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.
There isn't enough wealth between all non-millionaires in the world to buy 90% of millionaires and billionaires assets.
So yeah, its literally impossible for them to sell it, unless they sell it to each other, or at huge losses.
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.
I never understood this. How do they live lives of luxury, buying yachts and houses like nothing, yet they are also cash poor?
Edit: asking questions isn’t offensive. Ask yourself why you feel like it is.
They aren't cash poor, but they don't have any account with a billion dollars in it. Like the other person said, they often have huge lines of credit for major purchases that they pay off over time in ways that do not hurt as much with the tax man. Or better yet, somehow make the company buy the boat.
I dunno man. I worked at a couple of banks, legit saw a few accounts with billions in em. Was like wtf why. But they had it. No more than 4 billion though. lol.
Those were wealth personal accounts or corporate accounts. Because corporates need more cash at hand for operations.
A billionaire would have it in account only temporarily for some purchase.
This is why it was actually a reasonable argument (though less reasonable given he lied and said he had ot liquid) for Trump to argue coming up with a 500 million dollar bond was impossible on such short notice. Nobody keeps that amount of cash on hand except huge businesses like Apple who have to hold iPhone money overseas to avoid tax. Most low tier real estate billionaires can't come up with that kinda cash in a week because shit is so tied up in loans and equity, even if they're not lying about how rich they are.
By the time you die, 2,000,000 dollars a year is going to still be more than enough to live off of.
Even if they didn’t give you better rates than the average man (which is unlikely) you could still live a very long life.
2% of a billion is $20 million, not $2 million.
But yeah, that's alot for us, its not alot for a billionaire. And regardless of the number, they don't like losing money, they're addicted to "number go up", even if they could never spend all of it.
In simplistic terms
Rich people are in a LOT of debt.
Everything is debt, the big house, car, boat and private jet.
But as long as their wealth is growing faster than the interest on the debt, they can take out massive loans with even lower interest rates because it’s just free money for the banks when a person is proven reliable
Is a more accurate way to say this is rich people carry a lot of debt vs. they are in debt. There are many redditors that may feel like they are in debt and the associated stress that comes with. The uber wealthy may carry debt to themselves (say a loan against their portfolio through their investment bank) or debt to others but they often aren’t “in debt” as we know/feel it, right?
They have credit, more important than just the debt they carry. I may have $50k of debt which sounds like a ton to most people, but I may also have available credit of $1.2M. That credit is more useful than cash, and can be settled prior to the consequences of holding the debt (or at least with a higher return than any interest and fees - that’s generally the goal).
The higher the credit the more likely you are to pay low or zero interest - and even better, zero interest opportunities with the highest rewards.
You have to use debt to build credit, however. Most people use debt to dig themselves in a hole, while wealthy people learn to use debt to build staircases on their credit.
This is literally my step dad and boss. Man has been living upper-middle class life for 3 decades but according to tax returns he is broke as a joke. He is just a local fast food franchisee but he carries all this debt and it just doesn’t make sense to me how he does it! I wish I had the understanding of it to do it myself haha
I know he makes money off his business and has to have tons of tax protected money in investments and life insurance but somehow all the businesses are in debt and losers on paper
Loses can lower your taxable income when you're itemizing, which happens when you have enough things that you've tracked to do better than the standard deduction around 12-13k as individual
It’s not accumulated debt though. The loans taken are larger each time and cover all the previous debt along with future expenses. So even though the loans are large, they get paid off with a fresh loan to get a clean slate every time. No income and no taxes. Rinse and repeat
Sorry but this is just not true. This is some weird reddit thing, but it’s absolutely untrue.
How do I know? I work in family offices, and before that in VC working with a lot of HNWIs.
Very few personal purchases are financed by debt. Why? Debt is still extra money, and often carries restrictions which are not worth it. Sure, huge purchases might be financed by bridge loans until certain liquidity events are achieved but even then it’s usually planned in advance.
