Economics 101

[BeFree]

Say you have a million bucks.

You give it to one person, making him a millionaire.
He buys a hamburger a day and one car a year and socks the rest of it away.

Or you give 1,000 guys $1,000 each.
Now you have 1,000 hamburgers a day being bought, and a 1,000 cars a year being bought.

You tell me. What makes for a better overall economy?

[noiretextatique]

1. #2, professor

it's elementary. unfortunately, some prefer the fantasy.

[whistle]

2. Letting the Federal Government utter that million dollars in credit...

....begin infrastructure projects across the land directed by the Federal Government or based on a National plan, let contracts and hire people to do productive work related to those projects so they can earn the money legitimately and spend it on whatever they choose. We should not be giving one person or a thousand people handouts, that has never made for good economics in America.

Check out what the FDR administration did from 1933 to the end of his term. It was called the New Deal and it worked!

[provis99]

3. but that's communism!

why would we want a society where all of us are substantially better off, than one where us feudal peons can fight for garbage scraps from the table of our lordly masters, like trickle-down economics promises?

[HamdenRice]

4. What happens to the money the millionaire "socks away"?

On balance I agree with you, when it comes to tax policies that put money in the hands of consumers. But there are reasons to promote savings as well.

What your scenario does not take into account is what happens to the money the millionaire "socks away." If he puts it in the bank, the money may be lent to regular people to purchase and renovate a home, which involves buying lumber and dry wall from Home Depot and hiring contractors. Or the millionaire may purchase stock in a small company with a promising new technology, that enables it to hire young scientists and lab technicians, who in turn buy hamburgers for lunch every day.

It's not as unbalanced as your scenario makes it out to be.

[BeFree]

5. Well

As an example, the OP was quite simple.

In your scenario, all the bank investing does is create wealth for the one while making everyone else pay interest. Interest that instead could buy more hamburgers or lumber 1,000 more times.

The simple idea is that a concentration of money in fewer hands makes for shortages for the masses.

[A HERETIC I AM]

6. Nonsense.

From your OP;

Say you have a million bucks.
You give it to one person, making him a millionaire.
He buys a hamburger a day and one car a year and socks the rest of it away.
Or you give 1,000 guys $1,000 each.
Now you have 1,000 hamburgers a day being bought, and a 1,000 cars a year being bought.

How much is a car in this scenario? A hamburger? If hamburgers are a dollar then cars can't be more than $635.00 and your "Economics 101" fantasy has a lifespan of 366 days.

HamdenRice said:

If he puts it (the million dollars) in the bank, the money may be lent to regular people to purchase and renovate a home, which involves buying lumber and dry wall from Home Depot and hiring contractors. Or the millionaire may purchase stock in a small company with a promising new technology, that enables it to hire young scientists and lab technicians, who in turn buy hamburgers for lunch every day.

To which you suggested "In your scenario, all the bank investing does is create wealth for the one while making everyone else pay interest. Interest that instead could buy more hamburgers or lumber 1,000 more times."

So if I understand you correctly, you discount the value of a home improvement to zero just because it was facilitated with borrowed money, and you think hamburgers, cars, lumber and probably everything else should be cheap enough to fit into this model.

That's ridiculous.

What if the person in your OP used the million to buy a hamburger stand? He then is employing people to make hamburgers to sell to others and they receive pay that allows them to buy the hamburgers themselves. This can and has been a self sustaining concept. As I said above, your concept has a very short shelf life.

Capitalism may indeed tend to concentrate wealth but it is also the best system yet devised that so easily allows the creation of more wealth by anyone with enough drive to bring a good idea to market.

[BeFree]

7. Pain in the ass

Gawd, the concept is too simple for you, eh?

Ok, so the guy buys a hamburger stand. And then it goes broke, as they all do eventually. Leaving people without jobs and the bank with a foreclosed note.

The only reason we have such a 'great' capitalist system (that is about to go head over heels), is because only a few have most of the money.

Sustainable my ass. Now, if you think that you and what you do today is ALL that matters, then yes party on dude.

[A HERETIC I AM]

8. LOL Thanks.

Ok, so the guy buys a hamburger stand. And then it goes broke, as they all do eventually. Leaving people without jobs and the bank with a foreclosed note.

