Well that's brilliant ... take a wise behavior that far too few people do, and blame it for the world's problems.
Our rulers know that if we don't save any money, we'll be more vulnerable and dependent ... plus, it's too hard to tax saved money, whereas it's trivial to tax money that's moving.
In an economic system which requires either gainful employment, or humiliation, poverty, and destitution from its people, AI and robots are indeed destroying the economy.
America produces more then it ever did, yet manufacturing is considered dead as a source of jobs.
The small number of well-paid engineering jobs AI and robots create is dwarfed by those losses.
It only destroys imagined wealth and not actual wealth (more useful stuff is created). In the current system the new wealth creation is skewed to the already wealthy, hence why the majority will see a decline in living standard and the feeling of the destruction of the economy. However wealth disparities takes money to maintain, and it is inefficient. It requires taxpayer subsidies to be maintained. If the wealthy had to pay the unsubsidized cost of the police, legal system, and foreign wars to protect their investments they would stop being wealthy very quickly. So it's not AI or robots that will destroy the economy it's high income taxes and low capital taxes.
> If the wealthy had to pay the unsubsidized cost of the police, legal system, and foreign wars to protect their investments they would stop being wealthy very quickly.
That will depend on how effectively we can replace those systems with AI and robots. We're on our way there with the legal system.
In order to maintain an ever increasing wealth disparity society will have to become more fascist and taxes more confiscatory. To prevent this you simply need to fight fascism in all its forms (including socialism and political correctness). This is guaranteed to happen eventually as fascist states are inherently unstable.
Oh, we definitely need to fight political correctness.
Your god-given right to be a rude motherfucker to whomever you feel like, whenever you feel like, without being subjected to any social censure, must be defended. I just don't understand why we can't call a _______ a _______ in polite company anymore.
As long as the methods used to uphold political correctness does not use state or taxpayers subsidised institutions then it's ok. That's just normal society organization with freedom of association. If you need to use the state to enforce beliefs on others, that is where it becomes fascist.
Socialism is "fascism with a human face", the “The Fascists of the future will be the anti-fascists.” - Winston Churchill.
"I hate Indians. They are a beastly people with a beastly religion."
"[Ghandi] ought to be lain bound hand and foot at the gates of Delhi, and then trampled on by an enormous elephant with the new Viceroy seated on its back."
"I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place."
If he wanted to find fascism, all he needed to do was look to his treatment of the imperial holdings - something that British socialists were quite eager to point out.
If you torture the definition of fascism so far as to include social democracy, then it will also encompass America since the arrival of settlers, centuries of monarchical and parliamentarian Europe...
The quote is one I agree with and I thought I should give its origin. I do not agree with everything Winston Churchill has said or done, and I probably disagree with him more than most (even of those on the left).
But perhaps some context is in order.
At that time India was pretty terrible. E.g. burning at the stake of widows after their husbands died. Even Marx found that the British occupation was a civilizing force. It could be argued that the occupation in its totality and for all of it's faults was a net positive.
Obvious fascism is obvious. Which is why George Orwell's books are dedicated to the less obvious fascisms. And it's why I made the point on political correctness, because it's less obvious.
yeah, absolutely ridiculous. Create a burden for the state during bad times by not saving. Also, where is the money going to come from to buy and sell shares. Pension schemes are huge sources of investment. Isn't that also an economic driver?
Besides which, the entire article is rendered moot by the fact that inflation exists precisely as a tax on savings.
Isn't the burden of the article poking at the people who have tremendous wealth and who use it to influence policy?
>> inflation exists precisely as a tax on savings
I don't think the article is suggesting that a person who has a savings account at the bank is the problem. Although the title is misleading in that case....
First step is to blame it for the world's problems. Next is to remove the ability to use or store cash. Finally, charge to save with negative interest rates.
And if negative interest rates don't spur growth, it's because they weren't negative enough!
A survey by the Money Advice Service has found that four in 10 adults in the UK do not have £500 or more in savings. Another by ING bank suggests 28% of UK adults have nothing at all in the bank.
