What happens to the economy if millionaires and billionaires spent 90% of their wealth in 6 months? How would it impact someone earning $75k a year? #economy #wealthdistribution #incomeinequality #financialimpact
Understanding Wealth Distribution and Economic Impact
How does the spending behavior of millionaires and billionaires affect the economy?
– Explore the potential consequences of drastic spending by the ultra-rich
– Examine how wealth redistribution impacts different income brackets
– Consider the implications for individuals with moderate incomes
Scenario Analysis: $75k Income amid Wealth Redistribution
What does it mean for someone earning $75k a year?
– Discuss how changes in wealth distribution could affect middle-income earners
– Analyze the potential ripple effects on purchasing power, job market stability, and overall economic health
– Offer insights on ways individuals can prepare for sudden economic shifts
With the right set of questions, we can explore the potential implications of extreme wealth redistribution for individuals at various income levels. Let’s dive in and uncover the possible scenarios together!
They can’t, 95% of their wealth is in stock. They can’t sell that without someone else buying. Unless you say how you want this to happen.
If they spend all of their disposable wealth, there would be a very minor boost to the economy. It might lead to some hiring/low unemployment/raises. Very little likely.
Spend on what? Just selling their assets to each other in a round robin? Then almost nothing. Selling all their assets to middle income retail investors at a huge loss and buying blow? Skyrocketing cost of blow! Means of production held by the petit bourgeois. Lots of different things can happen.
I’ve seen some other comments get into the weeds about wealth being tied up in other assets, the need for liquidating those to “spend,” etc., but let’s just wave our magic wand and pretend we don’t have to answer those questions to fantasize about a shit ton of money entering the economy all at once.
I think the short answer is massive inflation — The price of about everything would get unaffordable.
I feel like there are a couple of assumptions built into this unrealistic scenario. And one of those is that these millionaires and billionaires aren’t spending their wealth on *other* forms of wealth. To say that they would sell their stocks to buy other stocks would totally render the question moot, so to make the question an interesting hypothetical at all, we have to imagine them converting all of their “wealth” to things that wouldn’t be tallied into their net worth.
If that much cash was emptied into the U.S. economy all at once, everything would get massively expensive. You’d probably have a hard time buying stuff, because your nearest billionaire just bought every item off the shelf in your local supermarket. But never fear, he’s probably giving it all away, because who really can drink that much milk before it all goes bad.
Thinking about remodeling your house? Forget about it. All the rich people will have all the tradespeople tied up for months working on their own home improvements or kitchen remodels.
Want to go on a trip? Good luck, the price of airfare just went up 1000% because now all the rich people are flying around to burn through their wealth in the 6 months you gave them.
It’s all already spent, in a sense.
A startup company has an idea for a product it wants to sell. It has no money to pay the employees or buy the machines it needs to make the product.
A bunch of rich people, who all have only 0.1% of their wealth in cold hard cash, decide to put that 0.1% into the company. The company can now make product and do stuff, and in return, the rich people own the company.
Rich people constantly have only a tiny bit of their overall wealth in cash, which they then immediately put into some random company. They never have giant piles of cash on hand. They could if they wanted to, because they own a bunch of companies which make them cash, but they immediately put loose cash into another company because it will make them more money.
Millionaires and billionaires are already spending 99% of their wealth, and always have been.
In fact, this is the only reason the economy functions at all. If millionaires and billionaires didn’t “store” their wealth in companies and instead stored it in hard cash, companies couldn’t get off the ground and all the normal people would be (even more) fucked.
The vast majority of the country’s wealth would vanish, because the stock an commodities markets would suffer a crash that would make the 1929 crash look like small potatoes.
Someone making $75K a year would probably make $0K a year with how high unemployment as the result of that crash would be. And heaven help them if they had any money that they themselves invested in the stock market.
I am so sick and tired of all this anti capitalism rhetoric being posted as questions on this and other subs.
Crazy inflation
Unbearable inflation. Effectively your 75k would become worth way less in a very short time
It’s important to understand that most billionaires don’t just have a billion in cash on hand. Most of it is the valuation of their companies.
The first step to this has to be them all selling off all their assets and if other people of wealth aren’t buying it means they are selling at increasingly dropping prices. It would be unparalleled stock market collapse with unparalleled real estate crash.
Really tough to say what happens in this situation since it’s never happened before.
I guess anyone middle class who is able to take advantage of buying stocks for Pennie’s on the dollar while at the same time the companies make record profits might become the new class of wealthy.
Next year they would earn 75k
AmEx created the black card for exactly these people. And a lot of them use it. No income, no taxes, so they buy everything on credit.
Spend?
Like sell investments to buy other investments?
People act like owning stock in a company is removing money from Circulation.
Alexander the Great pillaged and gave away the Persian Treasury. The economic stimulus has been estimated to have lasted 200 years
So they would sell 90% of their assets to have disposable income? The stock market would crash. Inflation would run rampant since production couldn’t keep up with demand. So your 401k would tank, just at the same time you would need to cash it in to be able to afford living expenses. Then things would stabilize, and the market would reach new highs, but it would be of no benefit to you as you would already have spent it all.