Really? All of them? And every time a hamburger stand (or a widget factory or a rubber chicken plant...whatever) goes out of business, absolutely none of those workers ever find gainful employment ever again, right? And what "foreclosed note" are you talking about? There isn't one in this silly situation.

It's been said before on this board but it bears repeating;

Whenever someone posits the idea that capitalism is so bloody horrible, they NEVER have a viable alternative they can share. NEVER.

If your idea of economic utopia starts with "lets give 1000 people $1000 dollars" but fails to indicate where that money is supposed to come from and what happens when it runs out, you haven't suggested anything other than nonsense. I get it that you don't want one person to have the million. How incredibly cutting edge of you.

The concept isn't too simple for me. The concept is flawed. Do a better job of explaining your point so that it is actually workable and my opinion will change.

[BeFree]

10. Ummm

The title was Economics 101. IOW Basic economics.

I get it that you believe in being a slave to capitalism. I am not. I use it when I can and toss it likewise.

And I've seen lots of hamburger joints close their doors. Stores of all kinds, too. Enron, the one day hero of the capitalist class is down the drain screwing over those at the bottom: the workers. And here you are trying to prop them up.

[A HERETIC I AM]

11. You obviously havn't a clue WHAT I believe.

The title was Economics 101. IOW Basic economics.

It wasn't even that. It was a ridiculous and absurd question which made very little real sense and, while it may make you feel good to show others how magnanimous you are, failed utterly as any kind of solution or revolutionary idea.

I get it that you believe in being a slave to capitalism.

Laughable. I believe in no such thing. I know that I can make capitalism work for me, however.

I am not. I use it when I can and toss it likewise.

Said the man typing away on an instrument that is the result of pure, unadulterated capitalism, hooked to a network put in place by the same system, using electricity provided by the same evil capitalistic system. Poppycock.

And I've seen lots of hamburger joints close their doors. Stores of all kinds, too. Enron, the one day hero of the capitalist class is down the drain screwing over those at the bottom: the workers.

And every single one of those workers - ALL of them - are destitute now, is that it? They never found gainful employment ever again? Not every single capitalist venture is akin to Enron, BTW. I only mention this because I have a feeling you are not aware of that fact.

And here you are trying to prop them up.

Prop who up? Because I simply asked you to be clearer and to make sense I am propping up someone or something?

The only reason I responded to this thread in the first place was because your response to HamdenRice's question was demonstrably wrong. Your perspective that the only gainers from loaned money are those that make the loan is just flat out incorrect and can be demonstrated to be so in literally millions of ways.

If you can see no benefit whatsoever that the person receiving the million might make an investment that employs other people, produces a good or a service that others want to buy and has the potential to improve the lives of those who participate in it, then so be it.

Shrug off all things capitalistic. Be proud of yourself for doing so. I applaud you. But the fact is capitalism has made your life unbelievably easier than it would have been if it did not exist. While you may know how to hunt, slaughter and dress game or cattle, tan hide, do leatherwork and cobble shoes, grow crops, can foods, build a house and do all the other things that have produced the goods you use regularly, capitalism has made it so you don't have to. You can specialize on your own skillset, whatever that may be and you can market those skills to the highest bidder, just like everybody else. But you would really rather someone just gave you the thousand bucks, right?

I say again; You and everyone else who has put forward the idea that capitalism is so horrible have yet to come up with an alternate viable, sustainable system that is worth a Tinkers bollocks for any length of time at all.

I suppose I was hoping that you had spent the time since Wednesday evening typing up an economics treatise to enlighten the rest of us of your cutting edge and heretofore unheard economic theories. Oh well.

[BeFree]

12. You're funny

I trade my labor, yes. For money, sometimes.

The idea that blows you away is the simple idea that if more people have access to the available dollars it is better for the economy as a whole. I guess it eats at you that you may have to share with others so that others can live as well as you.

Of course the capitalist pigs hate the idea that sharing is the best way... they want it all for themselves.

BTW: the take it or leave it attitude comes from none other than Thoreau. A man who saw what capitalism would do to those who aren't fortunate enough to share in the bounty because of the money hoarders.

Capitalism by itself isn't so bad. Its the pigs that make it bad. Just stop propping them up, and you'll feel better in the morning.

[Name removed]

13. Deleted message

Message removed by moderator. Click here to review the message board rules.

