
The Two Economies: The Top 40% and the Bottom 60% - donmcc
https://www.linkedin.com/pulse/our-biggest-economic-social-political-issue-two-economies-ray-dalio?articleId=6327163206116667393#comments-6327163206116667393&trk=prof-post
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unpwn
Quite an interesting article with lots of good insights. This was particularly
interesting to me:

    
    
      The increasing disparity in financial conditions is a major cause of the slowing of growth, because those in lower income/wealth groups have higher propensities to spend than those in higher income/wealth groups. Said differently, if you give rich people more money, they probably won’t spend much of it, whereas if you give poorer people more money, they will probably spend more of it, each motivated by the extent of their unmet needs and desires.
    

I intuited poor people spent more than rich people, but never understood why,
but this actually makes a ton of sense.

~~~
mikestew
It's the flip side of regressive taxes like sales tax. If Bill Gates buys
another Ferrari, percentage-wise he spend far less of his resources than you
did, even if you buy a ten year old Hyundai.

It applies at even a more realistic level. Take me, for instance. Our needs
are met. We have no trouble making the payment on the house we bought fifteen
years ago, food is always on the table, and our cars are long paid off. We
have tech incomes, so that leaves us with surplus. Do we go buy Ferraris? No,
we have no need of a Ferrari. Gadgets? We've got more gadgets than we need.
We've run out of things to spend it on, so we save it.

Whereas the poor family will never run out of things upon which to spend their
meager earnings, because they're barely keeping their heads above water at
best. _" As a result, according to a recent Federal Reserve study, most people
in this group (lower 60%) would struggle to raise $400 in an emergency."_ I'm
sure there is more than one person reading this comment that could raise 1000
times that if they had to. Might hurt, but you could do it. I could, and I'm
not even a $HOT_STARTUP millionaire, just some dude that caught the tail end
of the Microsoft gravy train as it was leaving the station (and regardless,
most of our money is capital gains and saving like a squirrel before winter).

And that's why I don't support the currently proposed tax cuts, even though we
would probably benefit. Other people need those cuts far more than my wife and
I do, and we'll get along just fine without them.

~~~
tdb7893
It's always amazing to me that people can't raise 400$ in an emergency as I'm
in my mid 20s and make 70k a year and I have 100x that in the bank. It reminds
me that I make a decent amount more than the median household income in the US
and how lucky I've been overall.

~~~
mikestew
_It reminds me that I make a decent amount more than the median household
income in the US and how lucky I 've been overall._

We would all do well to remember, as it's easy to forget when you see your
fourth Tesla on the way to work, amid a sea of BMWs (hi, Redmond!). Then I go
visit my parents in Florida. Oh, yeaaaaah, I forgot that I'm fucking rolling
it and I'm lucky as can be. And I did _not_ grow up rich, so you'd think it
would stick better. <shrug>

But I do wonder if some of the political decisions made are a result of an
extreme version of that. Take our sitting president, as one example. The man
has never known want, never once has the price of a pair of shoes ever
factored into his decision making. Is he a _complete_ dick, or just clueless
and tone-deaf as a result of his environment? Kind of like how George W. Bush
famously didn't know the price of a gallon of milk. You know who has two
thumbs and _also_ doesn't know the price of a gallon of milk +/\- $1? This
guy. I'm not ridiculously rich, and even I don't know. But I remember a time
when I needed to know. But I can't remember the last president we've had that
might have ever needed to know the price of a gallon of milk at any point in
their life. Maybe Clinton, if one believes the story of his upbringing to be
completely true.

~~~
dragonwriter
> Kind of like how George W. Bush famously didn't know the price of a gallon
> of milk.

Well, not famously enough for people to remember _which_ President Bush this
story is usually told about, apparently (George H. W. Bush, in his 1992 re-
election campaign.)

Also, AFAIK, it didn't actually happen, but is a myth that has grown up by
mixing a common description of out-of-touch politicians with the actual story
of George H. W. Bush seeming surprised by (at that point, common for many
years) grocery scanners.