Yeah, I'm sure all those hardcore savers in the UK are ruining it for the world's economy.
In addition to that they name pension funds as #1 source of savings. So they really want people to stop saving for their pensions? I doubt the author of the article wants to live off £150/weekk state pension..
If you want to lower the savings rate you have to introduce a state pension system like Germany where (most of the) pension is paid by current workers. Doesn't work well with the ageing population but means that all money is directly distributed.
State pension systems tie your financial security directly to government finances, and also to election results decades in the future. They are essentially a form of gambling.
No rational person relies upon them, and rational people are precisely the kinds of people to have savings!
Private pensions also tie you directly to private finances, and market results decades in the future. You're also gambling that the money won't be stolen by the institutions or suffer a collapse in value - banking on a TBTF bailout in the future.
(Overstated slightly, but there is a role for both private and state pensions in a sensible system!)
With a state pension, a government can exclude people from reaping what they have put in, retroactively. I don't expect to be able to claim a UK state pension -- they can just keep putting up the minimum age from 65, to 66 to 70 to 75 to 80... until the scheme is removed entirely.
Whereas with private pensions the values go up and down but are unlikely to hit 0 and stay there -- unless it's really mismanaged!
> I don't expect to be able to claim a UK state pension -- they can just keep putting up the minimum age from 65, to 66 to 70 to 75 to 80
What would be the point of doing this? Whose interest does it serve? It does not serve the banks' interest. It does not serve the politicians' interest. It does not serve your interest.
It brings the deficit down, and as long as it's only done to a narrow group of people at a time and has the support of the newspapers it looks good for the government's economic competence.
> So they really want people to stop saving for their pensions?
I would stop immediately if I could. I am, however, required by law to save for a pension I will never receive.
The retirement age has already been raised to 67 where I live and is now linked to life expectancy. The second someone finds a cure for old age my retirement will be cancelled. Even if they don't, by the time I'm 67 the pension age will be >70.
As an American in their late 20s I don't know anybody who thinks they'll see a dime out of social security. We know we're paying into it to keep current retirees alive and we know that just won't happen for us.
This is not even social security. This is a private pension. Theoretically, the money is invested and you'll make a nice profit on it. In practice, the only one who's making money off it are the insurance companies.
My pension fund is actually worth less than the amount I paid into it, because all the intermediaries want a cut for their 'services' (whatever those may be). It's like being legally required to flush money down the drain.
I know the difference between pensions and social security.
I also know that some of the commenters in this thread are talking about pensions without distinguishing between public and private pensions.
I also know that there is an enormous amount of capital in the form of public pensions and that public pensions are often invested with relatively few restrictions compared to private pensions. (At least in the US?)
Assuming you're talking about a social insurance plan like Social Security, that's not saving for a pension and never was. It is insurance against getting too old to work productively, which is perhaps a concept that is becoming more and more quaint as technology and medicine both improve.
(Technology means that fewer and fewer people can "work productively" regardless of age, medicine means "too old to work" becomes older and older.)
They will cheat you off of interest, so in that sense, yes, but "a pension you will never receive" is outright theft if true. I don't know why you would believe that your pension would not be paid out at all. It makes no sense for any party involved; it's much better for all involved for you to have that money to spend it in the economy again.
Financial institutions are private businesses. No one forces you to have a contract with them. Current accounts are very competitive in most countries (i.e. loss making for the bank), all other products are voluntary.
Since you refer to 67, I guess you were referring to Germany or Netherlands and there it is a social insurance. You don't save for your pension. You provide the pension of current pensioners (via taxes or contributions) and trust that future workers will provide your pension.
In all countries where the main part of a pension comes from saving (e.g. UK, US), you will directly receive what you saved (plus interest, minus taxes). A system such as what you describe doesn't exist anywhere as far as I can tell.
German here: the state pension system has become a joke. None of my friends below 35 actually believe they can rely on it for something that comes close to a livable retirement, and even people already on the state pension system feel cheated for various reasons. The only people with okay pensions are politicians and civil servants, who fall under a completely different system.