[BeFree]

15. Not funny

You have a bug up your ass for capitalism. Fine. It's your problem, not mine.

You are now venturing into the realm of hypocrisy. Twilight zone material. I feel sorry for you. Honestly. I am done with you because I really don't have anything nice to say. Goodbye.

[HamdenRice]

20. I'm probably the only DUer who spent a year learning a socialist system in order to

advise an organ of a socialist government (China) on economic reform, while working from within a financial bastion of capitalism (New York finance sector), so I think I know how both systems work. I think there are things to be taken and learned from both, and I was very impressed with Chinese socialism. Btw, all the bullshit you read in the msm about China having abandoned socialism and embraced capitalism is just that -- bullshit. They have created a very sophisticated mixed economy rooted in socialism.

But I would point out that even a successful socialist country has to figure out a way to allocate capital for new enterprises and innovation - something the Chinese obviously have been doing better than us, considering they have $1.4 trillion in national savings in US currency denominated investments alone.

Even a socialist system puts money in the bank and lends it out to new enterprises.

[BeFree]

25. Money in the bank

If all the needs are taken care of and there is money left over, then yes, put it in the bank and use it to provide for the future needs.

Another way of looking at this would be.... very simply again...

What if you took all the available health care and gave it to one person?

Or spread all the health care to 1,000 citizens?

Which scenario would be better for a country?

[Terry in Austin]

22. More nonsense: rah-rah capitalism

it is also the best system yet devised that so easily allows the creation of more wealth by anyone with enough drive to bring a good idea to market.

Jeez -- got kool-aid?

This is standard Horatio Alger propaganda, complete with built-in elitism. If you aren't part of the narrow population with what fits the capitalist definition of "drive," or not one of those few who have the rather specialized skill of coming up with an idea that "the market" defines as "good," well, then, you are one of the damned according to this economic religion. Tough luck, it says -- if you don't fit this particular mold, it doesn't matter how smart or diligent or honest you might be, you don't "deserve" a decent living.

Buying into this crapola is a sucker's game. Even if you win for a while, the odds are rigged in favor of the house.

[Karl_Bonner_1982]

17. What does matter is the time frame

The giving of tax breaks to millionaires will not result in quick economic transactional activity; when the economy is in a demand-side slump any such stimulus will have weak effects.

But more importantly, the question is: Which of the two scenarios better conforms to our ideal of distributive justice, i.e. who gets how much in the end?

[leftofthedial]

21. the usual

a yacht, and the rest goes to the CEO of a bankrupt bank.

[PiperOno]

9. Reality

Here is what happens when you give the rich a tax cut:

http://www.youtube.com/watch?v=xXj-oQm-NbE

And here is what happen when you shift monetary and fiscal policy onto the back of the middle class:

http://www.youtube.com/watch?v=l3OFWYb4GWk


The reality is that trickle down economics is flawed. They don't even teach it in college anymore. It needs to be put to rest once and for all.

[Me Again]

14. wow

insight

[AdHocSolver]

16. Modern capitalism is a system for implementing, justifying, and legalizing large scale thievery.

The stock market is a giant system of competing Ponzi schemes.

A Ponzi scheme requires a large number of suckers to buy the stock thereby "bidding up" the price to the point where the insiders sell at a handsome profit. Then the insiders deflate the price, for example, with bad news about next quarter's earnings, and use part of their profits to buy back the stock that they recently sold, which is now at a new lower price. Repeat as needed, since the suckers, who haven't a clue how the system actually works, will keep on buying stocks, and similar financial instruments, until they lose their shirts.

At some point, all of these Ponzi schemes collapse at the same time, and then you get an economic depression.

What the suckers don't understand is that the stock market is totally independent of the "real" economy. That is why, even though the real economy is in a shambles, the stock market hasn't already collapsed. As long as the Fed and the treasury department keep shifting the money around between the capital markets, the stock market will maintain its price level. This artificially created demand will keep the stock prices up. It is a game of musical chairs. At some point the music will stop, the money shifting will cease, and the system will tumble like a house of cards.

The only difference between now and the 1930's is that there are more money shifting schemes available today, which didn't exist back then.

For what it is worth, economies are DEMAND driven. Supply side economics is self-serving fantasy. If supply side economics really worked, we would still have buggy whip factories today.

