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Old 03-19-2013, 11:10 PM   #41
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Huntsman and Paul were the only ones who knew what the hell they were doing. I don't know what the rest were doing up there
Getting rich and/or famous?
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Old 03-20-2013, 11:22 AM   #42
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Getting rich and/or famous?
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Old 03-20-2013, 11:34 AM   #43
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That logic is called marginal propensity to consume. Those with more money have lower MPC, because they save more. Those with less available funds have less ability to save. The higher the MPC, the more impact a monetary policy has. We were over 1 during the last recession, which causes negative effects. We're at about 0.9 now.

1/1-b(MPC) is the formula for multiplying

If b is 1, it becomes 1/1-1 which equals 0

If 0.9, it becomes 10

If 0.5( saves 50%) it is 1/1-.5 or 1/.5 which is 2.

So throw $1000 in extra government spending(to be simple), the 0.9 would boost production by 10,000, and if our country's MPC was 0.5, it'd boost by 2000.

So, if you want government policy to actually do something, you have to make sure those with highest MPC aren't struggling.

Hence why we are currently doing micro Econ to get the ball rolling (eg Feds lowering interest rates) to get consumption back up before macro policies will come in.
This analysis seems to rely on the assumption that when people save more they just stash money in their mattresses. Most people with money invest that money as a form of saving, thereby providing liquidity to industry.
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Old 03-20-2013, 11:45 AM   #44
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This analysis seems to rely on the assumption that when people save more they just stash money in their mattresses. Most people with money invest that money as a form of saving, thereby providing liquidity to industry.

And your theory relies on the idea that if a person is saving that money at a banking institution then those savings become a reserve of the bank that they can then lend out to a consumer, that is, if the consumer is willing to lend and the bank is willing to lend. If the funds aren't lent out then there is no increase in consumption.


And of course this is all on the presumption of ceteris paribus
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Old 03-20-2013, 12:18 PM   #45
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And your theory relies on the idea that if a person is saving that money at a banking institution then those savings become a reserve of the bank that they can then lend out to a consumer, that is, if the consumer is willing to lend and the bank is willing to lend. If the funds aren't lent out then there is no increase in consumption.


And of course this is all on the presumption of ceteris paribus
Stock market, 401k, etc. are other venues of 'saving'
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Old 03-20-2013, 12:20 PM   #46
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Stock market, 401k, etc. are other venues of 'saving'
Those are avenues of investing. To call it "saving" would be irresponsible.
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Old 03-20-2013, 12:30 PM   #47
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Those are avenues of investing. To call it "saving" would be irresponsible.
It just depends on how you define "saving". It could be as simple as "deferred spending". Nobody invests just for the hell of it. The expectation is that we'll be able to spend more later on down the line.

In any case, using "FDIC insurance" as shorthand for saving is pretty narrow as well. Money market funds are, by statute, not Federally insured (although they were during the financial crisis), do those count as savings? And if so, and given the fact that there is a chance you could lose your principal investment, where do we draw the line on risk when we categorize something as "savings" or "investments"?

Besides, I'm sure most 401ks at this point offer a Treasury fund. If the risk free rate isn't a form of "savings" I don't know what is.
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Old 03-20-2013, 12:34 PM   #48
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This analysis seems to rely on the assumption that when people save more they just stash money in their mattresses. Most people with money invest that money as a form of saving, thereby providing liquidity to industry.
Investments are a part, but a small part. Consumption is the key to our economy. Change in saving habits for the highest MPC( let's say the poor get smart and start saving) individuals would be a negative effect to our economy.

My point, is both parties are equally important to our economy. To let the poor suffer would only hurt the people that supply them, the rest of the country.
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Old 03-20-2013, 12:37 PM   #49
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Investments are a part, but a small part. Consumption is the key to our economy. Change in saving habits for the highest MPC individuals would be a negative effect to our economy.

My point, is both parties are equally important to our economy. To let the poor suffer would only hurt the people that supply them, the rest of the country.
So you are advocating that people don't save, spend what they can't afford, buy stuff they don't need and basically live paycheck to paycheck in order to keep the machine running. Maybe we can assign some people to serfdom while we're at it?
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Old 03-20-2013, 12:41 PM   #50
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It just depends on how you define "saving". It could be as simple as "deferred spending". Nobody invests just for the hell of it. The expectation is that we'll be able to spend more later on down the line.

In any case, using "FDIC insurance" as shorthand for saving is pretty narrow as well. Money market funds are, by statute, not Federally insured (although they were during the financial crisis), do those count as savings? And if so, and given the fact that there is a chance you could lose your principal investment, where do we draw the line on risk when we categorize something as "savings" or "investments"?

Besides, I'm sure most 401ks at this point offer a Treasury fund. If the risk free rate isn't a form of "savings" I don't know what is.
Investment implies risk. As you stated, saving is simply deferred spending. You might be receiving returns of 7.5% on your investments while I receive 0% on the money I set aside each week in an FDIC insured account. I am saving money. You are investing money and receiving returns on said investment (i.e., ROI).
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Old 03-20-2013, 12:43 PM   #51
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In any case, using "FDIC insurance" as shorthand for saving is pretty narrow as well. Money market funds are, by statute, not Federally insured (although they were during the financial crisis), do those count as savings? And if so, and given the fact that there is a chance you could lose your principal investment, where do we draw the line on risk when we categorize something as "savings" or "investments"?
Money market accounts are insured, but money market mutual funds are not insured.

