> GNP (red line) tripled since 1970 [...] So why on earth do we have to talk about a lack of money when society's wealth has increased so fast? [... Link to income gap ... ]
It's less of a problem of income distribution than one of wealth distribution. The key issue is that people with lower incomes accumulate assets that cost them money (house, car, TV...) while those with higher income collect stocks, bonds, rentable real estate property, all of which generate more wealth.
Right. Governments print money all the time, but the total value of all the money remains constant, thanks to inflation. It's just a measure of how much power someone has in a society compared to everyone else.
> It's less of a problem of income distribution than one of wealth distribution. The key issue is that people with lower incomes accumulate assets that cost them money (house, car, TV...) while those with higher income collect stocks, bonds, rentable real estate property, all of which generate more wealth.
That's not given by God. Stocks didn't use to be money making machines and there is nothing that says they have to be. Stocks have been doing amazingly well since about 1980's because during the same time period wages have gotten a smaller and smaller share of the gnp. The ugly truth of the stock market is that for every winner there is also a loser.
>> Right. Governments print money all the time, but the total value of all the money remains constant, thanks to inflation. It's just a measure of how much power someone has in a society compared to everyone else.
Inflation, by it's definition, is caused because more money is chasing the same goods & services...which drives the prices up. That's why loose monetary policy (i.e. the Fed printing money) often comes with lots of "concerns about inflation".
Also...if money was indeed constant as you suggest, and it's just a power tool, then why have we seen 2 phenemona in the last 100 years.
1. The greatest number of people are moving out of absolute poverty, than at any other time in recorded history (hundreds of millions if not 1 Billion+ by now) - meaning, more people (as a % of the global population) are earning enough income to move themselves out of an abject poverty state, at a faster rate than at any other time in recent recorded history.
2. The greatest income gaps between the top 1% of the top 1% and the rest.
If the money supply were constant, both of those would be mutually exclusive. But they are not.
Anybody can create wealth, likewise anyone can destroy wealth. Money is just the physical/tradable manifestation of wealth. It's just a proxy. That's all. No conspiracy to see here.
I think you misunderstood his argument. Assuming I understand correctly he was saying that if you have $100 in your society and 100 goods available for purchase, evenly each good is $1, if you have $200 and 100 goods each good is $2. Despite doubling your money it is still worth the same. Obviously it is more complex than that but I think that's the basic idea he was getting at. You can only increase the wealth of a country if you increase the amount of goods rather than the amount of money as money will more or less scale to goods. From what I understood he was referring to goods as wealth.
> The ugly truth of the stock market is that for every winner there is also a loser.
That's hardly the case. The only loser is someone who sell a stock for a loss (and even then considering dividends and the tax advantages it doesn't necessarily mean a net loss).
If our economy has $100 we both receive a paycheck for half the remaining money and you buy a stock that gives you $1/year and I do not, assuming we spend the same you will automatically become richer each year until we are both paid a pittance while you sit on most of the money. I think that was the general idea.
Assuming that is true inflation will still decrease the real value of the goods I purchase providing you with a greater share of the economy year after year. The general idea is that goods will increase at a higher rate than $1/year providing me with more wealth regardless of how rich you become. Unfortunately while a good idea in theory it hasn't really seemed to work in the US. The gap between the rich and the poor increased dramatically and minimum wage workers having trouble surviving.
So wealthy people do not bother with housing, transportation or entertainment, and instead put all their money into investments? I think it's more likely wealthy people had income sources that allowed them to invest, while still enjoying some level of comfort.
I think it is reasonably clear from the GP that relative levels of investment was the gist; of course rich people live somewhere, moves about and try to keep themselves happy.
Then I don't see why it's important to state that those with lower incomes paying for housing, transportation or entertainment is the reason for their inability to become wealthy. Merely stating a difference in income causes the disparity is enough. Housing, transportation, communications, food and even entertainment are necessities.
That's because they have more money. You have to pay for the necessities, and then you can save. If you're making near minimum wage, you won't be able to save much.
Also, those investments, like stocks and rental properties, transfer wealth from the poor to the rich, generally.
Sure, no one is disputing the fact that rich people have more money than poor people. For many reasons the rich get richer at the expense of the poor, the OP was noting one of the reasons.
Another is that the tax code incentivizes making your income through investments, something unattainable for people who aren't rich.
I would suggest it is not so much related to level of income, but rather knowledge of money management. The choice of buying more assets than liabilities is a basic, reliable (although frequently dull) way of acquiring wealth.
I am reminded of frequent stories of individuals with large incomes still being relatively poor - Doctors, Lawyers, etc. purchasing ever larger houses, ever more luxurious automobiles, etc. (all liabilities).
Or, as one individual who like to get peoples' attention puts it: "It's not how much money you make, but how much you keep."
No it's not: https://en.wikipedia.org/wiki/Money_supply#United_States
> GNP (red line) tripled since 1970 [...] So why on earth do we have to talk about a lack of money when society's wealth has increased so fast? [... Link to income gap ... ]
It's less of a problem of income distribution than one of wealth distribution. The key issue is that people with lower incomes accumulate assets that cost them money (house, car, TV...) while those with higher income collect stocks, bonds, rentable real estate property, all of which generate more wealth.