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Wealth & Economics > Where the money goes?

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message 1: by Nik (new)

Nik Krasno | 13802 comments Does it gradually disperse among individuals and corporations or over time gets concentrated in fewer hands/hubs? What do you think?


message 2: by Scout (new)

Scout (goodreadscomscout) | 5532 comments What money are we talking about? Tax money? Is any other money really up for grabs?


message 3: by J.J. (new)

J.J. Mainor | 2151 comments I might argue the way to deal with wealth concentration should be similar to how we should deal with climate change - offer incentives to spend/invest the money and get back into circulation rather than force it out. Many of us in the US, the more you tell us not to do something, the more we're going to do it - the more you force us to do something, the more we're going to resist.

With the climate change issue, the whole denier movement casts us in an unfair light because the liberal position is to force it on everyone, however we've seen in many states that offer tax incentives of solar and wind development, that people willing make the choice when there is an incentive. Wal Mart has touted their efforts to transition many of their stores to renewable energy, but the hidden truth of that is that the transition has only happened in states where credits are available. Their home state of Arkansas doesn't offer incentives, so you won't see a lot of solar panels on their roofs in Arkansas.


message 4: by Nik (new)

Nik Krasno | 13802 comments Scout wrote: "What money are we talking about? Tax money? Is any other money really up for grabs?"

In general, all the money. Does it get concentrated or dispersed?


message 5: by Nik (last edited Oct 26, 2017 10:08AM) (new)

Nik Krasno | 13802 comments J.J. wrote: "I might argue the way to deal with wealth concentration should be similar to how we should deal with climate change - offer incentives to spend/invest the money and get back into circulation rather..."

If we believe the money in circulation is better than when parked in the off-shores de-circulated, then incentives is as good an idea as any as long as it works..


message 6: by Nik (new)

Nik Krasno | 13802 comments Just to update the picture: https://www.visualcapitalist.com/all-...
Real estate alone is estimated bigger than the entire global debt, but is it so?


message 7: by Philip (new)

Philip (phenweb) Any asset is only worth what someone is willing to pay. So land forecast prices are based on current supply and demand. See what happens in a fire sale of any asset if you want real value


message 8: by Papaphilly (new)

Papaphilly | 2853 comments Money moves. It is not static and it grows. As odd as it seems both answers are correct. There is more money floating around than ever in history. At the same time, the rich have more money than ever too. The percentages probably about the same.

The indicator is that actual true poverty is down across the board in the world. I started to notice this trend 30 years ago when the definition of poverty in America was changing. Nowadays, not having air conditioning is considered an indicator of poverty, which is strange to me because I was solidly middle class and we never had it.


message 9: by Scout (new)

Scout (goodreadscomscout) | 5532 comments Yeah, I guess the indicators for poverty have changed. We never had air conditioning when I was growing up, either. I can't see that lack of air conditioning is a dire circumstance, given that I survived it.


message 10: by Marie (new)

Marie I agree that money flows here and there. There seems to be quite a bit lining the pockets of the rich and less of it lining the pockets of the poor.

But when the economy is struggling it seems to hit everyone even the middle class.

Not much of anything is moving over here in the U.S. even with real estate.

People are just not buying anything including cars. The car rental industry lost one of their major companies about 3 months ago due to covid as they just could no longer keep their doors open as no one have been renting cars as no one is traveling.

It makes me wonder what will happen down the road after covid. What companies endure and what companies will survive. Is there really a light at the end of the tunnel?


message 11: by Nik (new)

Nik Krasno | 13802 comments Those businesses that were experiencing hardships in pre-corona era may not be able to survive, those - not flourishing a certain per cent may die, while some will survive, those in good shape - will not only survive but take an advantage of "less crowded" markets later on and assets sold at liquidation price. Undoubtedly, lots of personal tragedies there.
Sure some industries and business niches are almost closed now, but they will re-emerge once the circumstances change. Not all will survive till those times, but then new or old-new players will occupy them.


message 12: by Nik (new)

Nik Krasno | 13802 comments Here's housing market recovery: https://thehill.com/policy/finance/51...


message 13: by Gary (new)

