Offshore. I think that money goes offshore. I even said it in the previous sentence, which you didn't quote.
>Another word for that is investment.
Well let's entertain the fantasy that the money doesn't flow away into offshore accounts for a second.
So you're saying that investing is good? Then instead of giving money to rich people (e.g. by tax cuts), the government should do what rich people do and invest. Domestically.
What do we have here? Ah, stocks and real estate. Got it. The government should buy companies and houses, the way the rich people invest.
Didn't expect HN to argue that we should socialize housing and nationalize corporations, but I'll take it.
I'm curious as to what you even mean by "money goes offshore" and how does that cause it to appreciate?
And of course investing is good - how could you even argue against that? Businesses need funding. And yes, governments in fact do invest in both companies and private housing, I don't understand why you think this is some gotcha. It's just that on average governments tend to do worse at investing, so it's generally restricted to areas where the private market fails to provide.
So you're just talking about buying stock/assets then? I don't know what other financial products you mean.
>Buying stock in an IPO in a multinational corporation based in Taxhavenlandia would be one example.
Even if this were the case, the only bad part would be evading taxes. To generate a profit, it still has to be an investment in a profitable venture, which increases overall economic productivity. (I also don't think there's any indication that this happens on a large scale, otherwise the stock index of any such Taxhavenlandia should show this)
A financial product is ultimately a claim on real assets. That is their essence.
Buying stock in an IPO in a multinational corporation based in Taxhavenlandia is capitalizing a presumably enterprise which will generate a positive return. I can understand that you might be concerned about capital leaving the country rather than being invested domestically, but I'm not sure you've been advocating capital controls.
First, what tiny fraction of US money goes offshore versus for US investment? Ridiculously tiny. The total value of US investments dwarfs any offshore boogeyman.
And, offshore isn't a dead end. It invests where it's worthwhile, which, again, is incredibly US based - look at our bond rates and market caps.
>that investing is good
What allows new companies, large and small, to form and employ? What allows small companies to make payroll during slow seasons? What allows people to get college loans, mortgages to help build wealth, people to get loans for things that allow them to create and plan? What allows farmers to farm all year and only sell in a small window?
Offshore companies are very popular in countries with unstable economy, like Russia, because oligarchs can confiscate your money at any time, so people in Russia are fighting with offshores with help of oligarchs. This is the real problem for them.
Governments are notoriously bad at investments. Rich people will not keep money frozen in offshore accounts forever, to be eaten by inflation. They will invest at some point, and when they do it's going to be much more efficient than whatever the government can do. All the former communist states had the government make all the decisions where the money is invested, and they fell further and further behind in economy. They even had long term plans - 5 years, much better in theory than the quarter to quarter sprints that modern companies have, and it still didn't help.
You could say that once in offshore accounts, money will maybe be invested in other countries rather than domestically. That might be true, but that is a different problem (globalism) rather than trickle down.
There is a picture of Elon Musk on the article. Do you really think a government would have ever been able to create Tesla?
I'm not sure everyone here is arguing that the government should make investments. Many are arguing that the poor and middle class must be capitalized to increase demand and that an economy with nothing but rich people trading vanity goods with each other is a recipe for stagnation and societal collapse.
There should not be a picture of Elon on the article. That speaks to ignorance. Elon gets a lot of flak because he's highly visible but he's nowhere near a poster child for the idle rich. The idle rich who sit and extract rent know to keep out of the limelight.
Didn't Norway just bought into the stock market via their pension fund? That is literally the opposite of investing it themselves. They take the largest part of the money and put it on the market, believing that the private companies can grow those money better than they can. And they were right...
"Didn't Norway just bought into the stock market via their pension fund? That is literally the opposite of investing it themselves."
A pension fund is payment to a group of people over a period of time. Traditional investment from a government into a country comes in the form of building infrastructure and military. Dollars spent on infrastructure and the military will not pay yearly cash dividends.
A factory can take it's payroll budget and "invest" it on machines, but it will not be able to pay it's employees, which defeats the purpose of a payroll budget.
Norway has a yearly budget and it invests in traditional things like infrastructure and their military. This is what the GP means when they say that governments can make good investments. [1]
Doing a quick lookup over the budget of Norway, it seems like they invest directly about 4 billion USD each year (this is for year 2007, but it can't be be wildly different today). Compare that to the government letting the pension fund invest 1400 billions on the open market. https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...
I would say even the government of Norway recognized that the free economy will do better with the money that they can (and how right they were!)
Not sure how to calculate ROI on infrastructure. There is a limited amount of infrastructure a country needs, once that is built the government can decide to keep pumping money into the economy (say state operated oil machinery factories, armament factories, furniture factories etc.) or they can do what the Norway government did and just dump the money in the stock market, letting the market decide what works and what doesn't.
So you're saying that we should take all the money the government spends and put it in stocks? What about infrastructure and public works? Schools? Research?
Those investments only benefit very few people though, who already have well paying jobs.
Private investors prefer to take long bets in technology corporations (like FAANG, etc). That benefits to a small extent the few people working there because the high stock price convinces the CEO that he can afford another position here or there. It does nothing for the people in the lower income percentiles, because the additional money earned by the people in the higher percentile is not spent on consumables. It's mostly just spent on financial assets (that is housing, equity and bonds). Unsurprisingly the people in the lower percentiles have very few financial assets and mainly live off of their labor. Of course it won't benefit them.
Instead the government needs to invest in projects that create jobs for everyone. But since the biggest voting base consists of older people with lots of savings they don't want the government to spend more, which could cause inflation and increase their tax rate. QE by the Fed on the other hand increases their portfolio value. So it's ultimately a political decision.
>Buy stock and benefit (or take a loss) with them.