Inflation across the board though especially in luxury goods but not just them.
Stock market crash.
There are a lot of millionaires.
As others have said, there’s no way for the economy to turn Amazon into yachts or whatever you want. The assets exists. The economy exists. So what you’re describing is wealthy people selling off their assets all at once to less wealthy people while trying to consume more.
So a whole bunch of well off non millionaires would see inflation and stock market cratering but have the option to buy have shares of companies with massive yields.
Basically I’d guess poor people screwed high income asset poor make out like bandits.
Mostly massive inflation.
That class would almost invariably be the true recipients of any economic benefit (they’d be the ones earning all the money off the big spend regardless), but the volatility would probably crush the lower classes.
That’s assuming by spend they can foresee a return on investment; otherwise, they just wouldn’t. If it was a forced divestment it would probably cause a civil war.
Too hard to say. For example does your definition of a millionaire mean someone with $1m in assets? There a lot of regular people that would fit that definition mainly because they own a house. So if everyone all of a sudden had to sell their home, it would probably cause the real estate market to crash as there’d be more supply than buyers and sellers would be forced to accept a hard cap of $999.999k for their homes otherwise they’d trigger your above rule
They would lose their 75k job because their boss went bankrupt.
It would create inflation with the amount of cash injected into the banking system. It would also cause a selloff and potential liquidity crisis in the stock market because most of their wealth is likely in the form of company ownership. That would mean higher prices starting between months 6-24 of this exercise.
Insane levels of inflation?
You would be renting your house and be working for the man who bought the business
Uranus explodes
Mansa Musa provides a study of flooding the markets with gold on his world tour. It caused massive deflation and devaluation of gold, crashing local markets.
So in his case the supply of gold increased so dramatically, so quickly, such that it was valued at nearly nothing, causing prices to skyrocket and any savings to become next to worthless.
This is why direct wealth transfers aren’t optimal in market dynamics.
The funds need to be allocated and resourced into different venues. New and improved infrastructure, for instance, would create high paying skilled jobs, perhaps unionized with great benefits if the modern capitalistic paradigm is upheld, raising employment, wages, and consumer spending and confidence also providing much needed support to local principalities that are starved of money, funding, and resources to initiate new projects or repairs.
This is just one route. We can invest into education at all levels, universal Healthcare, immigration, finance. Et cetera.
We could change the world, lift people out of poverty, provide universal Healthcare, cure diseases, create new technology, eliminate hunger in the US let alone the world. Any number of projects could be started and completed, creating jobs, opportunities, and technology to reduce stress and commitment time of individuals and allow them to contribute back to society in to fuel a new golden age…
You know, if we didn’t let people horde property in the BILLIONS…
That bald dude would fucking lose it… I honestly don’t remember his name
What are they spending it on? Old stock pringles?
It’d surprise you to know that a lot of wealth held by the top 1% isn’t actually very liquid. It’d also surprise you how much of their operation and just general day-to-day relies heavily on credit.
But let’s say it was all liquid and they decided to just buy random shit, including from “Ma n Pa” shops and vendors. It would improperly reflect general consumer spending – as a majority of spending in this scenario is made by the multimillionaires and billionaires – rich folks so to speak. It could improperly stimulate aggregate demand and potentially lead businesses to raise their prices on goods and services being bought mainly by the rich.
So prices increase making it less affordable for those outside the rich – as described in this case. The rich, largely unaffected in contrast.
I say “improperly” in this scenarios because it wouldn’t reflect the general consumer spending – just by the rich.
This is probably the most simplistic interpretation- I’ll admit my Economic Fundamentals is long gone now but I think that’s probably the general pattern.
Massive hyperinflation.
Complete meltdown of the banking system
I could get all deep into details but that’s the end result. The guy making 75k would be spending 500 bucks on a loaf of bread
Deoends on what/where they spend it. It would definitely boost some businesses
Good if they spend their cash. Bad if they liquidate their assets.
How do you spend 90% of your wealth?
That’s like asking what would happen if rich people decided to be poorer and just give everything away.
In this massively *hypothetical* scenario, my guess would be the below happens to the economy for someone earning $75Kish:
**Market crash:** A sudden influx of assets like stocks and real estate flooding the market would likely cause a significant drop in prices. This could trigger a recession as businesses and consumers lose confidence. So your job is immediately at risk.
**Disruption of credit:** Wealthy individuals are major sources of investment capital for businesses. Without their funds, access to loans and credit could become scarce, hindering economic growth. So you’ll struggle to get a loan.
So basically it’s not good.
They’d likely be buy in physical items and most things manufactured or made (means of production) are owned by other billionaires. There are instances where individual people own unique products like food or video games, so in those cases the wealth would flow to those with unique products but will largely just go back to the billionaires who own the physical infrastructure.
If the money goes to the poor from the bottom up the world becomes a better place