you food in exchange for your asset. This is counterintuitive, but globally saving is not possible, in a financial sense. IIRC from economic models it nets out to investment. Which makes sense. Real world saving is amassing a grain store, or an oil stockpile in a strategic reserve, etc And we can't do v…

You can definitely eat stuff bought with the earnings of assets. Retirement is non-ponzi like because the assets appreciate in value due to increased predicted future earnings. This is totally different from paying out what others pay in. Assets can appreciate in value and income even without new investment.

The earnings of the assets are generally like the assets: digital or paper currency, or their equivalents.

You can trade those for things, now. In saving for retirement, you're planning to trade the earnings from those assets for future things made by future workers.

Assuming the economy continues relatively normally, we'll be able to do that when we retire. (I don't think retirement is a ponzi scheme).

But, I do think it's worth considering things from that angle. For example, could everyone do FIRE (financial independence, early retirement)? No. At least, not unless in their efforts they created perpetually working robots to replace everyone who retired.

To put this in other terms, you could say I'm saying "if there aren't enough future workers, the future value of investments will decline, causing retirement shortfalls". Which, again, doesn't make retirement a ponzie scheme. I'm just providing another frame: money can be confusing. It doesn't work in the aggregate the way it does for an individual.

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