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Too much money and too few places to invest it

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Re: Too much money and too few places to invest it

#51

Post by AnthonyMouse »

skywhopper wrote: post #8
fastball wrote: post #3

Earlier quoted context omitted.

If you pay your workers more you have less money for investment opportunities...

This is a reason why increasing the minimum wage or providing health coverage for low-wage workers is a great way to improve everyone's situation. Sure, Walmart has to pay their workers more, but every low-wage worker who works for someone other than Walmart suddenly has a lot more money to spend... at Walmart. On net, companies like Walmart will benefit far more than they lose. But they aren't willing to unilaterall…

> This is a reason why increasing the minimum wage or providing health coverage for low-wage workers is a great way to improve everyone's situation.

We got here by setting policies based on the bottom rather than the middle. The problem isn't that the bottom 5% needs a modest raise, it's that the middle 50% should be making enough to afford to buy a house and they're not.

Price floors don't change that. If anything they make it worse, because most of the new cost of that comes from the middle class in the form of higher prices.

What we really need is to do something about the cost of housing, education and healthcare. And not just subsidizing it -- that's how we got into this mess to begin with. Actually reducing the underlying cost.

The alternative would be combining significant inflation with high interest rates, so that asset prices don't rise from the inflation because of the high interest rates, but wages do.

Re: Too much money and too few places to invest it

#52

Post by HillaryBriss »

internet_user wrote: post #24
rhizome wrote: post #16

Earlier quoted context omitted.

I thought ZIRP was the culprit, with QE being a response to the 2008 crashes that stacked up on it.

and QE is just kicking the can down the road a little further. We are the new Japan.

in some ways, yes, but one difference is that our population is not shrinking.

another is that our debt to GDP ratio is something like 90-100%, but Japan's is more like 200%. yet another is that we don't have the sort of nationalized healthcare system Japan has. also, Japan's been playing the "managed trade" game for decades now and they know how to do it well, whereas the US has been practicing a consumer driven economy better characterized by "free trade."

in order to really become like Japan, we'd have to enlarge our federal level trade negotiation bureaucracy and become more mercantilistic, improve literacy rates and secondary school quality, and become more racially and culturally and linguistically homogeneous, as well as implement extremely strong gun control laws and lower the murder rate.

we'd also need to increase government job-creation spending on infrastructure to the point where we're building bridges to nowhere all over the place, plenty of underutilized airports, etc and create even tighter restrictions on immigration than we have now (yeah, I know Japan is liberalizing immigration, but not very much).

Re: Too much money and too few places to invest it

#53

Post by theturtletalks »

rb808 wrote: post #42
theturtletalks wrote: post #25

Earlier quoted context omitted.

The Fed is against raising the minimum wage because it will make inflation increase above the allowed 2% per year. Which kind of makes sense because paying workers more will make things more expensive especially service businesses. But, they should still raise the minimum since most service businesses are heading for automation and the bump will help workers have a better job transition.

Source? I dont believe they ever said that.

I saw an in depth video about it and how an organization that is fighting for higher wages went to a FED event and was asking people high up why wages have not increased. I cannot find the video, but I'll keep trying.

Re: Too much money and too few places to invest it

#54

Post by dev_dull »

joshgel wrote: post #30
dev_dull wrote: post #19

Earlier quoted context omitted.

Precisely why I’m a big fan of tariffs and America-first foreign policy. We need a way to restore manufacturing industry to the US, the loss of which played a large role in the erosion of the middle class. Protecting manufacturing and factory jobs used to be a selling point for Democrats but things have been a little turned upside down lately.

This is just incorrect. A 25% tariff doesn't correct for the difference in labor costs between China and the USA, because the difference in labor costs is > 25%. It just makes stuff more expensive for Americans.

I don’t think that’s true, besides, couldn’t the same argument be said about raising the corporate income tax? Yet many people are in favor of that.

Tarrifs directly benefit American workers and factories, who find their prices 20% more competitive.

Re: Too much money and too few places to invest it

#55

Post by tryptophan »

Ugh. These sort of pseudo-intellectual articles that mix economics and politics are my least favorite things to see on this site. They are super misleading and play towards people's biases about how they view the world while selectively interpreting the sparse data they present to do so.

An example:

If there was too much money, you would think that bond yields would go down. Look here: https://www.cnbc.com/quotes/?symbol=US30Y -- looks like they are! Guess we can all go blame the fed and "trickle down". But oh wait, scroll out to a longer time-span. Looks like yields have been falling ~linearly from 1989 till today, 2019. Show me where QE/ZIRP started based on the chart. You can't, because the trend didn't change at 2008/9. All this "blame the fed, im smarter than them and would've not done QE" nonsense maybe isn't as supported by evidence as some would like. The world is a little more nuanced than that. On the surface level, the data seems to agree, but you look a little deeper and it quickly becomes apparent it's all bullshit trying to spin a narrative.

