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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

#81

Post by HillaryBriss »

internet_user wrote: post #70
HillaryBriss wrote: post #52

Earlier quoted context omitted.

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 eco…

Debt/GDP ratio doubled in 20 years, and the bulk of that change in the in 10 years or so. It won't take much longer to get to 200%, we are going to see it. I'm not sure what you are trying to say in the last two paragraphs? That we are somehow so fundamentally different, that the fiscal picture is not comparable?

i'm just trying to highlight some important factors beyond debt ratios that tell the story of an economy and quality of life for its participants: education levels, trade policy, portability and reliability of health insurance, population growth trends, murder rates, etc. we are "the new Japan" in only a very rough sense. i guess we might say we're the new Italy and the new Portugal and the new France, too? IDK.

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

#83

Post by piva00 »

siculars wrote: post #49
dev_dull wrote: post #14

Earlier quoted context omitted.

It’s trickled down but in narrow bands. For example, starting salaries in the Bay Area are up big in the last decade, partly because of an influx of easy money into tech growth tech companies. However, much of that goes directly into the pockets of land owners. Ultimately the winners in QE are those that own the finite resources.

Ya, and? Isn't that always the case - the owners of finite resources profit. Is there some other way it would be?

Having more owners of finite resources instead of helping them to concentrate it through mergers and acquisitions could be a way.

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

#84

Post by fallenfallacy »

How misleading.. There are a ton of places to invest money. My personal favourite are businesses and real estate.

There's two things in common with businesses and real estates as a form of investment:

1. They build equity for you in two ways: cash flows and appreciation

2. Businesses & real estate are some of the most transparent vehicles when it comes to doing research on whether it's a good investment or not. This is in comparison to investments like stocks where information might not be as transparent or as easily accessible as doing research for a real estate or a business.

Not only that but when it comes to an investment like real estate, some people are unknowingly leveraging in an environment where real estate has consistently appreciated 4% per annum for the past hundred years.

Consider this:

If you purchase a $100,000 house at fair market value for 10% down, you borrow $90,000 and drop $10,000 as down payment.

If it appreciates at the historical average rate of 4% per annum, your house is worth $104,000 next year.

You sell your house at $104,000, and paying off your mortgage ($90,000), you pocket $14,000, a 25% return on investment ($4000/$10,000).

Obviously this excludes variables like rent, interest, or mortgage but the illustration shows how a simple real estate investment can turn out to be a far better investment than it would otherwise show on paper (4%).

If there are 'too few places' to invest your money, there's always businesses or real estate. There's a compelling article here that further suggests why real estate might be the most consistent way of building wealth: https://digitalyse.io/why-real-estate-investing-is-the-most-...

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

#85

Post by CryptoPunk »

maxxxxx wrote: post #59
CryptoPunk wrote: post #21

Earlier quoted context omitted.

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.

Actually you have it backwards. Everything produced is sold at its clearing price. If everyone has half as much money, then the price gets cut in half. Likewise, if the number of goods/services produced is doubled, the price of everything gets cut in half. A little bit of a simplification, but that's generally how it works.

Money is not wealth. It's how we measure it. Real wealth is goods/services. And the only way to increase the volume of goods/services produced is to invest in the capital equipment that increases our productivity in producing them. More goods/services means more purchasing power, which means higher wages.

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

#86

Post by CryptoPunk »

AnthonyMouse wrote: post #63
CryptoPunk wrote: post #48

Earlier quoted context omitted.

It could boost per worker automation, but there will be fewer workers, and less economic output to reinvest into capital (which is essentially automation), so there will be less automation in general. So higher automation per worker but lower automation per capita.

Capital isn't "essentially automation" in general. It includes a lot of other things like land and art and government bonds. If you have a job which can be automated at a cost equivalent to a $10/hour wage, it doesn't get automated when the wage is $9 and does when it's $11. The money doesn't inherently come at the cost of some other automation, it may (and if the other automation is profitable, more likely does) com…

I'm referring to 'capital' in the economic sense, not financial sense.