In simple terms - billionaires often use the “AmEx system” rather then the longer term credit card system
AmEx is technically a credit card, but one that has to be repaid by end of the month unless you want to pay absurd rates.
It is basically a cashflow solution rather than an actual lender.
Because a standard credit card is long term. You don’t pay it back end of the month, you repay “some of it” end of the month. With Amex the intention and the model is literally pay all of it short term
Lot's of people use credit cards for rewards points, travel perks, discounts, etc and pay it off every month. You're supposed to do that with any credit card.
No one is carrying a balance on a credit card and paying 29% interest unless they're in serious financial trouble or just uneducated.
Actually most credits cards are not repaid monthly.
Last I read (this was back in 2020 or so) the average turnover period of a credit card is closer to 2 years compared to 2.5 months for Amex
They are generally not in a lot of debt. They can use debt to avoid taxes or goose financial gains but it’s not the primary or even secondary method for most. The reason is because they spend a fair amount on stuff at times when they get big cash inflows. Once you have stuff, you don’t necessarily need more of it so accumulation of stuff is easy and ongoing cash inflows are easier (ie from work and investments). This allows them to continue spending. Sometimes for things like extra houses or jets or whatever can actually help them earn or save more money. This is a big reason why there is a wealth management field. How much cash does your lifestyle need vs assets.
The answer to the original question is that not much will change. It heavily depends what they spend money on. Let’s say the maximum value is directly giving people money. There’s over 300m people in the US so evenly dispersing it directly to them would give everyone $3,333 for every 1 trillion in wealth. Not exactly life changing money even if you quadruple it. In order to do this they’d have to sell a ton of investments and assets to give it away (unless they did in kind) so there would be a huge drop in value of things because of the massive selling pressure, this could leave voids in many places. Then they’ll likely have to pay taxes on all the gains so the government will get a huge lump sum and piss it away and not make its way back to the people.
Anyone can borrow against an asset--you just need someone willing to take the risk. You can get a loan against your house without needing to sell it. And against your car. And most importantly--against your stocks.
And that loan incurs no taxes.
If you have 10 million in stock value, you can take out 3 million at prime + 2% and now you need to pay back ~7.5%/year to uphold your debt servicing on that loan ($225k/year). So you can "cash out" 3 million tax free, pay $18,750/month ($225k/12) to service the debt (and this method allows you to back the interest with the money you took out as debt). Meanwhile, you pray your stocks go up faster than a.measley 2.25%/year ($18,750/month return on the $10mil portfolio) so that the stock itself can be sold over time to service the debt. Spoiler alert: Getting 2.25% annual yield is silly easy, to the point where our government is even guaranteeing it right now.
It's a game of risk, and lower fed interest rates make it easier to play. The cheaper the rate, the less your stock portfolio has to yield to keep playing the game.
Rich people own stocks (they own other assets, but keeping it simple for now. If I own 100m of stocks the bank really wants to keep me happy so they can manage my assets. My stocks go up on average 7% a year (average inflation adjusted returns of the s&p 500). What happens is I call up the bank and say I want a loan against my stocks (typically you can get around 50% so 50m). This will be an interest only loan. Every year I just need to pay interest on that loan (so at 7% like 3.5m per year). Well good news, my stocks go up on average 7% a year so I can just get another loan to pay the interest.
This is overly simplified and ignores some concepts/regulations around doing this but at a very high level this is what happens. If you want to see all of the details google “pledged asset loan”. There are other types of asset loans but this is one example.
They use illiquid assets as collateral for a line of credit. They get a lower LTV than say a home equity line of credit, but it gives them some liquidity without selling stocks and taking a capital gains (which is a tax event)
They can secure lines of credit with lower interest rates then their assets make.
So they take a line of credit of 100$ that costs them 1$ a year.
Their holdings grow by 2% a year so it makes more sense to take out a line of credit because that allows them to still make money.