Re: Too much money and too few places to invest it

#56

Post by theturtletalks »

tdfx wrote: post #47
theturtletalks wrote: post #25

Earlier quoted context omitted.

The Fed is against raising the minimum wage because it will make inflation increase above the allowed 2% per year. Which kind of makes sense because paying workers more will make things more expensive especially service businesses. But, they should still raise the minimum since most service businesses are heading for automation and the bump will help workers have a better job transition.

Could you elaborate how the timing of a minimum wage hike now could help with the adjustment to the arrival of automation related job loss? Note: No snark on my part, it seems plausible and I'm generally looking to be able to debate the topic more intelligently.

Many service workers work 2 jobs to make ends meet. If they start earning enough from one job, that's extra time and money that can go towards a certification. I know Amazon has offered many of it's workers $10,000 to quit and start a delivery company. They are trying to help them transition as bots are taking warehouse jobs.

Re: Too much money and too few places to invest it

#57

Post by Maarten88 »

chiefalchemist wrote: post #7

> "How we got here: The Fed's quantitative easing program pushed the cost of borrowing money to next to nothing for nearly a decade, allowing companies to splurge on debt for mergers and acquisitions and to boost revenue." Put another way, the Fed made the rich richer, and the lack of significant "trickle down" has created a socio-political Charlie Foxtrot; of which the Fed is not accountable for.

The "trickle down" story keeps coming up, but it's untrue. It simply doesn't work that way.

If someone who is already rich gets even more, it won't be spent in a way that is good for someone poor. More likely, the excess money will be invested in a way that provides yield, like buying real estate, driving up prices and rent. Or merging businesses to lower competition and costs. Leading to money streming 'up' instead of trickling down.

The trickle down story is a hoax that needs to die.

Re: Too much money and too few places to invest it

#58

Post by SteveGregory »

I've wondered if, in this context that we are in, it actually starts to make sense to both raise interest rates and simultaneously monetize government debt.

We want some inflation, but we also do not want a late-1980s-style Japanese asset price bubble.

I cannot find a real answer to this question anywhere - would this plan produce any negative effect? The plan would, as far as I can tell, help the long-term outlook of our currency and economy while incentivizing wealthy people to stay invested.

I might be missing something obvious. Maybe this would lead to businesses having a harder time employing because of the higher borrowing cost (but we are at full employment now), or maybe the effect is just too uncertain on the money supply. Either way, I really want to know the answer, so I'm asking it here.

To be clear, I am not suggesting that politicians have direct control over monetizing debt, but rather that the central bank deems this to be best for the economy in the long term.

Re: Too much money and too few places to invest it

#59

Post by maxxxxx »

CryptoPunk wrote: post #21
maxxxxx wrote: post #15

Earlier quoted context omitted.

What kind of messed up thinking is this? More consumer spending has an opportunity cost? What’s a capitalist supposed to do if nobody can afford their stuff?

This is basic economics. Consumer spending is not the only kind of spending, and directing all economic output to meeting consumer demand would be disastrous for the economy. >>What’s a capitalist supposed to do if nobody can afford their stuff? Investing in new capital equipment is how you allow more people to afford your stuff. More consumers will afford your stuff in the future when you've built your factory and y…

That’s totally backwards. If nobody had had any money nobody wouldn’t have bought any phones. You Can’t just invest into things nobody can buy.

Re: Too much money and too few places to invest it

#60

Post by repsilat »

theturtletalks wrote: post #25
chiefalchemist wrote: post #7

> "How we got here: The Fed's quantitative easing program pushed the cost of borrowing money to next to nothing for nearly a decade, allowing companies to splurge on debt for mergers and acquisitions and to boost revenue." Put another way, the Fed made the rich richer, and the lack of significant "trickle down" has created a socio-political Charlie Foxtrot; of which the Fed is not accountable for.

The Fed is against raising the minimum wage because it will make inflation increase above the allowed 2% per year. Which kind of makes sense because paying workers more will make things more expensive especially service businesses. But, they should still raise the minimum since most service businesses are heading for automation and the bump will help workers have a better job transition.

> above the allowed 2% per year.

The US Fed's inflation target is symmetric about 2%, though it has almost consistently undershot it in recent years.

Some argue that higher inflation is less scary than deflation because "interest rates can always go higher", but I would agree the Fed does seem to be more worried about upside inflation risks. Possibly because monetary policy has been "accommodative" (in their view) for so long, and "normalisation" has been a clear long-run goal. There are signs those tendencies have changed, though -- they've been talking about being "data driven" since last year, and recent messaging has smoothed the road to possible rate cuts too.

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