The Tax-Burden on the other hand has been growing and growing, leading to a lot of braindrain and tax evasion.
Same situation in the US. The personal savings rate is around 5.7% near the all time low and certainly well below the historic average. When the US experienced the highest levels of economic growth in the past, the savings rate was double or triple what it currently is.
It nicely contrasts with picture of letting agencies that have hundreds of properties in each of TOP50 cities and take +70% of minimum wage for single bed.
The unprecedented size of these savings might not matter if investors only wanted a modest return. Unfortunately investors are greedy and there are simply not enough things to invest in that can offer the high returns they demand.
So how do investors react? For decades, they have bullied governments to release assets for sale that can then be leased back at high returns. In the UK, this is why we have privatised utilities and a swath of other safe, previously state-owned, assets in private hands.
It is not morally wrong ("greedy") for investors to seek high returns. If an investment does offer high returns, investors will flock to it, the price will increase, and it will quickly offer average returns, relative to the amount invested.
Nor do investors "demand" high returns - who would they demand them from? - they simply look for the best place to put their money. Investors are not a cartel that lobbies the government. Government services were privatised in the UK for political reasons.
Then there is the way most people, businesses and governments have accumulated their savings. Just a quick look at the $100tn total and we can see that most of it is the result of tax avoidance.
The Japanese are famous for their savings and investments. But middle-income families can only save because they don’t pay enough tax for officials in Tokyo to provide basic services. Every year the Japanese government runs a 10% budget deficit, such that its accumulated debt is worth almost 250% of GDP.
The author has expanded the meaning of "tax avoidance" to cover cases where he thinks the government should be imposing higher taxes. I agree that governments should run a balanced budget (I would prefer they do so by cutting spending), but the author implies that you could pay all the taxes you owe, and you would still be cheating the system.
> Investors are not a cartel that lobbies the government.
They most definitely are, especially in the UK and US. I'm actually a little unsure how you could honestly believe that investment institutions don't lobby governments.
> Investors are not a cartel that lobbies the government.
Investors as a class most certainly lobby the government.
> Government services were privatised in the UK for political reasons.
.. and this politics does not exist in a vacuum. There is a whole mythology about privatisation that is put forward by opaquely-funded think tanks. It has other functions simply than providing assets - it's also an anti-strike measure and a means of avoiding complaints.
Investors aren't a class. "Investors" includes pension funds, university endowments, hedge funds, banks, sovereign wealth funds, individual savers - the only thing these people have in common is they have funds and want to grow them, but they differ completely on risk preference, time preference, amount to invest, etc, etc. I.e., they all pursue their own individual self-interest, not some collective class interest.
Some of these entities fund lobbyists and some don't.
mythology ... opaquely-funded think tanks
I don't know if you are a Marxist, but this is a Marxist way of looking at the world, where each class pursues its collective interest, and funds propaganda to spread a self-justifying mythology.
I'm not a Marxist, but I was wondering as I typed that if the class analysis would get pattern-matched that way.
My comment about think tanks was driven by http://whofundsyou.org/ , really. "Funds propaganda to spread a self-justifying mythology" is definitely something that happens to varying extents by various actors - that's effectively how "super-PACs" work in the US. And privatization has the characteristics of a mythology: it's asserted as a cure-all for problems in public services, and implemented even when extremely unpopular. It relies on creating pseudo-markets, often with only one buyer and tiny number of sellers, and the buyer is not the consumer of the service so the quality gets driven down.
> It is not morally wrong ("greedy") for investors to seek high returns.
This is an example of isolating an action from a bigger picture. Of course, it's not morally wrong to seek high returns - in complete isolation from how they're sought.
What's more important is how the higher returns are sought. Is the investor privatizing water? Canceling funding for services like abortion? Or are they doing things that net benefit a society like building housing, designing and researching more efficient transportation.
Therefore the means through which the investment is sought can circumscribe morally wrong investments.