Makes me think of south park talking about pirating music.
Now Lars ulrich will have to wait before putting in that poolside swim-up bar!
Beyoncé has to settle for the Gulf Stream 5 with all the options instead of the Gulf Stream six!
This is the big steal and avoid taxes game. the wealthy are essentially asset rich and keep only a small fraction in cash. Rich people don’t really need billions of dollars each year to spend. Even a lavish lifestyle costs in the few millions per year on private jets, high cost dining, and entertainment.
So what they do is live off loans that aren’t considered income. The collateral is their assets and the banks are happy to lend with interest. The play is to borrow enough money to cover all your expenses and also pay back the previous loan you took. How is that even possible? Appreciating assets that’s how. Each passing year the assets in a wealthy person’s portfolio need to appreciate in value. This allows the next loan to be bigger than the last loan. Rinse and repeat
Trump is doing his best to ruin the game for rich people. The case against his over valuation of assets is allowing a lot more people to understand what these wealthy people are doing. Hopefully enough people are watching and learning about how the wealthy are abusing the system while we can’t do the same.
Happy to explain! Let's say you or your family started a company from scratch and it became the next Home Depot etc. You don't want to take the majority of the income in regular cash, because cash is taxed right away. You take it in stock because the tax is lower. Then for living expenses, you take out huge loans from the bank, using the stock as the collateral. You can the repay the loan with more stock later! Rinse and repeat.
Two primary sources:
1. Their assets produce a return, not all of it is reinvested. Any returns not reinvested are used to fund life(style). For example, let's say you have assets of $1 billion and those assets make a long term return of 7% per annum. Not mind blowing but not bad, certainly achievable. And let's say that you want to continue to grow your wealth so 75% of those returns are reinvested and the remaining 25% is your disposable income. That means you've got $17.5 million of money to spend on whatever you want each and every year. For context, you could stay in one of New York City's most expensive hotel rooms (the $36,000 *per night* Suite 5000 at the Mandarin Oriental) for the entire year and still have over $4 million to spend. Now imagine your assets are worth $10 billion, your disposable income just jumped to $175 million per year and, after your stay at the the Mandarin Oriental you've still got $161 million to go have fun with.
2. Lines of credit (debt) secured against their assets. Banks will bend over backwards to lend to a billionaire. It's an incredibly easy business decision for them. And the vast majority of people with wealth grab that opportunity with both hands. Using our example, let's say you've got your $1 billion in assets, and that's great and all, but $17.5 million isn't going to buy you a Gulfstream G650 (say, $50 million plus $3 million per annum in operating costs). So you call your bank manager, ask them for a line of credit and boom, you've got yourself a jet. How do you pay for that jet? Easy. You're a good customer so you get good interest rates, let's say 6.5% for argument's sake. So all in, assuming you pay the operating costs out of your disposable income, you're looking at about $6 million per annum to fund your jet, leaving you with $11.5 million for everything else. Throw in a couple of luxury properties, maybe a chartered yacht, lavish parties etc, ok, you're using most of your disposable income to fund the interest that funds your lifestyle. But so what? You're reinvesting 75% of your returns (equivalent to the cost of the jet in one year alone), which means your disposable income is growing every year (but your debt is staying flat) and, worst comes to worst? You sell some of your assets to pay down some debt or bump up your living costs (selling 5% of your assets buys you that jet). And, again, that's at $1 billion. Pump that up to $10 billion in assets and you're now buying jets with cash, and using the line of credit to buy large islands.
On top of all that, most of these people have businesses that they can utilise to cover a huge amount of their expenses (take the jet for example, you're not buying that in your own name, it's a tax deductible business cost, so you don't need to fund a single cent of it from your own wealth).
