True. The people who make $250K a year anticipate making more money so they live to even higher standards :/ Although doesn’t supposedly 1% of the population own 40% of the wealth or so?

Cool thing on the agreement. A revenue business has a better foundation than a valuation business

Yea, the unsuccessful startups would be more an issue that we need more data and tools to answer properly…

Good talk. How’s the job going?

When I commented about savings rate, I meant more about your standard issue rich (250k/year) and not the ultra rich. The 250k rich people take out mortgages and leases they can’t afford!
The ultra-rich put their money into credit markets, true, and I’m not really sure how that’s calculated in the savings rate… hrm.

I agree on the start-up revenue model selection then!

For unsuccessful ones, however, I think one has to take in the cost of starting up a new business and all the money that is lost by making beginners’ mistakes as well as the boons from cheaper labor. I’m not sure which one would come out ahead so I think it’s relevant to consider.

And thank you as well. It’s always nice to bounce off your own ideas/opinions with another person!

Btw, if you didn’t realize, my product examples are all replacing the term “dog” with “fish.”

Inflation is not evil, but high inflation is. If the government owes more money than the entire world GDP, that becomes a possibility.

Really about the savings rate for the rich? I feel like the people who are making $100M a year aren’t really spending $90M a year…I thought most of them is sitting in some asset that makes them feel valuable with their high network.

Relating to startups, I’m referring to ones that have real revenue models that CLEARLY “make more money in revenues than you put down.” Google is a big revenue success, but most of the clear ones are actual hardware products like semi-conductors, robots and cellphones (which is the stuff that got Taiwan and Japan and probably Korea to lift off). Another thing is about startups though, yes, most of them fail, but I believe that the money they spend (aka waste in your view) will be those that have a higher spend rate (low paid employees, cheap services etc), so ultimately it would be doing some good for society, just not compounded as much as the businesses that actually create a good industry.

Thanks for the time and insights!

I had a response stating my disagreement with your loosely referenced trickle-up theory, but after thinking it through, I agree with you in most regards.
One thing I do disagree with it though is the presumption about spending ratios. The savings rate in the U.S. is around .5%… the rich ARE spending tons and tons of their money. If they weren’t this would be at a healthier level – like 7%.

Another comment, though not necessarily a disagreement, is that inflation is not this evil, horrible thing that the media has made people believe it is. Out-of-control inflation is bad, of course, but inflation is a monetary policy tool that can be extremely useful. Some countries are supposedly even trying (illegally) to devalue their currency in order to increase exports! And hey, at least it’s not deflation!

The “hotfish” example is a good one for showing the perils of a rapidly increasing savings rate. However, the savings rate in the U.S. only rose rapidly for a very short period – it’s still relatively stable, albeit extremely low, at this point.

This problem is largely related to people using their $10 to buy $50 of hotfish to make a huge profit. After a while, some of those borrowers realize they can’t sell their $50 of hotfish for $50 and so they default. Their creditors lose a little money and so call in their other loans – but those other debtors haven’t been able to sell all their hotfish yet so they have to default, etc., etc. Eventually, the creditors have to default themselves!
Stupid guy who borrowed hotfish he can’t sell… hehe.
In case I lost anyone there, the creditors in this example were banks who bundled all home buyers’ mortgages together assuming that the high credit risks (bad hotfish sellers) would be balanced out by the low credit risks (good hotfish sellers).

I also think it may not be such a great idea to subsidize start-ups. Sure, Google created a lot of value for society – but it’s not the norm. Meebo got almost $40 million in funding. $40 million! Honestly, I don’t need another instant messaging client and I don’t want money from taxes being spent on that. Further, as we’ve all read numerous times, most start-ups fail and waste a lot of resources. Start-ups that are frugal with resources are great, but once you subsidize them they’ll likely lose their thrifty roots.
I think speculation should remain with the super-rich. Imagine the public outrage if the government gave $50 million as a gift to new hedge funds so that they might create more wealth for society.
If you’re only talking about start-ups that produce real value, such as biotech, then I wholeheartedly agree. I just think it’ll get extremely messy to choose which start-ups are worthy of the government’s support.