> It is not morally wrong ("greedy") for investors to seek high returns. If an investment does offer high returns, investors will flock to it, the price will increase, and it will quickly offer average returns, relative to the amount invested.
Companies ask governments for favors all the time. The Carrier deal is a widely viewed example. If you do x, Carrier will invest in your state. Sometimes the investment isn't even open for the public to take advantage of. In other words, a single hyper-wealthy person can have his/her agents lobby for their own personal benefit.
> Nor do investors "demand" high returns - who would they demand them from? - they simply look for the best place to put their money. Investors are not a cartel that lobbies the government. Government services were privatised in the UK for political reasons.
They lobby the government, or whomever has the power to grant them the higher returns. Sometimes that means displacing the local population, for example poor oil rich countries.
Maybe you are thinking about the small investor. Someone who is passive and without the power to change the playing field?
This article is all kinds of wrong. It does not make an appreciable difference between savings, investing, and speculation. There is not a glut in savings but there is a glut in speculation. This is due to a global war on savers. Savers are punished by artificially low interest rates, inflation of money supply, high taxes on earned income, and subsidies to speculators (e.g. various housing subsidies).
There is a colossal glut in savings at the global level. There are books which cover the topic in depth (e.g. The End of Alchemy) but instead I'll just link to the relevant Wikipedia article: https://en.wikipedia.org/wiki/Global_saving_glut
Firstly, savings are not currency although they are used interchangeably with the assumption that currency is safe. This is not guaranteed to hold. Secondly, with rehypothecation the same currency is counted at least 9 times (M2 money supply). I'd contest that it's 50 to 100 times due mechanisms to get around the 10% reserve requirement - but this is difficult to explain. Thirdly, the increase in savings is dwarfed by speculation that the savings is backing and the resulting mix or risk reward when combined is still speculation. As in this is not unencumbered savings. And finally, the wikipedia link has a long list of references from people who are wrong about everything.
I'm pretty sure this is market forces. Glut of savings --> low rates. Sure there are local exceptions and regulatory impacts, but those generally can't stand against the tide, so I'd say it's 95% natural.
> inflation of money supply
Depends on the currency, but in the case of USD, increasing the supply is necessary to avoid deflation, which would seem superficially good for savers, but would be disastrous for economic productivity.
> high taxes on earned income
???
> subsidies to speculators (housing subsidies)
I don't know much about this one, but I think most subsidies are homestead-y (to owner-occupiers and first-time buyers).
Not market forces, see reserve bank interventions.
Deflation is not disastrous for economic productivity but it is a side effect of economic productivity.
Taxes on earned income vs capital is a regressive tax system on the working class and a subsidy to the upper class.
Owner-occupiers and first-time buyer subsidies are subsidies to the speculators. Increase in house prices happen the moment such policies are implemented to capture the entire benefit. The policies are only implemented after speculators have invested and drive up housing prices. This only benefits speculators (who can also be first-time buyers).
Indeed, the article seems blind to capital taxes, focusing instead on income tax. Wealth tax is a pretty alien concept in the US -- I think it would face strong cultural resistance, and cause even more wealth flight to tax havens. And yet, I can see how it would tackle a big part of the problems described here.
It may need to be implemented in a coordinated global fashion to avoid cheating. You'd need the rich nations to do it, with a working enforcement mechanism that spans international borders. That, combined with cultural resistance, sounds hard.
No need for a global system in taxes to reduce wealth disparity. Just need to stop subsidising speculation. Due to agency costs (information asymmetry etc.) it's harder to make large returns on large amounts so the wealth levels off. The problem with a global system in taxes is that the taxes will just be used to subsidise more speculation.
It's indirect, but if institutions stopped loaning the US Gov't money, it would have to raise bond rates -- wouldn't that force the Federal Reserve to raise its rates as well? That would connect the market to the rates.
"There is a glut in speculation. [...] Savers are punished by artificially low interest rates"
I thought interest rates were kept low to entice those having money to, rather than put it in the bank, invest it, that is: speculate. Problem seems to be that that's not what households did. In many countries, they paid back on their mortgages and put more money in the bank, despite the low interest rates. The science of psychological economics isn't that well developed, it seems.
