That’s why they say “industry”. “Investing” in the housing market or stock market or rent seeking positions or mergers or fine arts or baseball cards do nothing but asset inflation. Investing in industry creates new markets, new jobs, new skills, new avenues of education - all sources of friction that spread the new wealth around.
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I have never said we should get rid of patents. Royalties, certainly, should be paid, even possibly to the point of extending terms. The exclusivity, though, and stacking royalties to the point where no competition is possible, must go away.
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We might be surprised. I’ve never made that kind of money, but like many people, have a wildly fluctuating income. We keep way too much cash in the bank (I really should invest it somehow, but am more comfortable with liquidity). It’s saved me in lean times.
The thing to remember is there is a metric crap-ton of Americans. It adds up. Stats show that at least 14% of American adults have over $10,000 in savings. The average savings is over $4,000, which would equate to about a trillion. 2/3 that from the 86% with less than $10k.
Nothing that some good old fashion (worldwide) inflation can’t solve.
Considering around 20% of the US doesn’t have a savings account and another 25% has $0 in savings you would be categorically wrong. Between corporations and income disparity and retirement, that 14% probably holds more in banks than the rest.
This is a confusing headline. Is the $2 trillion owned by the banks themselves? The US government? US citizens?
The headline is referring to where the cash currently resides in digital or banknote or other formats. Some of it is proprietary to various kinds of banks and financial institutions, some of it belongs to large corporations that are hoarding it in treasury, some of it is black money that has to sit for a while before being laundered, a smaller portion of it belongs to ordinary citizens, a much smaller portion belongs to American governments.
Think of the proportional breakdown in terms of which entities (human, corporate and organisations) can most afford to leave their capital sitting idle instead of investing it or loaning it out to see some growth in it or just spending it.
Something like 0.2%?
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and both give money to Goldman Sachs…
Yeah, that’s the idea, but what if they can’t make a profit on loans that aren’t too risky? With interest rates so low, banks ran out of good investments (loans) awhile back and took on tons of subprime mortgages. Those are kinda looked down on now (for good reasons), but the interest rates are still low. To help solve the problem, the federal reserve started paying interest on bank reserves. But that means that un-loaned reserves are safe income, while the only better paying ones are those risky subprime ones (for the most part, because everyone already has so much debt). So the money sits in the bank, collecting low but safe interest from the government.
Consider how much the money supply increased in recent years due to quantitative easing and how little inflation has occurred. At the rates the money supply was being expanded, we would expect sky-high inflation. But the money mostly hasn’t made it into circulation. It’s sitting in bank vaults collecting that federal interest. So inflation just muddles along. Except for things like student loans, which have been rendered risk-free, resulting in an entire generation in deeper debt to the banks while tuition costs soar.
At least, that’s the way I understand it. The basic idea holds up and works well as long as all of the core variable numbers are all within certain ranges, but futz with the variables and that same system can generate potentially pathological results. We ended up in that situation and still haven’t found our way out yet. So far, we’ve evaded a catastrophic economic collapse, but we haven’t really fixed it yet. With so much of the economy so deep in debt already, things like collecting interest on reserves and student loans are the only safe things for the banks to do. Meaning most of the money that isn’t harming the next generation is idle. But to release it could be potentially devastating.
Maybe somebody that knows more about economics could explain it better?
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Ok, so let’s say the 14% have more than half of the trillion. Your point is? Are all the 14% in the 1%? Some other trope? I don’t get it.
Or maybe you are pointing out the well know fact that Americans are terrible savers. Agreed.
My point was that you can add up to big numbers because there are a big number of savers. That with some simple research, you can show that at least a trillion is in savings spread across tens of millions of people. That implies different a policy approach for stimulating investment than if it was just a handful of people and companies.
This is a complicated issue, but basically that money sits idle to prevent inflation.
“Paying interest on reserves allows a central bank to maintain its influence over market interest rates independent of the quantity of reserves created by its liquidity facilities.”
Please have a look at this http://www.washingtonsblog.com/2013/06/81-5-of-money-created-through-quantitative-easing-is-sitting-there-gathering-dust-instead-of-helping-the-economy.html
And this, straight from the Fed https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr380.pdf
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Right. Income inequality is a “trope” when 50 million out of 350 million holding most of a $2,000,000,000,000 sum in savings while 155 million have $0 because they didn’t do enough. At the risk of being accused of being in a bubble, I’m bowing out.
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Not sure what you mean by bubble. But thank you for finally saying what your point is.
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