All of the comments about how to give tax money to people to boost the economy is pure nonsense. Give the tax refunds to the wealthy and they will do exactly what they did with the tax money they received from Reagan and the Bushes -- build factories and create jobs in China. Give tax refunds to the middle class and they will use it to pay off credit card debt (giving it to the banks) or fill their gas tanks (giving it to the oil companies and the Saudis).

Neither tax refund scenarios will help the economy one bit. The ONLY government policy that will help the economy is a policy that will create jobs in America.

Manufacture in America the products that Americans buy and you reduce the foreign trade deficit, provide Americans the means to pay their debts, and increase the tax revenue for governments since American workers pay taxes. This is Economics 101 yet hardly anybody on this web site understands this.

Most of the people here have bought the capitalist Kool-aid. If you cannot understand how you are being screwed, there is no way you can avoid it in the future.

Free trade does not currently exist. NAFTA, the WTO, the IMF, the World Bank, together with the Fed, are all cartel agreements designed to stifle competition and PREVENT free trade. These cartel agreements have to be radically changed or eliminated to save the American economy.

Import restrictions, import taxes, and the tax laws have to be rewritten to level the playing field to enable American companies who want to create jobs here to do so profitably. Currently, the corporations who used to manufacture goods here have turned themselves into importers of goods from China and elsewhere. They no longer manufacture anything. This is what is destroying the American economy, and bankrupting the government.

[SCBeeland]

18. Or, don't give it away at all

What I'd do

[leftofthedial]

19. you sound like the kind of godless commie who has never gutted a moose

[anigbrowl]

23. Well, ain't that cute. BUT IT'S WRONG!

(bonus points if you get the reference).

It's an interesting point, but it's way too simplistic. You assume there is only one kind of hamburger one kind of car, that $1000 is enough for all the people to buy cars (when in reality 1000x more buyers would drive prices for both hamburgers and cars sharply upwards) and that socking the money away means its under a mattress rather than invested and actually working in the economy.

Of course too much concentration is bad. But spreading it evenly does not automatically give you a healthy economy. There's an old soviet era joke about this: a man finally saves enough money to buy a car, so he goes to the car factory and orders on. 'Come back 3 years and 17 days, and your car will be ready,' says the factory clerk. 'Morning or afternoon?' asks the man. 'Why do you care?' asks the clerk. 'The man says 'it's just that the plumber said he might get to my house by then.'

If you've ever been in a communist country and seen how it works in practice, you'd think twice about automatic redistribution. It has its own epic faults.

[BeFree]

24. Funny

Some folks read a lot into a very simple example. I never mentioned communism or any other system. I only asked which of the two scenarios would be better for the economy (as a whole)

[anigbrowl]

26. And I'm only saying that such simplistic questions give rise to simplistic answers.

You did not mention communism or other flavors of socialism, but it's usually not far behind on threads of this sort, even if the proposal is made by someone else.

Besides, your question of what's best for the economy is moot. If you need $500,000 to open a car factory, it's hard to get 1000 people to give up half their annual income. But it may be possible to get one person to give you the full amount, because he can afford to wait for the return.

[BeFree]

27. Uhm

If you need $500Gs to start a car factory and you can't get a 1000 people to support you, sol.

You claimed I was wrong. (see title) Wrong about what? Wrong to pose a simple question? Ie: What's better for the economy.

Defenders of the hoard and blow capitalist system have a problem with such a thing, eh? But there really is only one correct answer, afaict, and if you will, please answer.

[anigbrowl]

28. Sigh

"If you need $500Gs to start a car factory and you can't get a 1000 people to support you, sol."

So how do the people in your hypothetical example buy cars?

"You claimed I was wrong. (see title) Wrong about what? Wrong to pose a simple question? Ie: What's better for the economy."

I was pointing out flaws in it. The title o my reply is a reference to an old cartoon, but not everyone has seen it. I think it is wrong to propose such simplistic dilemmas, because neither scenario has any kind of realistic relation to economics.

"Defenders of the hoard and blow capitalist system have a problem with such a thing, eh? But there really is only one correct answer, afaict, and if you will, please answer."

It's your belief that there's only one correct answer which is leading you astray. The idea that everything will be magically better if you hand everyone $1000 is as foolish as the belief that it will all be better if you hand $1 million to a single individual.