That is it's intent but ironically it increased the amount of savings required to retire so ordinary people couldn't participate in the speculation but still have to pay tax to subsidise it. It's huge wealth transfer from ordinary people to the finance industry.
> One peak is the mountain of debt ... that is casting its shadow over the whole world ... We all recognize the mountain of debt.
> But few people recognize its twin: A mountain of idle cash, belonging to rich savers and corporations, too terrified to invest it into the productive activities that can generate the incomes from which you can extinguish the mountain of debt, and which can produce all those things that humanity desperately needs, like green energy ...
Mark Blyth recently mentioned[1] two numbers that are particularly effective at explaining where money is being "saved".
> In 2015, Wall St. bonuses - not regular compensation, bonuses - seven years after they were bailed out with the public purse totaled $28.4 billion. Total compensation paid to every single person in this country who earns minimum wage: $14 billion.
It is intriguing, but with nearly every statement he makes, I feel like I need a citation to believe it, because they feel like overstatements or misleading.
Varoufakis is a very smart man. His talk on this subject is interesting, and the figures easily verified. Unfortunately most of the critisim if his ideas come in the form of some type of ad-hominem: "Well he is a Marxist, so everything he says is false"
I doff my hat to the Guardian's clickbait team on this one. This is the best I've read in ages. Is it self-parody? Is it bullshit? Does the guy believe this nonsense? I CAN'T TELL. My slack-jawed incomprehension remained firmly in place throughout the entire article, with only my motivation changing. A master craftsman is at work here. <sheds single tear>
(More generally: a few years ago I saw a random comment on somebody's blog suggesting that it was only a matter of time before savers were rebranded as hoarders. So it's interesting to see this perhaps (finally) start to come to pass.)
It's not individual savers, but institutional investors that collectively hold ~$100tn, as estimated by the IMF. They're risk-averse, which leads to rent-seeking. That's $100,000,000,000,000. I don't get to write that many zeroes very often.
The article argues that we would all be better off if that money were spent on the common good -- infrastructure, green tech, education, even ag & manufacturing -- rather than being put into buying up what used to be the public sector and putting a price on it without improving it.
Of course, how to make that happen is a hard question.
It is the herd behavior of the banks. Before the Lehman Brothers bankruptcy everyone got a credit, no questions asked.
Now, when the banks are supposed to give out more credits (which is why the interest rates are so low in the first place), the current herd behavior is to refuse anyone but clients who don't need any credit to begin with.
I wonder if it is time that the central banks lend directly to private individuals. Scoring and credit rating is largely done by computers anyway, at least for the typical amounts that private individuals need.
No reason to have a middle man who does not meet his traditional obligations.
This article is overblown, but the demographic changes in the West are heavily impacting economic growth. It isn't so much to do with saving as to do with the Boomers getting older.
The Baby Boomers are retiring and their spending patterns are changing. No new cars, downsizing in property, and less expense on child rearing.
At the same time there is a fertility crisis among the young, meaning we will not see another Baby Boom anytime soon.
These changes are as big a reason for low growth as the rise of automation, debt levels, and deleveraging.
I think there are some legitimate concerns in here about privatization ,large investors and questionable practices which is being confused with ordinary savers.
The headline and first few paragraphs are a disaster, because they set up everyone to get fighty about "savers". On closer inspection:
It says institutional investors such as pension funds, insurance companies and mutual funds, along with the sovereign wealth funds of oil-rich nations and central banks, hold around $100 trillion in assets under management.
This huge sum compares to US GDP of around $18 trillion and the total market value of US-listed companies in 2015 of $19 trillion (which today is more like $25 trillion).
Hyper-concentration of wealth is what's choking off the economy. An economy where most of the returns flow to the 0.01% is unsustainable.
technically, saving is saving whether you're rich or poor or whether or not the assets are held by a custodian. the article doesn't make the distinction.
as far as wealth concentration, it certainly is happening. what's scary is: whether or not it's sustainable remains to be seen. what will society look like if it is?
