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Originally Posted by Hebdomad
Anyway, essentially the social problem comes down to whether you believe in trickle-down economics or not. I've a bias against trickle-down economics; but I'm far from sure of my position. Essentially, from what I can tell, the trickle-down economics argument has to centre on the argument that providing tax breaks engenders the creation of more businesses. More businesses mean more jobs. More jobs means more income.
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I think i've come into this argument elsewhere on this forum already. However, generally the concept of "trickle down economics" has been generally misrepresented, and the assumptions governing its operations are quite restrictive. However, it does (or should) actually occur, but is more of a "soft" rule.
ie, countries that facilitate trickle down economics do better than those who dont, but just because a country has the structures in place doesnt mean that it actually occurs.
So, A leads to B, but B doesnt necessarily lead to A.
The IMF, and to a lesser extent, the World Bank, doesnt seem to understand this. The IMF is generally shit.
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However, most people use their wealth as a positional good i.e. "shit, check out how much more money i have than you",
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Anyone who owns/runs a corporation and does this is an idiot. Cash on hand is incredibly expensive as it strongly depreciates,
and doesnt generate additional wealth under compounding interest. The only possible reason to do this is a hedge against future uncertainty (ie, against a downturn, in which case Gold is much better or even Treasury bills), or because they are compelled to do so due to regulation.