Here's the Wikipedia definition:

>>In economics, capital consists of an asset that can enhance one's power to perform economically useful work. For example, in a fundamental sense a stone or an arrow is capital for a caveman who can use it as a hunting instrument, while roads are capital for inhabitants of a city.

and

>>Capital is distinct from land (or non-renewable resources) in that capital can be increased by human labor. At any given moment in time, total physical capital may be referred to as the capital stock (which is not to be confused with the capital stock of a business entity).

Increases in capital essentially mean increases in automation.

>>If you have a job which can be automated at a cost equivalent to a $10/hour wage, it doesn't get automated when the wage is $9 and does when it's $11. The money doesn't inherently come at the cost of some other automation, it may (and if the other automation is profitable, more likely does) come from selling some bonds or other assets you own, or by borrowing it from a bank which just creates the new money from nothing as banks do.

Not inherently, but generally. There's generally an opportunity cost. If the business has to pay $11 instead of $10, that extra $1 represents more resources being expended on accomplishing that task, which leaves less resources for other things.

Yes there are always situations where some extra cost leads to a business or a combination of businesses unlocking productivity that was otherwise dormant, but there will be cases of the opposite, of an extra cost exacerbating wastage, beyond the value of the extra cost.

You can't assume that an extra cost will lead to more efficiency gains than efficiency losses. The reasonable assumption is that the two variables will balance each other out, and on average, a $1 an hour increase in the cost of accomplishing a task will mean $1 less resources going into other productive tasks.

>>A lot of these things are actually good -- if people sell real estate to buy automation equipment then housing prices come down.

That's an overly optimistic and unsupported assumption. The profitability of holding real estate will not go down relative to investing in manufacturing as a result of manufacturing costs increasing.

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

#87

Post by imtringued »

jlawson wrote: post #80
Maarten88 wrote: post #57

Earlier quoted context omitted.

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…

It 'keeps coming up' because it's a strawman people love to punch. People literally only bring up this concept in order to tear it down - because it was only created in order to be torn down. Nobody actually argues for 'trickle-down' policies. It's a sneer term signifying a deliberately oversimplified version of right-wing economic policies. It's not a real position people hold and push for. I guess it's a lot easier…

Corporations and rich people fight for lower taxes all the time. Usually the argument is that if the taxes are too high they will just move to a different country.

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

#88

Post by imtringued »

fastball wrote: post #3
astazangasta wrote: post #2

Ironically the best thing they can do to create new investment opportunities is pay their workers more, but they never will because they are too short sighted.

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

There are no investment opportunities. Otherwise you would have invested in those and wouldn't complain about not knowing what to do with the money.

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

#89

Post by imtringued »

CryptoPunk wrote: post #85
maxxxxx wrote: post #59

Earlier quoted context omitted.

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.

Actually you have it backwards. Everything produced is sold at its clearing price. If everyone has half as much money, then the price gets cut in half. Likewise, if the number of goods/services produced is doubled, the price of everything gets cut in half. A little bit of a simplification, but that's generally how it works. Money is not wealth. It's how we measure it. Real wealth is goods/services. And the only way t…

What you just said completely defies the laws of supply and demand. Companies don't just overproduce and accept a loss on their goods and services [0]. If everyone has half as much money then the supply gets cut in half. Likewise the supply will only be doubled if everyone has twice as much money.

What you might be talking about is how economies of scale result in increased productivity but your rule of thumb is a pretty poor model. Every industry has it's own learning rate. PV for example reduces costs by 28.5% on every doubling of production capacity.

[0] Ok, ok, this is actually the business model of Uber and pretty much all modern unicorn startups but they do it to drive out competitors, not because it makes economical sense.

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

#90

Post by maxxxxx »

CryptoPunk wrote: post #85
maxxxxx wrote: post #59

Earlier quoted context omitted.

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.

Actually you have it backwards. Everything produced is sold at its clearing price. If everyone has half as much money, then the price gets cut in half. Likewise, if the number of goods/services produced is doubled, the price of everything gets cut in half. A little bit of a simplification, but that's generally how it works. Money is not wealth. It's how we measure it. Real wealth is goods/services. And the only way t…

Seems like you are a true supply side economist.
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