Savers? What savers? No one is saving. Americans are drowning in debt. How many studies have been done showing the average American is living Paycheck to paycheck and couldn't sustain losing their job or a medical emergency? Even those wishing to save can never ever make money chasing 0% interest or even worse negative interest in almost all financial vehicles.
Savings? That is a complete and total joke. The average American is being snuffed out and reduced to a wage slave.
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[ 2.8 ms ] story [ 98.9 ms ] threadOur rulers know that if we don't save any money, we'll be more vulnerable and dependent ... plus, it's too hard to tax saved money, whereas it's trivial to tax money that's moving.
America produces more then it ever did, yet manufacturing is considered dead as a source of jobs.
The small number of well-paid engineering jobs AI and robots create is dwarfed by those losses.
That will depend on how effectively we can replace those systems with AI and robots. We're on our way there with the legal system.
Your god-given right to be a rude motherfucker to whomever you feel like, whenever you feel like, without being subjected to any social censure, must be defended. I just don't understand why we can't call a _______ a _______ in polite company anymore.
Socialism is "fascism with a human face", the “The Fascists of the future will be the anti-fascists.” - Winston Churchill.
"I hate Indians. They are a beastly people with a beastly religion."
"[Ghandi] ought to be lain bound hand and foot at the gates of Delhi, and then trampled on by an enormous elephant with the new Viceroy seated on its back."
"I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place."
If he wanted to find fascism, all he needed to do was look to his treatment of the imperial holdings - something that British socialists were quite eager to point out.
If you torture the definition of fascism so far as to include social democracy, then it will also encompass America since the arrival of settlers, centuries of monarchical and parliamentarian Europe...
But perhaps some context is in order.
At that time India was pretty terrible. E.g. burning at the stake of widows after their husbands died. Even Marx found that the British occupation was a civilizing force. It could be argued that the occupation in its totality and for all of it's faults was a net positive.
Obvious fascism is obvious. Which is why George Orwell's books are dedicated to the less obvious fascisms. And it's why I made the point on political correctness, because it's less obvious.
Besides which, the entire article is rendered moot by the fact that inflation exists precisely as a tax on savings.
>> inflation exists precisely as a tax on savings
I don't think the article is suggesting that a person who has a savings account at the bank is the problem. Although the title is misleading in that case....
I think the real issue is the money multiplier effect. If I spend a dollar, it's spent and re-spent. This means that it gets to be taxed many times.
And if negative interest rates don't spur growth, it's because they weren't negative enough!
Firstly there is the sheer scale of savings held by individuals, companies and governments.
From http://www.bbc.co.uk/news/magazine-35801951:
A survey by the Money Advice Service has found that four in 10 adults in the UK do not have £500 or more in savings. Another by ING bank suggests 28% of UK adults have nothing at all in the bank.
Yeah, I'm sure all those hardcore savers in the UK are ruining it for the world's economy.
If you want to lower the savings rate you have to introduce a state pension system like Germany where (most of the) pension is paid by current workers. Doesn't work well with the ageing population but means that all money is directly distributed.
No rational person relies upon them, and rational people are precisely the kinds of people to have savings!
(Overstated slightly, but there is a role for both private and state pensions in a sensible system!)
Whereas with private pensions the values go up and down but are unlikely to hit 0 and stay there -- unless it's really mismanaged!
What would be the point of doing this? Whose interest does it serve? It does not serve the banks' interest. It does not serve the politicians' interest. It does not serve your interest.
Private pension collapses: "stakeholder" ones seem a bit safer, but company ones keep getting into trouble e.g. http://uk.businessinsider.com/sir-philip-green-bhs-pension-f...
I would stop immediately if I could. I am, however, required by law to save for a pension I will never receive.
The retirement age has already been raised to 67 where I live and is now linked to life expectancy. The second someone finds a cure for old age my retirement will be cancelled. Even if they don't, by the time I'm 67 the pension age will be >70.