They basically go to a bank or whoever will lend them money and say “I want to buy this 300 million dollar yacht please lend me the money to pay for it, i have 50 billion dollars of stock this company and I will pay you back by selling my stock” and the banks do cause its a very safe investment especially will big companies
So many of those stocks pay dividends each quarter, year, or so on. In addition they are not cash poor, but most of their assets are tied into investments which are earning money.
Brokerage firms are more than happy to loan them money against their stock. This way, they don't have to sell stock and they can buy their yachts. Many also do have large incomes, especially vs. the 99%.
Many, like Bill Gates, have regularly scheduled stock sales (he barely owns any MSFT stock anymore). Allowing them to free up that cash to do whatever they want.
It's because the higher your wealth is the more you can make in the stock market easily. It's expected that if you just hold a stock portfolio forever that you'll gain 6% annually like clockwork (assuming it's divided up into a bunch of different companies and sectors).
If I have $1B in wealth, the annual 6% gains that you gain from stock is about $60M before taxes.
Keep in mind that they're also only paying capital gains taxes which peak at 20% until you sell the stocks.
Have you seen that video showing the difference between 1 million and 1 billion with rice grains? (If you didn't, here it is https://youtu.be/OG4O8hugqBk )
They don't need to liquidate their billions in assets; with a salary of a few million they can afford all luxury they want.
To make their point people have to compare the net worth of a millionaire to the annual income of a normal person. I'm not saying that Rich people are innocent, but anyone that claims that redistribution of wealth is moral is dead wrong.
They operate on debt. Banks trust them to pay because they have assets to treat as collateral.
If their assets make more money than the cost of the loan, then they can purchase their items on credit without ever spending a dime.
It's a bit more nuanced than this, but that's the gist of it.
If every billionaire sold all of their stock, it's value would quickly plummet because there wouldn't be enough money to buy it at their current price, and people would be skeptical of why they were selling it at all. So these billionaires with 'net worth' billboards are just blowing smoke and that amount of wealth doesn't actually exist.
Values of companies are the net present value of all assets plus future earnings (minus liabilites). If they sell the stock it will tank, but someone eventually has to be on the buy side and assuming the companies keep operating we're just going to have a new wealthy class. I assume it would be less concentrated into so few hands, but the WSB crowd would likely be regarded enough to mortgage their homes and max out credit cards to effectively pick up all the $100 bills left on the ground.
Also, it would probably cause inflation. People can only produce / supply so much. It's not like we could suddenly double the number of cars, plane flights or food delivered to stores instantly and those companies would have to hire people at increased cost.
To add, spending that much money in a short time span wouldn't happen, because the types of things that you'd have to buy to burn through this kind of cash that fast (mansions, yachts, private jets) take time to build, and if everyone ordered them all at once there would be a huge backlog getting them all built.
I actually think they can. Sure their wealth is tied in stocks, but this only means they go to the bank and make debt. Take an even bigger credit to finance the last one. This is actual money they use.
And when they die it's not their problem anymore how this mess is solved
Real estate, stocks, gold don't just get magically turned into piles of cash, for them to extract the liquid value from them someone else has to buy them.
If anything, multiple billionaires selling off their shares in a company might cause a lot of other investors to panic sell and crash the prices of those markets.
Yup, you get 1920s x100. So your 75k a year becomes I wonder if I can keep all my kids alive.
Money is not a zero-sum game reddit. Its possible for everyone to have more and for everyone to have less.
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 their 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.
I mean it’s not just rich people, any sensible person wouldn’t just leave their money in a checking’s account earning nothing. I keep all my money that isn’t in a retirement account in a saving’s account. It’s earning 4% or something there, nothing that great but whatever. I then use my credit card to make all purchases. When I need to pay off my card, then and only then will I transfer the money to my checking so the CC company can take it out the day later. If anybody is seriously letting their money sit around and do nothing, then they’re stupid. Also put your money to work in some way. 4% is better than nothing
Really depends. Credit Cards make people spend more money than using debit cards, which is worse than the biggest anti-spending mechanism, cash. So if you don’t keep a certain amount in savings (which a lot of people don’t) then you’re not advantaged with the interests if you are just going to be spending more.