I would categorize savings vs. investments based on the substantial risk of loss.
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Old 03-20-2013, 12:47 PM   #52
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So you are advocating that people don't save, spend what they can't afford, buy stuff they don't need and basically live paycheck to paycheck in order to keep the machine running. Maybe we can assign some people to serfdom while we're at it?
Not advocating for the bolded, just advocating to make sure those that will do that no matter what we do, have the ability. GOP believe there's some perfect structure that all people should be responsible with their money and we can live happily ever after. That's completely impossible. The violence and crime that would result would be far more detrimental than sending a welfare check that would be spent in our economy.
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Old 03-20-2013, 01:57 PM   #53
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Huntsman and Paul were the only ones who knew what the hell they were doing. I don't know what the rest were doing up there
I would narrow that to just Huntsman, who I found to be the single actually reasonable GOP contender for 2012 and the one GOP candidate I could give some serious consideration to.

Sadly, he was far too reasonable – an actual thinking man’s Republican -- for the GOP's base and primary system that seemed doomed to excrete demagogues, ideologues and general clowns.
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Old 03-20-2013, 03:21 PM   #54
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Money market accounts are insured, but money market mutual funds are not insured.

I would categorize savings vs. investments based on the substantial risk of loss.
401k?
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Old 03-20-2013, 03:42 PM   #55
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401k?
What about them? I would qualify them as investments for retirement.
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Old 03-20-2013, 03:48 PM   #56
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What about them? I would qualify them as investments for retirement.
Yeah, but it's not like 401ks don't have access to something like a Treasury bond fund. Do investment grade bond funds count as investments or savings? Or is anything without a Federal guarantee at the consumer end considered an investment?
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Old 03-20-2013, 03:50 PM   #57
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Yeah, but it's not like 401ks don't have access to something like a Treasury bond fund. Do investment grade bond funds count as investments or savings? Or is anything without a Federal guarantee at the consumer end considered an investment?
For me, and my profession, investments are for the long term, savings are for the short term. Since a person doesn't have access to a 401k until they're 59-1/2, I view them as investments.
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Old 03-20-2013, 04:41 PM   #58
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For me, and my profession, investments are for the long term, savings are for the short term. Since a person doesn't have access to a 401k until they're 59-1/2, I view them as investments.
For the purposes of this discussion, though, people put money into 401k's and that money goes to the economy. Again, people who come into money do not just stow it away in a lock box somewhere. Even keeping a savings account has an appreciable effect on the economy.

I brought it up because Collins was insinuating that rich people get money and then take it out of the economy by stashing it away. That simply is not true. Rich people invest and let their money work for them.

I personally consider my 401k "saving for retirement". My annuities are "savings" as they have guaranteed returns. Bonds are "savings" as well, for the same general reason.

It is wholly irresponsible to encourage people to go out and purchase things they cannot afford just so people are buying sh#t
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Old 03-20-2013, 06:05 PM   #59
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For the purposes of this discussion, though, people put money into 401k's and that money goes to the economy. Again, people who come into money do not just stow it away in a lock box somewhere. Even keeping a savings account has an appreciable effect on the economy.

I brought it up because Collins was insinuating that rich people get money and then take it out of the economy by stashing it away. That simply is not true. Rich people invest and let their money work for them.

I personally consider my 401k "saving for retirement". My annuities are "savings" as they have guaranteed returns. Bonds are "savings" as well, for the same general reason.
I think there are more than enough strong arguments that a dollar spent on a consumable has a far greater impact on the economy compared to investing that same dollar in a target retirement date mutual fund that owns a basket of stocks that are owned by a bank. In addition to that, a majority of economists are pretty much in agreement that increased savings usually equals slower growth of GDP.

Also, when you buy a mutual fund or a direct stock very seldom does that money go directly to the company. For example, if you go out and buy a share of Apple, you're not buying that stock FROM apple....aka, you're not giving money to them.

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It is wholly irresponsible to encourage people to go out and purchase things they cannot afford just so people are buying sh#t
Yes, it is, but that's how our economy works. The trick is finding the equilibrium.
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Old 03-20-2013, 06:10 PM   #60
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I think there are more than enough strong arguments that a dollar spent on a consumable has a far greater impact on the economy compared to investing that same dollar in a target retirement date mutual fund that owns a basket of stocks that are owned by a bank. In addition to that, a majority of economists are pretty much in agreement that increased savings usually equals slower growth of GDP.

Also, when you buy a mutual fund or a direct stock very seldom does that money go directly to the company. For example, if you go out and buy a share of Apple, you're not buying that stock FROM apple....aka, you're not giving money to them.



Yes, it is, but that's how our economy works. The trick is finding the equilibrium.
Exactly.
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