My pension fund is actually worth less than the amount I paid into it, because all the intermediaries want a cut for their 'services' (whatever those may be). It's like being legally required to flush money down the drain.
I also know that some of the commenters in this thread are talking about pensions without distinguishing between public and private pensions.
I also know that there is an enormous amount of capital in the form of public pensions and that public pensions are often invested with relatively few restrictions compared to private pensions. (At least in the US?)
(Technology means that fewer and fewer people can "work productively" regardless of age, medicine means "too old to work" becomes older and older.)
Incorrect assumption.
In all countries where the main part of a pension comes from saving (e.g. UK, US), you will directly receive what you saved (plus interest, minus taxes). A system such as what you describe doesn't exist anywhere as far as I can tell.
The Tax-Burden on the other hand has been growing and growing, leading to a lot of braindrain and tax evasion.
So how do investors react? For decades, they have bullied governments to release assets for sale that can then be leased back at high returns. In the UK, this is why we have privatised utilities and a swath of other safe, previously state-owned, assets in private hands.
It is not morally wrong ("greedy") for investors to seek high returns. If an investment does offer high returns, investors will flock to it, the price will increase, and it will quickly offer average returns, relative to the amount invested.
Nor do investors "demand" high returns - who would they demand them from? - they simply look for the best place to put their money. Investors are not a cartel that lobbies the government. Government services were privatised in the UK for political reasons.
Then there is the way most people, businesses and governments have accumulated their savings. Just a quick look at the $100tn total and we can see that most of it is the result of tax avoidance.
The Japanese are famous for their savings and investments. But middle-income families can only save because they don’t pay enough tax for officials in Tokyo to provide basic services. Every year the Japanese government runs a 10% budget deficit, such that its accumulated debt is worth almost 250% of GDP.
The author has expanded the meaning of "tax avoidance" to cover cases where he thinks the government should be imposing higher taxes. I agree that governments should run a balanced budget (I would prefer they do so by cutting spending), but the author implies that you could pay all the taxes you owe, and you would still be cheating the system.
They most definitely are, especially in the UK and US. I'm actually a little unsure how you could honestly believe that investment institutions don't lobby governments.
Investors as a class most certainly lobby the government.
> Government services were privatised in the UK for political reasons.
.. and this politics does not exist in a vacuum. There is a whole mythology about privatisation that is put forward by opaquely-funded think tanks. It has other functions simply than providing assets - it's also an anti-strike measure and a means of avoiding complaints.
Some of these entities fund lobbyists and some don't.
mythology ... opaquely-funded think tanks
I don't know if you are a Marxist, but this is a Marxist way of looking at the world, where each class pursues its collective interest, and funds propaganda to spread a self-justifying mythology.
My comment about think tanks was driven by http://whofundsyou.org/ , really. "Funds propaganda to spread a self-justifying mythology" is definitely something that happens to varying extents by various actors - that's effectively how "super-PACs" work in the US. And privatization has the characteristics of a mythology: it's asserted as a cure-all for problems in public services, and implemented even when extremely unpopular. It relies on creating pseudo-markets, often with only one buyer and tiny number of sellers, and the buyer is not the consumer of the service so the quality gets driven down.
This is an example of isolating an action from a bigger picture. Of course, it's not morally wrong to seek high returns - in complete isolation from how they're sought.
What's more important is how the higher returns are sought. Is the investor privatizing water? Canceling funding for services like abortion? Or are they doing things that net benefit a society like building housing, designing and researching more efficient transportation.
Therefore the means through which the investment is sought can circumscribe morally wrong investments.
Companies ask governments for favors all the time. The Carrier deal is a widely viewed example. If you do x, Carrier will invest in your state. Sometimes the investment isn't even open for the public to take advantage of. In other words, a single hyper-wealthy person can have his/her agents lobby for their own personal benefit.
