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Old 11-30-2012, 06:35 PM
 
Location: Littleton, CO
20,893 posts, read 16,049,604 times
Reputation: 3954

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Quote:
Originally Posted by jodipper View Post
Econ 101 must have changed. How is it that if you take my $10, keep $2, and give $8 to someone else, things are better than if I spent the whole $10?
Here's how.

If you're rich, you won't spend the $10. You'll spend maybe $2 and put the other $8 under your mattress. So the total effect on the economy would be to generate about $10 of economic activity (using a money multiplier of 5).

If you're poor, you'll spend that whole $8, adding $40 of economic activity to the $10 from the rich guy's $10.

$50 of additional economic activity is better that $10.
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Old 11-30-2012, 06:39 PM
 
1,728 posts, read 1,774,151 times
Reputation: 893
Economic models are full of ssumptions. Lets just say you are making alot of assumptions i dont agree with

Most notably the rich arent greedy





Quote:
Originally Posted by HistorianDude View Post
Here's how.

If you're rich, you won't spend the $10. You'll spend maybe $2 and put the other $8 under your mattress. So the total effect on the economy would be to generate about $10 of economic activity (using a money multiplier of 5).

If you're poor, you'll spend that whole $8, adding $40 of economic activity to the $10 from the rich guy's $10.

$50 of additional economic activity is better that $10.
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Old 11-30-2012, 06:45 PM
 
Location: Littleton, CO
20,893 posts, read 16,049,604 times
Reputation: 3954
Quote:
Originally Posted by boner View Post
Economic models are full of ssumptions. Lets just say you are making alot of assumptions i dont agree with
Not that you could actually name one.

Quote:
Originally Posted by boner
Most notably the rich arent greedy
I didn't say they were greedy. It is simply an empirical fact that the rich spend only a fraction of their income while the poor (out of necessity) spend all of theirs. This is not an assumption. It's not even controversial.
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Old 11-30-2012, 06:45 PM
 
5,915 posts, read 4,805,422 times
Reputation: 1398
Quote:
Originally Posted by Winter_Sucks View Post
Their government acts how you talk. If you want the government out of the economy, take a look at Somalia. It's not pretty.
Somalia was devastated by a civil war just a few years ago. How will cutting spending turn the US into a Somalia?
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Old 11-30-2012, 06:47 PM
 
5,915 posts, read 4,805,422 times
Reputation: 1398
Quote:
Originally Posted by HistorianDude View Post
Here's how.

If you're rich, you won't spend the $10. You'll spend maybe $2 and put the other $8 under your mattress.

Rich people don't keep their money under their mattress they invest it, which stimulates the economy.
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Old 11-30-2012, 06:48 PM
 
Location: Littleton, CO
20,893 posts, read 16,049,604 times
Reputation: 3954
Quote:
Originally Posted by Kirdik View Post
Somalia was devastated by a civil war just a few years ago. How will cutting spending turn the US into a Somalia?
We had a civil war too.

The Somalian economy is unrefined capitalism. Just like you want.
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Old 11-30-2012, 06:52 PM
 
1,728 posts, read 1,774,151 times
Reputation: 893
So we disagree on the meaning of spending. I would say that rich person reinvesting capital to make even more money is spending and doing one hell of alot more to stimulate the economy then handing a junkie $400.00 in food stamps




Quote:
Originally Posted by HistorianDude View Post
Not that you could actually name one.


I didn't say they were greedy. It is simply an empirical fact that the rich spend only a fraction of their income while the poor (out of necessity) spend all of theirs. This is not an assumption. It's not even controversial.
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Old 11-30-2012, 06:52 PM
 
13,900 posts, read 9,750,216 times
Reputation: 6856
Quote:
Originally Posted by Kirdik View Post
Somalia was devastated by a civil war just a few years ago. How will cutting spending turn the US into a Somalia?
They aren't right now. How come the magic of a minimal government hasn't turned Somalia into an economic powerhouse?
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Old 11-30-2012, 06:54 PM
 
1,728 posts, read 1,774,151 times
Reputation: 893
omparing the US to Smalia is an excercise in idiocy and irrelevant
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Old 11-30-2012, 06:56 PM
 
Location: Littleton, CO
20,893 posts, read 16,049,604 times
Reputation: 3954
Quote:
Originally Posted by Kirdik View Post
Rich people don't keep their money under their mattress they invest it, which stimulates the economy.
Investment does not stimulate economic growth. It is a response to economic growth. Look at the massive cash reserves that American companies are sitting on as we speak. They are experiencing record profits and record share values. Total cash reserves at U.S. corporations total more than $3 trillion.That's like the entire GDP of Germany. Why are they hoarding it instead of spending on plants, equipment, job creation?

Because consumers are not spending. They will use that money when there is the demand for more of what they produce. Until then... yep, it's under the metaphorical mattress.
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