Buy stocks, and explain to your children why they won't get to eat for the year to come.
It will pay off in the long run!
And if they starve to death, well, that's savings right there!
.... You do realize that millions — if not most people under 40 in the US — don't have spare money to invest into papers that they can't eat today, do you?
Rent, food, transportation, medical expenses, educational expenses, and a small amount of spending on something that makes that life feel like it's maybe worth living — and oops, there goes the paycheck.
Funny how the rent is larger than mortgage, but you can't get a mortgage unless you save money, but you can't save money because you have rent to pay.
And everyone who's working to make a living is one car accident away from a medical bankruptcy. A fun lottery nearly all of us get to play, funny that.
>Vote for such government
Yay, I voted, and FPTP ensured that meant nothing. I voted for ranked choice, but peculiarly, the vote for that was based on the same system that I was trying to replace.
>or immigrate to a socialists country, Venezuela or North Korea. They have the lot of jobs.
False dichotomy much?
And these are the only two countries in the world with universal healthcare and government providing housing and services to its citizens, I guess? Not Sweden, no? Not even the UK, or any EU country? Oh wait, nobody is waiting for me there.
But more importantly, what basis do you have for telling people what to do?
Especially when you tell someone to move to another country. How about... No.
What the parent commenter is doing, and what I'll do, is we'll be damn sure to talk about what the government should do in all public forums whenever the opportunity presents itself, to raise the awareness ans steer the public discourse in the direction we want our country to move into, rather than shutting up and moving if our vote gives us nothing this election cycle.
And we'll make it obviously, blatantly clear that opinions like the one you presented — ”vote or leave" — are rubbish.
Bad faith rubbish that doesn't belong on HN.
So I'll ask you to stop. My basis for that are the guidelines of this forum. We could do with less trash here.
Yes you absolutely do earn returns on money that isn’t doing anything. If I buy a share of Apple and the share price goes up, I’ve just made a return on money that isn’t doing anything. The money I spent on that share didn’t enable any real economic activity other that me buying that share. My money didn’t go to Apple to enable them to grow their business. It went to some other investor who is primarily engaged in the same activity as me - investing.
I buy a liquor store for $1 million. A year later someone offers me $1.25 million for the liquor store. Would you argue that my million dollars was doing nothing?
The income the liquor store earned was income on my $1 million. The $250,000 may have been because of a change in tastes for liquor, or improvements I've made to the business through efficiency or reinvesting the icnome.
But what of the original owner who took my $1 million. He is retired and he has most of it in the bank (who will use it to make loans) while he spends the rest over the years as his retirement income.
For example, I raised some money from Alice, so I have obligation to pay $1M(+%) to Alice. In other words, Alice invested $1M into me. Now, my business grows, risks are reduced, so Bob paid $1.25M to Alice. Now, I have obligation to pay $1M(+%) to Bob instead of Alice.
What you're doing is providing liquidity to earlier investors and taking on their risk, that's absolutely your money doing something. Without this, investing in an IPO would be a much more risky endeavor.
In addition to flooding offshore it mostly goes into rent extraction schemes. That in turn raises the cost of living for everyone else, generally to no benefit. I've heard it called the "slumlord economy."
A small percentage of it does get re-invested in actual production, but productive investments tend to be higher risk than rent extracting "investments." Conservative holders of wealth are not going to dump it into private space programs or <5nm microchips. They're going to buy up vast amounts of housing and collect rent.
Edit:
In my opinion entrepreneurs and investors in actual productive work should be against "trickle down" economics as it makes it much harder to build substantial new ventures. You can't build new products and services if there are no customers. Productive capitalism (as opposed to a rentier economy) requires a fully capitalized consumer base.
Personally if I were a VC I would be in favor of dropping money on the poor and middle class from helicopters, especially if my portfolio had many consumer or small business focused companies in it.
"Trickle down" economics primarily benefits the non-productive rich, the rentier class. It even hurts the productive rich.
TL;DR: zero income tax, zero sales tax, zero capital gains tax on productive investments, high taxes on the "ownership" of land and other things human beings do not produce. A modern take would also include pollution taxes such as a fossil carbon fuel tax.
I would guess income tax and sales tax account for a far larger amount of tax dollars than ownership dollars -- Not well read but I'd wager it is a 100x difference or more. I.e. if so for that to work we'd have to vastly reduce government services. Either that or land tax would go way up, e.g. you have much more money from a lack of income and sales tax, but then 100x higher rent (as landlords could raise rent to cover the taxes).
(FWIW I think I would be pro high taxes on multiple home ownership, investors purchasing and parking in home real estate on the surface seems like a bad thing, but then commercial real estate and dense urban housing seems like it would require investment-driven development so not really sure)
You could probably make exceptions to the high tax rate for high density commercial real estate ownership so you could own a suite of offices without it kicking in as well as providing temporary tax brakes (as in, for X years after construction) to people who own multiple homes in a single new development. That way people investing in the construction of new apartment buildings aren't paying extra tax so long as they sell them in say, 5 years.
Why would you assume that? Most stock people buy is of American companies.
And hell, even if it was true, what is wrong with investing in foreign companies (of presumably underdeveloped nations)? That money still isn't "doing nothing", but rather giving the funding to companies that need it.
Whats wrong is that this money was generated domestically, and people who generated it are screwed by lack of healthcare, education, housing, infrastructure, transportation, etc.
Thats ghost towns were noone lives.Art that nobody really appreciates. Companys that produce nothing anyone can really afford. Value is artificial scarcity and the power to uphold it.
To trade a investment, is to dig a hole and sell the void.
Another word for that is investment.
Where do you think that money goes? You don’t earn returns on money that isn’t doing anything.