Good article! I’m not sure how I feel about some of the things you mentioned (as noted!) but I appreciate the insights and think a lot of it is on-mark with my feelings!

Thanks for the thoughtful comments! My post actually didn’t come from some tech-heavy news source. Most of them is just from my own speculation. Although I do listen to the Wall Street Journal This Morning and read Tech Stuff a lot, so I’m sure I would be influenced by that.

I feel like the true insight is the part where money needs to stay in high-spending ratio nodes for as long as possible. The government has been doing a lot of what I suggested, but there’s still a big difference. One big theory is that the government should give money to rich people because they create jobs and it trickles down. I think in general that is a good idea but the problem is a higher percentage of that is saved up and does not become peoples’ income.

Yes, savings is important for investment, but lets think of a simple economy with only 3 people (this may not be for you Steve but just a general explanation to people). Lets say they each sell hotfish, underfish, and wazzup fish separately. Lets say there’s $10 in the economy and lets say they all want to spend so they all buy $10 worth of goods. After spending $10, it goes around and someone uses his $10 to buy your goods again. So with the same $10, everyone made $50 each. However, once you hit a guy who decided to save up $6 out of that $10, now he only buys $4. You only make $4 and you use that $4 to buy from the 3rd guy. The third guy makes $4, and panics a little, so he saves $1 and buys $3 worth of goods from the saver. The saver then feels the economy is not doing too well and saves even more. After awhile, no one makes income and they all feel there is a depression even though The saver has cash sitting in his bank.

Even if the money saved was invested to the person who sells hotfish to buy more fishing rods, when no one is buying, its really pointless. What makes this situation worse is that the government is one of the three people, so he prints more money. Now there’s more money but not necessarily more goods as long as a lot of them is still saved up because of fear of the economy. That’s why I think the instant money hits a person who saves a lot, the economy saving power decreases dramatically.

I 100% agree with you about the virtual goods issue. There still needs to be a lot of essentials that people need. The reason why the economy pops is because there are too many items that people are “convinced” that it is worth a lot, and he convinces the next fool. So after awhile, everyone believes they are wealthier than they actually are. When they suddenly realize they are not as wealthy they believed there were, then they declare its a recession and stop spending. People should stick to the basics of having things priced at what they’re actually worth, instead of how good it is at fooling the next person.

The big thing I felt was missing from this article… is the fact that almost all of its advice is exactly what the government/public has been doing for the past 15 years! The U.S. is partly in debt because its service sectors are growing so much faster than its manufacturing sectors.

When it comes down to it, people working at Facebook so they can purchase a premium account on Vimeo, which supports those working at Vimeo so they can buy virtual gifts on Facebook only works for so long. People need to eat and live in houses and brush their teeth. The U.S. needs more production in those final destination products.

That’s one opinion, at least!

Thanks for the response! I actually think women are more conservative on spending either way. Yes, they shop a lot and buy a lot of clothes, but men like to buy large cars, large houses, premiere service plans, first class flights, private jets. The $1,200 handbag that a woman purchases may not be too much compared to toys that men buy. Plus, a lot of the stuff that women are also bought by men trying to please them. Some woman buy luxuriously when its not their own money, but can cut down when they have a smaller budget. Men have some kind of competitive pride that forces them to buy things that increase their status, even though they might be low on budget this month. I truly believe that women value savings more than men, even though many are shopaholics. So I think giving money to men will help more.

I’m actually not referring to more taxes. I’m more referring to money-dumping. The government could probably do something that says if you make more than $250K in PERSONAL wealth, you get taxed more, but if you keep it flowing in the business and expand etc, you get taxed less. So maybe reinvested profits will be taxed less, but dividends will be taxed more (2nd taxation?). That way owners have more of an incentive to keep the money flowing in the business and create more jobs. Because truly, if someone is making $700K a year, I really don’t think he’s going to spend anywhere close to 80% of that (and if he does, people might say he is “irresponsible”)