Gary Allen, PhD (gallen6) Covid did not end Hertz - the company was billions in debt long before the strike of the pandemic. The timing is just coincidental


message 14: by Philip (new)


message 15: by Nik (new)

Nik Krasno | 13802 comments Congrats to Elon, well done. When was the last time any of us made 15 billion in a week?


message 16: by Scout (new)

Scout (goodreadscomscout) | 5532 comments I've forgotten why Elon is so reviled. Refresh my memory.


message 17: by Nik (new)

Nik Krasno | 13802 comments Maybe reviled by some, but I believe he's largely admired for he does advance a whole bunch of significant innovations and gamechangers in certain industries. He seems to be an eccentric dude and has his occasional idiotic remarks, but hopefully - nothing major..


message 18: by Philip (new)

Philip (phenweb) He's very rich and very public. Tesla and SpaceX are very high profile. Some of it is envy some of it just personal dislike based on media and commentator reports. I've never met him so I don't know what he is like personally - I haven't met most of the people on the planet either

I applaud SpaceX and Tesla advances. Take a look at Tesla roof tiles - not just cars. SpaceX is simply amazing. Blue Origin (Bezos) Virgin Galactic (Branson) and NASA (US Gov) seem to be lagging behind. Contract Musk's engineering and advances with Zuckerberg's Facebook's improvement in humanity. I'm sure MZ does lots for Charity (mate - for UK reference) when he's not coming up with new ways to steal or misuse data that is...


message 19: by Scout (new)

Scout (goodreadscomscout) | 5532 comments I'm very impressed with what Musk has done with Spacex and manned flights going to the Space Station. Just watching the rockets landing back on Earth with such precision amazes me.


message 20: by Philip (new)

Philip (phenweb) Scout wrote: "I'm very impressed with what Musk has done with Spacex and manned flights going to the Space Station. Just watching the rockets landing back on Earth with such precision amazes me."

Me too


message 21: by Philip (new)

Philip (phenweb) Just noticed last night they launched to deploy Starlink mini-satellites. Successful launch and the booster safely returned 7th time for that booster and 61st time for Space X


message 23: by Phil (new)

Phil I think generally, money flows to businesses and the owners of the businesses from people buying their stuff.


message 24: by Scout (new)

Scout (goodreadscomscout) | 5532 comments What about the flow from businesses? Is that money hoarded and sent offshore? Does it "trickle down"? Where does it go?


message 25: by Philip (new)

Philip (phenweb) Scout wrote: "What about the flow from businesses? Is that money hoarded and sent offshore? Does it "trickle down"? Where does it go?"

Trickle down great in theory - zero practice - buy goods - goes to other businesses, employee staff - how many millionaires employ gardeners at minimum wage....


message 26: by Nik (new)

Nik Krasno | 13802 comments Scout wrote: "What about the flow from businesses? Is that money hoarded and sent offshore? Does it "trickle down"? Where does it go?"

A big chunk (estimated at trillions of USD) of it sits offshore lest taxed. Some trickles down and most employed in the US used to have (maybe still) a fair living, yet oftentimes at minimal required level, thus enlarging the gap, and in recent decades - less benefiting locals and more - people abroad, in order to pay even less than minimally required in foreign sweatshops..


message 27: by [deleted user] (new)

Philip wrote: "Into housing in UK

https://www.bbc.co.uk/news/business-5..."


As discussed in other threads, I believe in capitalism and, as a homeowner, have no personal interest in seeing the housing market collapse.

However, I find many British people’s satisfaction in the continuous upward trend in house prices baffling (certainly not directed at you, Philip, as you’re only reporting what’s happening).

Unless you’re selling up to go and live in a caravan or on a boat, continuous significant house price rises benefit nobody, apart from possibly people who want to borrow more against their equity. They also have a profoundly negative impact on the happiness of society as a whole by further widening the gap between the haves and have nots, not to mention disillusioning young people who simply can’t afford a home and so don’t feel like they have the sort of stake in society enjoyed by older people. This will create problems of its own in the long run.

The longer the trend goes on, the fewer the number of homeowners there will be, and we may well get to a point where property is only owned by the exceptionally rich or by property investing companies.

