5 ms·

Megacaps don't just print money out of thin air. If you have a faltering middle class, who's gonna be there to spend money? Unless you institute some kind of un

Megacaps don't just print money out of thin air. If you have a faltering middle class, who's gonna be there to spend money? Unless you institute some kind of universal basic income, I don't see people's buying power staying the same. Remember, 70% of the economy is driven by people buying shit.

KaoruAoiShiho 6y ago
I think we're going to see just how small the mom and pop sector of the economy is.
- mvkel 6y ago
  There was a survey that went out that said 80% of small businesses can't afford more than 3 months under the current economic climate. If that's true, does that mean we will see all small business evaporate before the end of 2020?
somebodythere 6y ago
> Unless you institute some kind of universal basic income More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs.
- jcfrei 6y ago
  > More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs. Do you have any sources for that claim?
christophilus 6y ago
Sounds like you’re in the minority, but I think you’re right. Mega caps are built on the foundation of a broad consumer base that has been eroded faster than at any other time in history. Even those who seem insulated will feel the effects when their mega cap customers begin cutting costs because of their exposure to the consumer markets.
nerdponx 6y ago
Doesn't this depend on the company? Demand for agriculture, petroleum, and financial services (among many other things) are fairly inelastic. People are going to consume all of that stuff regardless of how financially well-off they are.
- pedalpete 6y ago
  Demand for agriculture is inelastic, but I don't think the same of petroleum or financial services. Without travel, demand for petroleum has dropped significantly, to the point it was below 0 for a short time. Financial services can come to a screeching halt as well if people stop buying on credit or taking loans out on housing and cars. Maybe I'm being short-sighted in only considering the consumer aspect here.
fladrif 6y ago
What's the last 30%?
- DSingularity 6y ago
  My guess is government and corporate spending.
- tfehring 6y ago
  GDP = Consumption + Investment + Government spending + Net exports [0] The investment component is dependent on companies' expectations about consumption (or other companies' investment, or government spending) in the future, and obviously the net export component depends on consumption in other countries. So in that sense the ~70% [1] due to direct consumption understates the true importance of consumer spending to GDP. [0] https://en.wikipedia.org/wiki/Gross_domestic_product#Components_of_GDP_by_expenditure https://en.wikipedia.org/wiki/Gross_domestic_product#Compone... [1] https://fred.stlouisfed.org/series/DPCERE1Q156NBEA https://fred.stlouisfed.org/series/DPCERE1Q156NBEA
mvkel 6y ago
UBI doesn't produce goods, though. You still need companies (open and) employing people to make the goods that people buy. Both need to be present.
- taneq 6y ago
  UBI doesn't stop people working. It just stops them starving if they don't/can't work. It allows them to re-skill without risking ending up on the street. It provides a safe path out of poverty traps. People will always get bored and people will always want nicer things, so they'll always eventually be motivated to go and get work to improve their lot. UBI won't change that. In fact, it will facilitate it.
  - samdamsamm 6y ago
    UBI doesn’t do that. Unless tied to something like land-value tax, UBI just raises rent cost. Of course it doesn’t happen immediately, but within a year or so UBI will be consumed by rent cost.
    - taneq 6y ago
      Shouldn't the free market take care of that? Rental costs in a given area are driven by supply of, and demand for, rental housing in the area.
      - netjiro 6y ago
        Housing is generally supply blocked due to zoning/regulation/bureaucracy/etc. It's a severely dysfunctional market in most areas.
dorchadas 6y ago
That's exactly why tax cuts to the rich don't make any sense to me. Give tax cuts to the middle and lower classes, they're the ones who go out and actually buy shit, which drives everything else, really.
- lsiebert 6y ago
  They make perfect sense if your goal is to enrich the wealthy in the short term.
- samdamsamm 6y ago
  The rich people create the value so they deserve whatever they want.

KaoruAoiShiho 6y ago

I think we're going to see just how small the mom and pop sector of the economy is.

mvkel 6y ago
There was a survey that went out that said 80% of small businesses can't afford more than 3 months under the current economic climate. If that's true, does that mean we will see all small business evaporate before the end of 2020?

somebodythere 6y ago

> Unless you institute some kind of universal basic income More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs.

jcfrei 6y ago
> More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs. Do you have any sources for that claim?

christophilus 6y ago

Sounds like you’re in the minority, but I think you’re right. Mega caps are built on the foundation of a broad consumer base that has been eroded faster than at any other time in history. Even those who seem insulated will feel the effects when their mega cap customers begin cutting costs because of their exposure to the consumer markets.

nerdponx 6y ago

Doesn't this depend on the company? Demand for agriculture, petroleum, and financial services (among many other things) are fairly inelastic. People are going to consume all of that stuff regardless of how financially well-off they are.

pedalpete 6y ago
Demand for agriculture is inelastic, but I don't think the same of petroleum or financial services. Without travel, demand for petroleum has dropped significantly, to the point it was below 0 for a short time. Financial services can come to a screeching halt as well if people stop buying on credit or taking loans out on housing and cars. Maybe I'm being short-sighted in only considering the consumer aspect here.

fladrif 6y ago

What's the last 30%?

DSingularity 6y ago
My guess is government and corporate spending.
tfehring 6y ago
GDP = Consumption + Investment + Government spending + Net exports [0] The investment component is dependent on companies' expectations about consumption (or other companies' investment, or government spending) in the future, and obviously the net export component depends on consumption in other countries. So in that sense the ~70% [1] due to direct consumption understates the true importance of consumer spending to GDP. [0] https://en.wikipedia.org/wiki/Gross_domestic_product#Components_of_GDP_by_expenditure https://en.wikipedia.org/wiki/Gross_domestic_product#Compone... [1] https://fred.stlouisfed.org/series/DPCERE1Q156NBEA https://fred.stlouisfed.org/series/DPCERE1Q156NBEA

mvkel 6y ago

UBI doesn't produce goods, though. You still need companies (open and) employing people to make the goods that people buy. Both need to be present.

taneq 6y ago
UBI doesn't stop people working. It just stops them starving if they don't/can't work. It allows them to re-skill without risking ending up on the street. It provides a safe path out of poverty traps. People will always get bored and people will always want nicer things, so they'll always eventually be motivated to go and get work to improve their lot. UBI won't change that. In fact, it will facilitate it.
- samdamsamm 6y ago
  UBI doesn’t do that. Unless tied to something like land-value tax, UBI just raises rent cost. Of course it doesn’t happen immediately, but within a year or so UBI will be consumed by rent cost.
  - taneq 6y ago
    Shouldn't the free market take care of that? Rental costs in a given area are driven by supply of, and demand for, rental housing in the area.
    - netjiro 6y ago
      Housing is generally supply blocked due to zoning/regulation/bureaucracy/etc. It's a severely dysfunctional market in most areas.

dorchadas 6y ago

That's exactly why tax cuts to the rich don't make any sense to me. Give tax cuts to the middle and lower classes, they're the ones who go out and actually buy shit, which drives everything else, really.

lsiebert 6y ago
They make perfect sense if your goal is to enrich the wealthy in the short term.
samdamsamm 6y ago
The rich people create the value so they deserve whatever they want.