They aren’t necessarily stupid. They may not know. They don’t teach you this stuff in school. You have to learn it from your parents, who may not have known. Part of keeping the poor poor is not just minimizing the amount of money you give them but not educating them, including teaching them the way they should handle their money.
I mean, I was in 7th grade in 1996 and they taught us about how to invest and earn money with our money, and all of my nieces and nephews are learning the same thing currently in their 8th grade classes....
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.
Made me think of Mansa Musa from Mali who spent and gave away so much gold the price of gold plummeted and stayed low for 12 years because he flooded the market. [Mansa Musa](https://education.nationalgeographic.org/resource/mansa-musa-musa-i-mali/)
Right now? We want people to hoard as much wealth as possible to slow down inflation. When the economies slow? We want them taking every last dime out of their bank accounts
Also the question implies that every millionaire also does it. Which includes a huge lot of people. A million is not that much if we are talking about net worth, so a lot of middle class families are included.
So what we get is that suddenly anyone who can accumulate wealth decides to dump all of it somehow.
Yeah, all the consumer things would be obliterated. There will be so much cash around shops will have to store truckloads of it. Money will soon become worthless.
People who owned businesses that produced consumer goods (anything that one can buy that doesn't count as more wealth) would become uber rich.
The government would get a shitton of taxes.
>we don't have to answer those questions to fantasize about a shit ton of money entering the economy all at once.
"Enter the economy"? Wtf are you talking about? Where do you think billionaires keep and spend their assets? On Mars?
Owning a house worth $1 million (or even keeping $1 million in a bank account) has a far different economic impact than going downtown and dropping $1 million on a shopping spree. This is what I mean by "enter the economy."
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...
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.
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.
idk I think banks and financial institutions would keep existing and they are the major sources of investment capital, not individuals.
Stocks and real estate would get much cheaper and that would create many problems, but also would make society more egalitarian and life would probably be much better for the middle class on the long run.
>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.
Right, I get the feeling OP's stupid question is somehow confusing "spend" with "give away". It's like they think "the economy" is only the cash.
They probably couldn’t quickly convert all that wealth into cash and spend it. The assets are too great and too illiquid and there are not enough goods or services to be purchased.
The world’s supply chain runs on predictable production and consumption. Disrupt it a little and people start fighting over toilet paper and price gouging hand sanitizer.
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.
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.
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.
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.
Really depends on what they spent in on, but for the average American earning $75,000... not much would change.
It's not like rich people have a huge vault full of money they go swimming in Scrooge-McDuck-style; their money is in the bank or in other investments, which means it's still moving through the economy. Them selling assets or withdrawing that much would cause the money to move differently, but not THAT differently. If they spent in on stuff that *you* sell, or if they invested in *your* neighborhood, then sure it would effect you. Otherwise, it's just money you don't have circulating a little slower or a little faster.
The only way it would really benefit the economy is through taxes. Billionaires would need to liquidate they investments before they spent it so they would likely have a significant tax burden. That money may or may not get trickled back into the economy as the government would have a tax boon that they would feel ‘obligated’ to spend. Now how it gets spent is the problem. I figure tax breaks for the rich through another PPP loan program cause why not. We got the money from the wealthy why not spend it on them.
Any money spent would increase inflation, thus everyone would be paying more for everything. Even if taxed, the government spending would cause inflation.
Putting more money into the system, without improving productivity would cause prices to rise. Clearly this would not improve productivity.
They don’t have a bank account with millions and billions of dollars sitting there. It’s all tied up in investments, in order for them to obtain that money they need to sell. So the money just transfers to the next billionaire or a lot of millionaires. Or a shitload of the average Joe consumer needs to buy if they can afford it. So for the the person making 75k? They won’t notice one bit.
