Wealth addiction

I just did.

 

DW, let's take 10,000 families from an area and say each family has $10,000 of flexible income each year. The average for each family is to save 25% and spend 75% on extras like new TVs, new kitchens, eating out at local eateries, going on vacation, buying another car...

That $100,000,000 is now $75,000,000 being spent in local businesses and generating $3.75 million in local taxes. Lets say that $75,000,000 is spent again at the same rate (25/75 split) every three months.

The tax base improved $3.75 mil in the first cycle in local taxes (which fund the largest employer in the county)
$56.25 mil for the next cycle and $2.81 mil in local taxes
$42.18 mil for the next cycle and $2.10 mil in local taxes
$31.63 mil for the next cycle and $1.58 mil in local taxes

That's $10.24 in local taxes thanks to the moving money.

Now, let's say people saved 50% instead of 25%.

That 2.5 million in the first cycle.
1.25 million in the second cycle
.75 million in the third cycle
.375 million in the fourth cycle

Less than $5.0 million in local taxes generated. Then you have local services cut or the tax rate goes up.

This is just a very simple way to look at it, but it shows when money lands in a bank account, it stops moving from person to person.

 

And if a CEO gets a $10 mil bonus, I highly doubt they are spending $7.5 million of that bonus.

 

Are you under the impression that banks keep your money in a coffee can behind the counter?

 

Are you under the impression that the money moves from person to person more when it is in a bank?

 

Devil is being ridiculous in his Devil way regarding banks, but as to the stock market, little if any of that money ever makes it into R&D, innovation, jobs or anything else. I suppose the IPO, but nothing else.

 

For the 10th time: It's. Not. "In." "The." "Bank."

It's not.

 

http://online.wSportsJournalists.com/news/articles/SB123120525879656021?mod=todays_us_page_one&mg=reno64-wsj&url=http%3A%2F%2Fonline.wSportsJournalists.com%2Farticle%2FSB123120525879656021.html%3Fmod%3Dtodays_us_page_one

http://en.wikipedia.org/wiki/Paradox_of_thrift

 

Usually, frugality is good for individuals and for the economy. Savings serve as a reservoir of capital that can be used to finance investment, which helps raise a nation's standard of living.

 

Usually, frugality is good for individuals and for the economy. Savings serve as a reservoir of capital that can be used to finance investment, which helps raise a nation's standard of living. But in a recession, increased saving -- or its flip side, decreased spending -- can exacerbate the economy's woes. It's what economists call the "paradox of thrift."

 

Are we in a recession right now?

 

Yeah I know that boilerplate, Dick.

What I'm saying is the current mode of investing isn't helping build anything. Companies carry tens of billions of dollars in cash. Wealthy individuals put their money in places where it isn't going to get into the pipeline (and often, as with hedge funds, in places that are specifically betting against the pipeline).