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.
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 $HOT_STARTUP millionaire, just some dude that caught the tail end of the Microsoft gravy train as it was leaving the station (and regardless, most of our money is capital gains and saving like a squirrel before winter).
And that's why I don't support the currently proposed tax cuts, even though we would probably benefit. Other people need those cuts far more than my wife and I do, and we'll get along just fine without them.
It's always amazing to me that people can't raise 400$ 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.
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.
> 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.
If you made 1000x as much money as you do now, you would probably buy much nicer house, food, clothing, entertainment, etc.
But you probably wouldn't spend 1000x as much on that stuff, because after a certain point, your needs are fully met. You could probably always find someone selling you bigger / more expensive things, but past a certain point it doesn't do any good -- a 25-room mansion is impractical for a family of four.