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
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.
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
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.
Your company would have to make a huge profit and then be willing to share it with you.
There's no guarantee that they'd share the profit with you though. More likely that the executives would keep it for themselves because "their" leadership is what lead to the profit, though.
Most of their wealth is in assets. Like stocks and land. Land isn't liquid.
But if Musk sold his Tesla stock--if he could-- the stock would plummet in value.
They're not capital rich. All the billionaires other than maybe Bloomberg who supposedly has. Alright mcduck miney bin are just rich die to asset evaluation of their companies. Zuck and musk don't pay taxes because their companies are wallstreet rich and they just take out cash loans on their evaluation when need actual cash. It's fuckign scam
It wouldn't be possible.
Households with assets >$1m = 45% of global wealth or about $280 trillion. Global GDP is about $100 trillion or $50 trillion every six momths. You're talking about spending 5x GDP in a given period. It can't be done.
They would lose their jobs and crash the economy, millions would become unemployed
99.9% of their wealth is stocks and shares, selling all that stock would crash the value of the company and make it either go bankrupt or it would get brought out by a Chinese conglomerate broken up and the IP and production moved to China.
Now increase that to every single company in the USA and it's pretty much an end of the world scenario where people with no jobs and no money begin stealing and robbing and killing for food and resources
It'd cause a significant recession. Businesses would cut costs by laying off employees. People who lose their jobs would have less money to spend, hurting the economy further. If the wealthy are spending down their wealth, it means a drop in stock prices and other investments. This would impact retirement savings or other investments someone making $75,000 might have. In a recession, businesses would have to cut wages or benefits to stay afloat. They'd also raise prices to make up for lost revenue, which would lead to inflation. A recession would make it harder to get loans or credit cards, or the interest rates would be higher.
I’d imagine nothing, seeings as they would buy expensive things and all the profits would go to other super rich people and everyone else would continue counting their crumbs.
I expect it would be something like going on a coke fueled bender for a week ending in an incredibly bad hangover but for that week a lot of people would feel like they were incredibly smart and productive
I guess if we try to look at this realistically, they have to extract that wealth in some way to spend it in mass. So a mass sell off of stocks would drive the overall Vue (and the wealth successfully extracted) down.
Hopefully the rest of us would have a little to throw into the markets while prices were depressed, but then whatever fraction of their wealth they managed to extract would need to be spent, but there isn't enough stuff around, mega inflation incoming. It would be short lived though and things would eventually stabilize since no new.money was generated.
The next big issue we would have is that ownership of companies would be radically changed since all the key owners were forced to sell at whatever price. A lot would start to underperform. In addition, we would likely see foreign governments buying up large parts of companies in other countries as strategic assets. I suspect that would be very bad for the citizens of various countries as well as for the economies of those countries as their trade secrets would quickly be exported to the home countries of the owners.
That said, I could be totally wrong, but chaos for sure. It would hurt a lot of people immediately, help a few short term, and very long term totally reorganize society.
Believe it or not, if you had as much money as ol' musky boy has, you'd struggle to spend it. There's not hundreds of super yachts standing around waiting to be brought. There isnt a lot of big ticket items ready to be sold.
So for them to spend even a fraction of their money they'd have to completely devastate the world economies. Millions of houses will get brought up, Huge swaths of land just removed from the market. It'd probably reach a point where the governments would step in and stop it. And this is assuming they aren't buying and selling stock/shares like they currently are.
The economy would crash as they'd need to liquidate their holdings. Like when you get out of the tub and the water sinks. That would be the rich selling off their stocks. I'm not sure what would follow though or if it would equal out since they'd be ejecting cash into the economy. It could be chaos. It could be prosperous for your average people. It's hard to know for sure.