For this reason, I believe the UK housing market is one of the areas of the free market where the Government needs to intervene, beginning with even greater taxation on second home ownership and certain restrictions on overseas investors. We could build more houses, yes, but concreting over greenfield sites is neither sustainable nor desirable.


message 28: by Nik (new)

Nik Krasno | 13802 comments Beau wrote: "However, I find many British people’s satisfaction in the continuous upward trend in house prices baffling..."

That's a global problem and we have exactly same here (only without a dive in 2007-8). I hear that Australia used to have an overheated (especially by Chinese investments) real estate market, but solved it recently, which enabled a friend of mine to finally buy an apartment in Sydney :)
Maybe our friends from Down Under would want to expand or correct me, if I'm wrong.


message 29: by Papaphilly (new)

Papaphilly | 2853 comments Beau wrote: "Philip wrote: "Into housing in UK

https://www.bbc.co.uk/news/business-5..."

As discussed in other threads, I believe in capitalism and, as a homeowner, have no personal interest in seeing the..."


Are you a homeowner?


message 30: by [deleted user] (new)

Papaphilly wrote: "Beau wrote: "Philip wrote: "Into housing in UK

https://www.bbc.co.uk/news/business-5..."

As discussed in other threads, I believe in capitalism and, as a homeowner, have no personal interest ..."


Yes - see the first paragraph of my previous post.


message 31: by Ian (last edited Jan 05, 2021 09:52AM) (new)

Ian Miller | 9779 comments Scout wrote: "What about the flow from businesses? Is that money hoarded and sent offshore? Does it "trickle down"? Where does it go?"

A lot of the wealth is purely on paper. Thus Bezos huge gain in wealth is due to an huge escalation is the price of Amazon shares. These can come down in a slump, and when you see statements that huge amounts of wealth were destroyed when Wall St slumped, again it is only on paper unless someone has to sell to manage debt. So part of this question is also dependent on debt levels and who is on the wrong side of the ledger.

A lot of the wealth is also on ledgers, numbers that can be moved wherever, and as Nik says, are moved to avoid tax. The real scary thing is what happens if these "numbers" are brought back and "liberated". OK, taxes will be paid, but then with trillions floating around looking for a home, what then?


message 32: by Papaphilly (new)

Papaphilly | 2853 comments Beau wrote: "Papaphilly wrote: "Beau wrote: "Philip wrote: "Into housing in UK

https://www.bbc.co.uk/news/business-5..."

As discussed in other threads, I believe in capitalism and, as a homeowner, have no..."


Missed that Sorry.

I am not as worried as you. However, maybe America is a bit different in the U.K. Not to argue this too much, but I have been hearing this lament since I was a kid. People still own homes in greater numbers than the past. At least in the United States.


message 33: by Ian (new)

Ian Miller | 9779 comments Nik, NZ currently has a huge housing problem, but only partly caused by Covid. Over the last two or three decades there was not a lot of house building, in part because various local governments put on ridiculous rules to stop the freeing up of land, while a small number of "land bankers" bought up what was available and sat on it. Why did all this happen? Because only too many of those voted onto local bodies turned out to be property investors, and it was ion their "conflicted" interest to keep supply down. Meanwhile, Central Government wanted to be environmentally friendly and it introduced a bizarre battery of rules, etc, which mean that few houses were built. With a stable population, it did not matter much, but in the last few years we have had a lot of immigration, much of it from people from Europe and bringing a lot of money. Added to that, the Reserve Bank has lowered interest rates toa ridiculous low and embarked on money printing to help with Covid, so there is a lot of money chasing . . . And herein lies the problem - houses seem to be the only thing to chase, so house prices are really out of control.


message 34: by [deleted user] (last edited Jan 06, 2021 04:53AM) (new)

No problem, Papaphilly. I completely agree with you about the argument not being a new one.

I was probably being a bit sweeping saying there is no benefit to rising house prices but, overall, I think it’s a bit of false economy. If your house goes up in price and you sell, the house you’re buying will probably have gone up in value too.