> Nor do investors "demand" high returns - who would they demand them from? - they simply look for the best place to put their money. Investors are not a cartel that lobbies the government. Government services were privatised in the UK for political reasons.
They lobby the government, or whomever has the power to grant them the higher returns. Sometimes that means displacing the local population, for example poor oil rich countries.
Maybe you are thinking about the small investor. Someone who is passive and without the power to change the playing field?
I'm pretty sure this is market forces. Glut of savings --> low rates. Sure there are local exceptions and regulatory impacts, but those generally can't stand against the tide, so I'd say it's 95% natural.
> inflation of money supply
Depends on the currency, but in the case of USD, increasing the supply is necessary to avoid deflation, which would seem superficially good for savers, but would be disastrous for economic productivity.
> high taxes on earned income
???
> subsidies to speculators (housing subsidies)
I don't know much about this one, but I think most subsidies are homestead-y (to owner-occupiers and first-time buyers).
Indeed, the article seems blind to capital taxes, focusing instead on income tax. Wealth tax is a pretty alien concept in the US -- I think it would face strong cultural resistance, and cause even more wealth flight to tax havens. And yet, I can see how it would tackle a big part of the problems described here.
It may need to be implemented in a coordinated global fashion to avoid cheating. You'd need the rich nations to do it, with a working enforcement mechanism that spans international borders. That, combined with cultural resistance, sounds hard.
I thought interest rates were kept low to entice those having money to, rather than put it in the bank, invest it, that is: speculate. Problem seems to be that that's not what households did. In many countries, they paid back on their mortgages and put more money in the bank, despite the low interest rates. The science of psychological economics isn't that well developed, it seems.
> One peak is the mountain of debt ... that is casting its shadow over the whole world ... We all recognize the mountain of debt.
> But few people recognize its twin: A mountain of idle cash, belonging to rich savers and corporations, too terrified to invest it into the productive activities that can generate the incomes from which you can extinguish the mountain of debt, and which can produce all those things that humanity desperately needs, like green energy ...
> Now, let me give you two numbers ...
Mark Blyth recently mentioned[1] two numbers that are particularly effective at explaining where money is being "saved".
> In 2015, Wall St. bonuses - not regular compensation, bonuses - seven years after they were bailed out with the public purse totaled $28.4 billion. Total compensation paid to every single person in this country who earns minimum wage: $14 billion.
[1] https://www.youtube.com/watch?v=VWMmBG3Z4DI#t=1104
With record low interest rates, any project that gives an ROI worth gambling on is worth borrowing for.
(More generally: a few years ago I saw a random comment on somebody's blog suggesting that it was only a matter of time before savers were rebranded as hoarders. So it's interesting to see this perhaps (finally) start to come to pass.)
The article argues that we would all be better off if that money were spent on the common good -- infrastructure, green tech, education, even ag & manufacturing -- rather than being put into buying up what used to be the public sector and putting a price on it without improving it.
Of course, how to make that happen is a hard question.
Populism is on the rise, and the demagogues steering it aren't actually going to fix any of the problems that created it.
Now, when the banks are supposed to give out more credits (which is why the interest rates are so low in the first place), the current herd behavior is to refuse anyone but clients who don't need any credit to begin with.
I wonder if it is time that the central banks lend directly to private individuals. Scoring and credit rating is largely done by computers anyway, at least for the typical amounts that private individuals need.
No reason to have a middle man who does not meet his traditional obligations.
It says institutional investors such as pension funds, insurance companies and mutual funds, along with the sovereign wealth funds of oil-rich nations and central banks, hold around $100 trillion in assets under management.
This huge sum compares to US GDP of around $18 trillion and the total market value of US-listed companies in 2015 of $19 trillion (which today is more like $25 trillion).
Hyper-concentration of wealth is what's choking off the economy. An economy where most of the returns flow to the 0.01% is unsustainable.
as far as wealth concentration, it certainly is happening. what's scary is: whether or not it's sustainable remains to be seen. what will society look like if it is?
Savings? That is a complete and total joke. The average American is being snuffed out and reduced to a wage slave.