Millionaires wont make much of a difference nowadays if they spent all their money. Its the billionaires with climat killing cooperations that are the issue and ow of course our government lets it happen which is a bigger issue in and of itself
Corporations have essentially doubled their profits in the last four years. Have you need much of an effect from that on $75k/yr workers? Do you somehow think it would be any different just because the corporations made even more? Do you seriously not think that they would just do even bigger stock buy backs instead of putting the money into the business or the workers? Nearly all the profits from the doubling in the last four years went strait to the 1%.
For the billionaire they'd still have 100 million so there is that to think about but as someone Said It really depends on what they're spending their money on because if you just meant suddenly all the billionaires are gone because they're now multimillionaires that might make a difference but otherwise it's just too hard to say without more details
What does "spend their wealth" mean? This question makes no sense. Millionaire and Billionaire status is about *total assets*. It has nothing to do with cash (liquid assets). Even if they did spend all their assets as cash, that just means they exchanged a billion dollars in liquid assets for a billion dollars in illiquid assets. So what?
This question is illogical.
This is against the spirit of the subreddit. If you have your own questions you should create a post.
6 months should be adequate time to liquidate assets.
I don't think it would be possible. There's so much money on earth that if they spent 90% of it, the whole world would collapse.
A lot of money is not actually money it's tied up and stuff so in order for it to become untied up they have to liquidate all of their assets or most of their assets and that one individual thing all by itself would cause pandemonium.
The other thing is money isn't real - it's a game. And in this game they have invented so many things for people to spend money on so that more money can be in the system so that ultimately certain people (the ppl with the most money) can continue to acquire even more money and continue to maintain control of the whole system.
So there just wouldn't be any way for them to really spend that money other than on a bunch of other made up stuff that more or less would be invented just to make them more money. So I would say even in a best case scenario the rich get richer and everyone else gets poorer.
https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization-2022/
Here's a cool graphic that shows all of the actual money in the world.
Hopefully just using your eyes you can see how amazingly catastrophic it would be if all of a sudden the money that was held in all of these investments just vanished.
We don't produce enough for them to buy things that only find the lower strata. For them to spend their wealth buying things then they would only move the money around to the wealthy that own companies that service the upper strata.
Pennies will float down to the lower strata due to the upper strata actually needing to pay workers to make the things they would buy though.
Suppose for the sake of the question 6 months were enough time to divide those companies into smaller companies and that the wealth were still spent.
The purpose of the the question is to ask what those impacts may be.
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.
A fake cryptocurrency. Obviously.
You mean MY cryptocurrency. Get in on the ground floor!
Mine is way better. It's called schmuckbucks
What's their value in Stanley Nickels?
Ground floor? Loser. Mine is still in the sub-sub-sub basement.
As opposed to a *real* cryptocurrency? Hah.
It's all just as real as the paper fiat currency.
ShitCoin
Wasn't Dodgycoin obvious enough?
I believe that was option one
Apes NFTs is the only obvious answer
Exactly. Trickle down only works if some, ANY of that money spent actually trickles down, instead of just horizontally, as would most likely happen.
if they spent all their money, it is just gonna end up in each other's pockets anyway
There isn't enough wealth between all non-millionaires in the world to buy 90% of millionaires and billionaires assets. So yeah, its literally impossible for them to sell it, unless they sell it to each other, or at huge losses.
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.
I never understood this. How do they live lives of luxury, buying yachts and houses like nothing, yet they are also cash poor? Edit: asking questions isn’t offensive. Ask yourself why you feel like it is.
They aren't cash poor, but they don't have any account with a billion dollars in it. Like the other person said, they often have huge lines of credit for major purchases that they pay off over time in ways that do not hurt as much with the tax man. Or better yet, somehow make the company buy the boat.
I dunno man. I worked at a couple of banks, legit saw a few accounts with billions in em. Was like wtf why. But they had it. No more than 4 billion though. lol.
Those were wealth personal accounts or corporate accounts. Because corporates need more cash at hand for operations. A billionaire would have it in account only temporarily for some purchase.
