Social security is broke....

[Shaul]

Self-made is an interesting term. I believe a statistic I saw said that 67% of millionaires were self-made, but in that same report it said 70% of those lived in homes that were in the top 20% of households growing up which gave them better access to education and networking opportunities.

I agree that ignorance is a hurtle for those that grow up in the lower and lowest tiers of family income. I'm curious, do you think taking money from you (or others that have achieved a modicum of success or better) to create more opportunity in the lowest classes is something that we should support? Do you think that's fair?

AFAIK the percentage is more like 79%. Nor is there a correlation between socio-economic status of the nurturing home and those that succeed in becoming well off.

Setting aside ethical or morality questions, if we ask whether wealth redistribution by governments work on a practical basis, the evidence of history says no. Therefore to try it is a form of insanity by one definition. Trying to outsmart the Free Market is a sucker's bet. I think the taking of wealth is always evil. It is not "fair". It may be the lesser of some evils. But "to create more opportunity for the lowest classes" is not a justification for taking anyone's property. That being said, I think you will find that wealthier people often choose to give to those will less voluntarily. That is the opposite of an evil, it is a great self-enlightened charity.

 

[Heyo]

If I were to oversimplify things, I think it's more like "expected demand=expected supply.

I had to think about that and maybe I still don't get it, but we basically say the same thing.

To simplify things let's use the Metro analogy with tickets being our money.
How many Metro tickets would I need to buy all the rides? Exactly, all of them. I.e. the "money" (tickets) equals the goods (rides).
You ask a different question but come to the same conclusion. You ask the Metro corporation's question "how many tickets should we print?". The answer isn't that straight forward in this case as the Metro first has to answer the question "how many cars (seats) should we use and how often should we drive?". And your formula answers that question: we should offer as many rides (seats * frequency) as we expect people will use. So the expected demand of rides = rides we will supply and we will print tickets for all of them.

 

[EconGuy]

I had to think about that and maybe I still don't get it, but we basically say the same thing.

As always I appreciate your conversational tone. Thanks for that!

To your comment, not exactly. Let me explain.

The laptop I'm tying on isn't for sale and if I never sell it then it will never have been available in the market, but it does have value. What we can do is try to estimate the amount of used goods that are sold in secondary markets and include that number in any estimations.


Let's look at the amount of estimated wealth....

According to the National Debt Clock, the US currently has about $194 trillion dollars in assets. We don't take all the money currently in existence and divide. Why? Because only a small fraction of those assets are for sale at any given time. We can estimate the value of the used market in any given year, let's just say $200 billion (ebay last year as $73 billion) is the amount, yes it's just a guess, the real number doesn't matter, just that we understand it's a tiny fraction of total assets.

Thus expected supply is only the subset of goods expected to be fore sale, that equals expected demand. That is MUCH, MUCH smaller than the value of all goods in existence in the US that could be sold.

Same goes on the currency side. We wouldn't divide all currency into expected supply because not all currency will be used to make a purchase. Lots of money is saved. Of course, you'd also need to factor in that currency that is traded can be traded more than once (that's velocity.

So let's say we have $1000 in currency, but only $250 in any given year is spent making purchases, but the velocity of money is 5:1 so expected demand is $250x5 or about $1250 out of a potential $5000 (I hope that made sense).

So expected demand=expected supply which is different than potential demand=potential supply.

Now I realize that this might seem like I'm splitting hairs, but I think it's important to make this distinction, because the supply of currency and total amount of goods actually fluctuates very little year over year. But, expected demand and expected supply can. It is the deviation from the expectation that creates instability in the form of unemployment and inflation etc.

The Metro example's can be useful to understanding the principle of currency creation, but the problem when comparing it to the value of currency is that Metro farecards aren't used as asset savings. The ratio of cards purchased to cards used over a given time would be close to 100% (though not quite), but the same is not true for money, unlike farecards, people horde money. Same is true of the trains. Some amount of trains are held in reserve, some are receiving maintenance, but I'd imagine on any given day most of the trains in a system are in use, unlike real assets where only a tiny fraction of assets are put op for sale over a given period of time.

And your formula answers that question: we should offer as many rides (seats * frequency) as we expect people will use. So the expected demand of rides = rides we will supply and we will print tickets for all of them.

Quite right!

I just want you to understand the difference between "money = assets" and expected "demand=expected supply" because those are very different.

Hope that helps.