Next!

I just put an end to a very silly conversation on my Facebook account between me and a socialist. Responding to this post he offered:

“Ahead of the Curve” by Joseph Ellis make a very good case that there is no truth in the trickle down theory. Rich people have a propensity to save, not make risky investments. Most all of them are nothing more than clever parasites.

I offered:

You missed the point of my post. Re-read. And calling “rich” people clever parasites is an extreme view I don’t come close to sharing. First off what is “rich”? Second, why would someone be a parasite cause they have more money than you? Not at all logical thinking. Envy.

He offered:

Only people who’s conscience doesn’t approve their conduct is subject to envy and jealousy. Luckily, I’m not one of them. If all we have seen over the past several months haven’t convinced you that most rich people are clever parasites, you need to remove your rose colored glasses. We can always have a separate discussion about the definition of rich.

I offered:

…the term “rich” can mean anything. If you are going criticize “rich” and not even bother to define the term before you use it, your argument is specious at best.

I then decided this was a “friend” I no longer needed on Facebook. The interchange had me go find a good Eric Hoffer quote:

Passionate hatred can give meaning and purpose to an empty life. Thus people haunted by the purposelessness of their lives try to find a new content not only by dedicating themselves to a holy cause but also by nursing a fanatical grievance. A mass movement offers them unlimited opportunities for both.

4 thoughts on “Next!

  1. Dear mystery ex-facebook friend of Covel’s,

    “Rich people have a propensity to save, not make risky investments.”

    Please reread this statement and try to point out the obvious, ridiculous logical flaw…

    (Don’t feel bad if it doesn’t come immediately. You’re not the only one to suffer from this misunderstanding. Even your president seems unable to grasp this concept.)

    OK, give up? Here’s the secret: SAVINGS EQUALS INVESTMENT. Yes! Every dollar saved, so long as it’s not under the mattress, is invested somewhere. Conversely, every dollar of investment capital in the world must first be saved by someone else. When you go to the bank to get a mortgage, the money they give you to buy the house is the same exact money saved by those “clever parasites.” Similarly, when a business wants to expand, and they need to borrow money, a pool of savings must, by necessity, exist.

    All the problems this economy is currently experiencing can be traced to this simple misunderstanding. Unfortunately, the people in charge of our currency think that you can “stimulate” investment by artificially driving down interest rates. This may appear to make some sense on the surface: hey, the price of capital is now lower, so more people will borrow and invest. OK, but this ignores the other side of the equation. When the price of capital is lower, fewer people will provide it (less people save.) So now we have a gigantic mismatch between the number of borrowers and savers. The only way to possibly reconcile this mismatch is to print more money. Unfortunately, this money does not correspond to any real resources, so the borrowers do not have access to the resources they thought they’d have. This means that A- borrowers will not be able to finish their projects at the prices they initially thought they would and B- borrowers, when they finally get their products to market, will find that consumers will not be able to afford them, since there was no real savings in the first place (remember: saving is simply deferred consumption.)

    Therefore, it is highly ridiculous to simultaneously plead that “we need to get credit flowing again” and then turn around and blame a lack of credit on a high savings rate. Our economy is currently STARVING for real savings. The market is doing everything it possibly can to return to equilibrium (asset prices are trying to go down, interest rates are trying to go up). Unfortunately, we have an economically illiterate government (both dems and repubs) determined to do everything possible to prevent that adjustment from taking place.

  2. Hoffer was among the first to recognize the central importance of self-esteem to psychological well-being. While most recent writers focus on the benefits of a positive self-esteem, Hoffer focused on the consequences of a lack of self-esteem. Concerned about the rise of totalitarian governments, especially those of Adolf Hitler and Joseph Stalin, he tried to find the roots of these “madhouses” in human psychology. He postulated that fanaticism and self-righteousness are rooted in self-hatred, self-doubt, and insecurity. As he describes in The True Believer, he believed a passionate obsession with the outside world or with the private lives of other people is merely a craven attempt to compensate for a lack of meaning in one’s own life.

  3. Funny you mention it Ken, but I think my blog needs to steer more to a happy medium of trading and economics (less economics). I guess events of the day have given some nice red meat that has been hard to ignore!

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