On the serious consequences for society as whole, I think it’s a bigger problem in the UK than in the US or Australia, as you have far more land to build on. It’s never been the case for everyone but, generally, the UK has been a property-owning democracy for many decades but there are becoming fewer and fewer new entrants into the market. It’s storing up trouble. Last year, we saw the problems when people don’t feel like they’ve got a stake in society. Paying exorbitant rents instead of a mortgage will further disillusion and alienate people.

Ian, spot on.


message 35: by Ian (new)

Ian Miller | 9779 comments In Auckland, there is also a land problem. The city sprawls somewhat awfully (leading to horrible transport problems - the roads choke, but it is too dispersed for efficient public transport. Anyway, towards the south it is threatening to expand into the richest soil for vegetable growing. This is one possible example where the restrictions on expansion have merit, but the difficulty then becomes how to densify when the occupiers of land like what they have.


message 36: by Philip (new)

Philip (phenweb) Ian wrote: "In Auckland, there is also a land problem. The city sprawls somewhat awfully (leading to horrible transport problems - the roads choke, but it is too dispersed for efficient public transport. Anywa..."

Build up seems to be the response in other areas although there seems to be unwillingness to live in high rise in UK compared to say New York. UK residents want their suburban houses - huge generalisation....


message 37: by Nik (new)

Nik Krasno | 13802 comments In ever appreciating housing market the fundamental assumption allowing 100% + of house's value mortgages should work, until they don't and collapse, as reflected in The Big Short.
Wonder whether anywhere else loans higher or equal to property's value were/are available?
And what's the average yield from renting a residential property out in your area?


message 38: by Ian (new)

Ian Miller | 9779 comments In NZ people want their sections, although many do nothing much with them and would be better off without them.

As for NZ renting yields, they are quite good as long as you have owned the house from times previously. I suspect all the recent purchases have been for capital gain, which, of course, is likely to generate a bubble and a crash. Apart from first home buyers, deposits will require about 35% of the price, i.e. a mortgage can only go to about 2/3 the price. Of course, long-term investors with stock can borrow against stock as well. The tax position tends to be favourable to property investment, but that may change.


message 39: by Scout (new)

Scout (goodreadscomscout) | 5532 comments If my neighborhood is any indication, home prices aren't unduly inflated, and homes sell fast, within a couple of months. There are no homes in my neighborhood currently for sale, but in the past few months, three have sold. Seems things are looking pretty good.


message 40: by [deleted user] (new)

Philip wrote: "Ian wrote: "In Auckland, there is also a land problem. The city sprawls somewhat awfully (leading to horrible transport problems - the roads choke, but it is too dispersed for efficient public tran..."

That's true, Philip, but the impression I get of NY City high rises is that they're luxury developments occupied by lawyers and stockbrokers. On the other hand, ours are bleak.

Even if you did want to buy one of these apartments you wouldn't get a freehold and you'd have to pay some sort of ground rent too. All in all, they were just one of the '60s planners' many mistakes.


message 41: by Ian (new)

Ian Miller | 9779 comments The other side of owning an apartment in a high-rise is overall building maintenance, which is covered by what we call a "Body Corporate". This requires all owners to chip in to pay for agreed work. If you have owners with different financial capacity, this can be difficult.

In NZ another difficulty has been that local bodies have decided to revise the building regulations regarding earthquakes, which has required astronomically priced repairs. When you buy an apartment you rarely have the engineering experience to check whether the construction was adequate, although of course most people do not live in earthquake zones.


message 42: by J. (new)

J. Gowin | 3115 comments Ian wrote: "The other side of owning an apartment in a high-rise is overall building maintenance, which is covered by what we call a "Body Corporate". This requires all owners to chip in to pay for agreed work..."

In the US, banks require home inspections and title/deed reviews before they will approve a mortgage. Is the process different in NZ?


message 43: by Ian (new)

Ian Miller | 9779 comments Yes, banks do require certain reviews, but they cannot do much about governing bodies changing the rules.


message 44: by J. (last edited Jan 07, 2021 10:11AM) (new)

J. Gowin | 3115 comments Ian wrote: "Yes, banks do require certain reviews, but they cannot do much about governing bodies changing the rules."

You posted, "When you buy an apartment you rarely have the engineering experience to check whether the construction was adequate..."

