Comment on It will trickle down any second now
InternetCitizen2@lemmy.world 1 week agoExample if Elon Musk takes out a loan with his tesla stocks as collateral, will the financial transaction that have taken place, be part of GDP calculations or not ?
No, but the things he buys with said loans will.
The standard understanding of how GDP is calculated is: GDP = Consumption © + Investment (I) + Government Spending (G) + Net Exports (NX).
The investment must be spent that year and most of the net worth that is being discussed here was accumulated over previous years. Said net worth is not real money until it is sold (or tax side stepped with loans on assets). To be a bit more clear this is money spent by investors on securities and such that is counted; not the revenue of the brokers.
I think in your wanting to make capitalism immoral, which it is, you are holding a private definition of these things. It is also confusing as these definitions can be somewhat similar to each other and used interchangeably (like mass and wight, have you ever said something weighs 10kgs?).
Saarth@lemmy.world 1 week ago
The point I am trying to make here is the equities act like real money. They can be traded, and profits can be generated by said trades and deals (the profits are part of the GDP calculations). Which means that for all practical purposes equities are equivalent to real money.
Now we can debate what actually constitutes real money, and whether the definition ends at dollars or all global currencies or government bonds or assets like gold etc etc.
InternetCitizen2@lemmy.world 1 week ago
I mean, all money is a social contract, but still; equities being close to cash is not the same as being cash. Similar idea to holding a collectable item with some value. Until you sell or use it as collateral the value is hypothetical.
Except that we do caveat. The ultimate question is how healthy is the economy or how insert question is the economy; which is non-trivial, mostly because things that we agree should be measured cannot be, so we take a proxy. At this point its worth pointing out that metrics that are used as targets stop being useful metrics.
Part of how we might agree to measure the economy is by items made; which is hard without considering all the intermittent steps. So the final amount bought by consumers (which could be people, business, foreigners, or the government). Some caveats here are that the data is not normalized by currency, costs of living, people that are served by said economy, velocity of money (search this one as it is somewhat relevant to what you might be asking), and so on. Keep in mind we did not mesure economic health or performance, just something we might find easier to tabulate which may help us infer other things. When making an inference it is important to list out assumptions made about the dataset.
Still, this is a different topic from “is billionaire wealth real”.
I mean I am not even sure what this means. It just reads like a non-statment that sounds good. Having better banking and financing will be better for an economy. Like there is a reason why we moved away from cash/gold to keep things going. Think of how long it might take to buy a house if you are going cash. It is faster to just get a loan. And everyone in that chain can spend their money sooner (velocity of money I said earlier).
Does China have a less developed equity market? Maybe, but that does not mean that they are a weaker economy. Just that some transactions might take more time.
Remember we cannot actually measure some questions we have, just take a proxy measurement. Take for example brain damage from football or boxing. As of this writing we cannot see the CTE, but we can take symptoms to build a case that someone might have CTE. We can build a similar story for how resilient or not any given economy in the world might be. So yeah we do caveat quite a lot.
Saarth@lemmy.world 1 week ago
Thanks for the detailed response, I’ll probably need to Google a bunch if stuff in here which I will.
But to the point that didn’t make sense to you: The american economy is considered to be big/high growth simply because it’s financial sector is so big. And yes this could mean it’s markets are efficient, but efficient at what? Often it’s trading stocks or debt instruments or some obscure financial instruments, and if that’s the case then the size of the economy seems quite made up just like Elon’s wealth.
InternetCitizen2@lemmy.world 1 week ago
A real economics discussion should state this in the thesis. A politician might just state it and leave the reader to make up their own conclusion the way a movie never shows the monster.
Elon, and all other billionaire, wealth is for sure inflated even in the academic discussion of leverage or whatever, and yes taking out loans should be considered realizing its value and be taxed.
To be clear, I am not a capitalist or trying to be an apologist for it. Just trying to answer a question about the world we live in and the systems that make it and that we interact with.
Is the following a pipe or a representation of one? Is the share money? What about the GDP.
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Saarth@lemmy.world 1 week ago
And my second issue is that when it comes to personal wealth of billionaires we always caveat it with ‘it’s not real money’. .
But when it comes to measuring the success of any country’s economy, we don’t caveat it with something similar. Countries like Singapore or even US make a lot of money from financial services. The success of American economy is heavily reliant on these unrealised gains compared to China for example where I am guessing it will be a smaller proportion of the total economy.