I’ve been wondering this question for a while. Ignoring current events, why is a little bit of inflation desirable?
I do understand that it’s done to “stimulate” the economy so people don’t let their cash rot in a checking account, but isn’t it a zero-sum game? Everybody says that money is not meant to stay where it is, rather, should flow through the economy. But if the economy always needs injections of liquidity because otherwise it fails, isn’t the economy broken?
I feel like there’s something I can’t comprehend about that.
No because it doesn’t answer my question. I asked about hoarding wealth - you’re talking about spending habits. Your average billionaire can’t just walk into a bank and withdraw, say 10 million. They probably don’t have anything even close to that much of liquid wealth.
From Elon’s twitter
Hmm. So, I think you’re struggling to understand how those two things are connected.
First off, when we talk about “hoarding wealth”, yes, we’re including assets in that. No one here is saying that Elon has 900 billion dollars in a big old Scrooge McDuck vault. Obviously it’s all tied up in shares, bonds, real estate, etc. That makes it technically less liquid, though in practice those issues are largely irrelevant, because a) as I was pointing out in my previous reply, what the ultra-wealthy spend is such a small fraction of what they own that in practice they rarely need to dip into their less liquid assets, and b) because even larger purchases can be handled by simply taking on very cheap debt using those same assets as collateral. Basically, your credit card runs at 20%, Elon’s runs at 2%.
More to the point, that huge hoard of assets is the problem. Because their ability to buy up investments (including things that really shouldn’t be investments, like housing) makes those things more expensive for the rest of us. They can buy all the housing and rent it back to us, instead of us actually being able to afford homes.
But ultimately talking about spending habits is the answer to your question, because those raw differences in what people spend versus what they make account for huge differences in how much of our wealth we can afford to hold onto. The fact that that wealth is stored in assets rather than a bank account is completely immaterial. Or, rather, it is material, but only further proves my point.
Think about it this way; Elon can afford to have 99.9% of his wealth tied up in assets where he cannot immediately access it, and can still live a life of luxury most people couldn’t imagine in their wildest dreams. Do you think the average 9-5 worker could afford to receive even 90% of their pay in the form of assets rather than money? Or would they just be selling those assets immediately to cover their daily costs? That, right there… That’s the problem.
I’m only focusing on the hoarding part here. I don’t understand what is being kept away from others. In the case of Elon, he owns shares in companies he founded. He’s not a housing investor. What seems to be implied here is that if you start a company and it grows too large then it gets nationalized or something. These are the specifics I’m trying to figure out here. Is Norway’s oil fund hoarding wealth away from the rest of the world? What you’re speaking of sounds more like criticism of the power that wealth comes with, but that’s not quite what’s being discussed here either.
OK, so let’s say you work in a company that makes cars. The workers make the cars. Their labour turns into products which the company then sells to make money. The company owner… Does nothing, basically. Management is done by managers, labour is done by labourers. Engineers designs the cars. Artists and marketeers sell them. Sure, maybe the owner is involved in a few tasks here and there, but even if they truly worked 120 hour weeks and obsessed over every little thing, their total contribution, judged as a percentage of the labour involved in making and selling those cars, would infinitesimal. Yes, they can make decisions about what new car to release, what direction to take the company, all of that, but they’re not the only person capable of making those decisions, they’re just the person who is allowed to make those decisions, because they own that privilege and no one else does.
And yet, that owner takes home billions, while the workers struggle to pay rent.
That’s the hoarding. That owner has those billions of dollars because their company sells cars. But they don’t make the cars, or even oversee the people who make the cars, they just… own it.
Now, I’m sure the counterpoint here would be that the workers have to use machines paid for by the owner. Except, the owner didn’t make those machines, they just bought them. Machines that were made with other people’s labour. If labour had access to the capital that the wealthy hoard, they could just start their own factory, sell cars that they make, and keep the profits (ie, a worker owned co-op). The wealthy owner isn’t providing, they’re gatekeeping. By controlling wealth, they control other people’s ability to deploy wealth, which in turn allows them to extract value from other people’s labour.
That’s the difference with something like Norway’s wealth fund. They’re publicly owned. The people of Norway benefit from what the wealth fund does. It’s a public good. But no one benefits from Elon Musk being rich. He didn’t even found Tesla; he paid the founders to give him the right to call himself the founder. This notion that he’s some kind of brilliant genius is a fabrication he invented about himself. He’s just a guy who had enough money to take ownership over the things that other people create. It didn’t take Elon Musk to come up with the idea of a company that makes rockets. We’ve been making rockets for thousands of years. But in a world where wealth is concentrated in the hands of a few, it requires an Elon Musk to permit people to make rockets, because he controls access to the wealth required to do so.
You’re right! They can’t just walk into a bank and withdraw 10 million!
Instead, they take out a loan for 10 million against a collateral of 20 million in stocks, expense the interest, claim 0 income and therefore no income tax, and have that transferred to their bank account. Then they withdraw 10 million, while their stocks continue to gain (or lose) value, and at some point they have to take some portion of their dividends as income rather than rolling them into more stocks or, God forbid, sell some of those stocks to pay back the loan.
In a technical sense, no, that money isn’t just sitting in a bank account, but there’s a weird effect. If you only have a small amount of stocks, say a few million worth, you can sell them off in a relatively short period without harming the stock because it’s just a blip at most in normal volatility. If you have a lot, say billions, you can sell enough to do whatever the average person would ever want to do with only slightly more volatility than is some nobody did it, and much of that is due to the visibility of a billionaire doing that. If that billionaire needs more than a few million, he can just follow the process outlined above with no impact at all to the stock market and a number of benefits to himself. So in a practical sense, if you only have a little stocks, say millions, accessing those millions may take days or weeks, but if you have billions, you can access it only slightly slower than I can withdraw $100.
This money is still in the economy and helping to economy to function overall, but the majority of that benefit is only experienced by one person, the billionaire. This is effectively them hoarding those billions, not because they’re sitting in an account but because a single person is experiencing the majority of that benefit while the rest is spread across thousands or perhaps millions of people.
I still don’t see what is being kept away from everyone else. Who is left without if I own a billion worth of stocks in different companies? The cartoon example would be me finding a cool rock that suddenly everyone in the village wants and I even get astronomically high purchase offers from the neighbouring villages but I choose to keep the rock to myself effectively making me the wealthiest person of the village - on paper. Is the rest of the village being deprived by that fact that I refuse to sell it and buy everyone a Lamborghini?
No, they are being deprived by the fact that billionaires are allowed to amass that amount of wealth without supporting society with it, i.e., taxes, labor laws that don’t allow the extraction of wealth from workers to the point that there is often an income disparity if 100000%, and comsumer laws that don’t allow vendors to charge exorbitant rates for basic necessities like food and housing and medicine. So someone can take trips to space and someone else can’t have food, in the more extreme examples.
You keep conflating artificial and unrealized value. Stocks have value, just like the cash in your wallet or the bits associated with your bank account. They aren’t physical things (even cash has no value based on its physical nature) but their value is real nonetheless. At least until society collapses and the only things that matter are the purely physical, anyways, at which point your cash will be just as worthless as stocks.