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View Diary: Wealth Condensation: Why the Rich Get Richer (172 comments)

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  •  Um, wham bam? (1+ / 0-)
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    mkor7

    You're right to champion savings and frugality. But, if everybody saves and invests, and no one buys $1k tv sets, then where will the profits on those investments come from? If everybody buys Sony stock, but nobody buys Sonys, Sony will go under and all that stock will be worthless.

    There has to be a balance.

    Al Qeada is a faith-based initiative.

    by drewfromct on Sun Sep 25, 2011 at 06:06:18 AM PDT

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    •  Heh... then you buy the Sony TVs while I buy (0+ / 0-)

      Sony stock.

      In the end, all money gets spent.  But we spend too much on consumer goods and too little on investment.

      If people saved more we would have more investment and less consumption and that would be good.

      •  Good luck with that (7+ / 0-)

        I already have a tv, and no plans to buy another one for a long, long time.

        But again, if no one buys consumer goods, sales go down, and investments suffer.

        A big problem is that when severe wealth inequality exists, there simply isn't enough money in circulation to support demand. Consider the CEO who makes 1,000 times the salary of the average worker. He can afford to buy 1,000 middle class houses, but will he? No. He might buy a dozen mansions, but, expensive as they are, do they add up to the cost of 1,000 middle class houses? It's not just houses, but the furniture and appliances to furnish them. That CEO might buy a dozen tvs for each of his dozen mansions, but that still doesn't come anywhere close to adding up to 1,000. It gets even worse when that CEO takes 1,000 times the pay of an average worker for making decisions that eliminate thousands of jobs. In order to sell things, you need workers who are paid enough to buy them. We've all seen videos of robots on the line building cars. Ever seen a robot roll into a showroom and buy one?

        Again, without enough buyers who are willing and able to buy consumer goods, your investments are worthless. That was the lesson of 1929, but, sadly, it was a lesson lost on the vast majority.

        Al Qeada is a faith-based initiative.

        by drewfromct on Sun Sep 25, 2011 at 06:54:33 AM PDT

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        •  Excessive wealth inequality suppresses trade (3+ / 0-)
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          drewfromct, swellsman, Calamity Jean

          In conditions of extreme wealth inequality,  trade will decrease. The wealthy don't buy much because they are few in number and quickly acquire everything they need, and don't sell much because they don't need the money. The poor don't have anything to sell, and don't buy because they don't have the money.

      •  Precisely backwards (0+ / 0-)

        It is the exposure of investments to risk that results in vast wealth disparities.  Despite the purported brilliance of those who build successful businesses, luck plays at least an equally strong role in determining the winners and losers in emerging markets.  And because virtually all money in our modern economy has value because it is backed by someone else's promise to repay a debt, nearly all savings literally is investment.

        On the other hand, if everyone spent and consumed all of their income, there would not be a disparity of wealth at all, because wealth would not be accumulated, only produced and consumed.

        From such crooked wood as that which man is made of, nothing straight can be fashioned. -Immanuel Kant

        by Nellebracht on Sun Sep 25, 2011 at 03:37:11 PM PDT

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