It shouldn't matter what the buyers are or aren't capable of checking, because the bank will require those assessments be done by professionals. It is an added cost for all involved, but it should never be a surprise bankruptcy.


message 45: by Nik (new)

Nik Krasno | 13802 comments Ian wrote: "In NZ another difficulty has been that local bodies have decided to revise the building regulations regarding earthquakes, which has required astronomically priced repairs...."

We have a similar situ here. We are close to Syria- African rift and there is a major earthquake roughly once every century. There is a program that incentivizes developers to reinforce older buildings, erected before the seismic standard was adopted, by getting additional building rights (adding 2-4 stories of apartments to be sold) without taxes, while residents get their buildings reinforced and enlarged paying nothing. Slow at first, the program picked up since the rollout, although mostly in more prestigious areas more distant from the rift than where they are desperately needed :)


message 46: by Ian (new)

Ian Miller | 9779 comments J., I am reasonably confident the banks do not do their own independent engineering assessment, although in the US East Coast at least it probably does not apply.

The problem in NZ was highlighted by the collapse of the CTV building in Christchurch following the second earthquake. The building was designed by professional engineers, it was peer-reviewed by professional engineers, the City Council engineers approved it. How many more engineers do you want? What the approved, of course, was that the building met the requirements of the then building code. This particular building survived the first earthquake, but there was clear damage, yet professional engineers permitted its further use. (My view is this was a display of incompetence - when cracks appear in corners, the floors are no longer level, something has moved when it shouldn't have, then the precautionary principle should apply.

Anyway, following that, there were major changes to the building code, and there is an industry reinforcing buildings. The building where my son works in Lower Hutt has been demolished because it was cheaper to do that than reinforce. But if you owned an apartment hit by that, nobody could have foreseen it. In principle it is a one-off "black swan event", but it has had a bit of a depressing view of the apartment market here.

Incidentally, once upon a time my accountant recommended I invest in apartments. I did not, and am rather glad I ignored that. Part of the reason I ignored it was because in my earlier days I had a friend in the national Physics and Engineering lab who had designed earthquake-resistant foundations, but most builders did not go for the extra price.


message 47: by J. (new)

J. Gowin | 3115 comments Ian wrote: "J., I am reasonably confident the banks do not do their own independent engineering assessment, although in the US East Coast at least it probably does not apply."

When one is seeking a mortgage from a US bank, it is a two part process. First they evaluate the applicant to determine how much the bank might be willing to loan them at a given rate. This is what generates pre-approval letters. The second part is evaluating the property as collateral for the loan. The bank requires the applicant to submit an inspection report from an accredited inspector, at the applicant's expense, and all parties must submit paperwork to show that the property is free of liens and compliant with all zoning requirements. Minor issues will result in a reduction of the loan value of the property. Major issues will cause the bank to walk away. If no bank will offer a mortgage on a property, then the value of the property is effectively zero, because it could only be sold for cash or trade.


message 48: by Ian (new)

Ian Miller | 9779 comments NZ is not that much different. Basically here the bank tries to ensure that it will not lose money, so the borrowers have to persuade the bank they can service the loan, and the bank has to be sure it has the right to sell the property if they can't, and if they do they will get their money back. As I said above, the engineering requirements from earthquakes was a black swan event, but it has soured the apartment market. I should add the problem in the Wellington region followed the quake about 3 years ago, so things have yet to settle down.

The biggest mortgage problem in NZ, in my opinion, is house prices have risen to ridiculous heights, and if there is an employment slump there may be blood on the street, figuratively of course, from recent borrowers.


message 49: by Papaphilly (new)

Papaphilly | 2853 comments Beau wrote: "That's true, Philip, but the impression I get of NY City high rises is that they're luxury developments occupied by lawyers and stockbrokers...."

Sort of. NYC has all that you think, but there are lots of both very good and very bad places to live. The high rises tend to be either for the well off or investors using it as an investment.


message 50: by [deleted user] (new)

Thanks for the information, Papaphilly. I've never visited NYC but would like to go in the future. I've always been under the impression that the bad areas are made up of houses and that the big apartment blocks are upmarket.


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