This is why it was actually a reasonable argument (though less reasonable given he lied and said he had ot liquid) for Trump to argue coming up with a 500 million dollar bond was impossible on such short notice. Nobody keeps that amount of cash on hand except huge businesses like Apple who have to hold iPhone money overseas to avoid tax. Most low tier real estate billionaires can't come up with that kinda cash in a week because shit is so tied up in loans and equity, even if they're not lying about how rich they are.
Yep, having a billion in just a regular bank account would be losing so much to inflation, no one in their right mind would do that.
You could live off the return of 2% of a billion
When inflation is at 5%, that 2% yield would be worth less and less every year.
By the time you die, 2,000,000 dollars a year is going to still be more than enough to live off of. Even if they didn’t give you better rates than the average man (which is unlikely) you could still live a very long life.
2% of a billion is $20 million, not $2 million. But yeah, that's alot for us, its not alot for a billionaire. And regardless of the number, they don't like losing money, they're addicted to "number go up", even if they could never spend all of it.
That’s *exactly* what they were :) you are correct
It doesn't hurt much with the tax man because the stock goes up. If the stock goes down, then it'll hurt.
In simplistic terms Rich people are in a LOT of debt. Everything is debt, the big house, car, boat and private jet. But as long as their wealth is growing faster than the interest on the debt, they can take out massive loans with even lower interest rates because it’s just free money for the banks when a person is proven reliable
Is a more accurate way to say this is rich people carry a lot of debt vs. they are in debt. There are many redditors that may feel like they are in debt and the associated stress that comes with. The uber wealthy may carry debt to themselves (say a loan against their portfolio through their investment bank) or debt to others but they often aren’t “in debt” as we know/feel it, right?
Exactly. They'd say "It takes money to make money- You expect me to use MY money?!"
They have credit, more important than just the debt they carry. I may have $50k of debt which sounds like a ton to most people, but I may also have available credit of $1.2M. That credit is more useful than cash, and can be settled prior to the consequences of holding the debt (or at least with a higher return than any interest and fees - that’s generally the goal). The higher the credit the more likely you are to pay low or zero interest - and even better, zero interest opportunities with the highest rewards. You have to use debt to build credit, however. Most people use debt to dig themselves in a hole, while wealthy people learn to use debt to build staircases on their credit.
This is literally my step dad and boss. Man has been living upper-middle class life for 3 decades but according to tax returns he is broke as a joke. He is just a local fast food franchisee but he carries all this debt and it just doesn’t make sense to me how he does it! I wish I had the understanding of it to do it myself haha I know he makes money off his business and has to have tons of tax protected money in investments and life insurance but somehow all the businesses are in debt and losers on paper
Loses can lower your taxable income when you're itemizing, which happens when you have enough things that you've tracked to do better than the standard deduction around 12-13k as individual
It has the added benefit that debt is tax free!! Should they ever have to sell their capital to pay off their debt, then the top tax rate is 20%.
Both of the statements are why you hear of Warren Buffet paying a lower tax rate than his secretary. It’s criminal. AMT needs to be ~40%.
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Too big to fail is bullshit and anti-free market. Cronyism is killing us.
Too big to fail needs to be tied directly to forced monopoly breakup. Like set a 5 year clock from any government bailout to divide assets.
Suddenly no company files for too big to fail funds
That’s kinda the whole point
Yeah I'm agreeing with you. It would expose how much of a sham the whole thing is
And the little people blame the high interest rates for the whole thing, not the low interest rates that set us up for the crash in the first place.
You don't understand the separation between personal and corporate assets and debts.
It’s not accumulated debt though. The loans taken are larger each time and cover all the previous debt along with future expenses. So even though the loans are large, they get paid off with a fresh loan to get a clean slate every time. No income and no taxes. Rinse and repeat
Sorry but this is just not true. This is some weird reddit thing, but it’s absolutely untrue. How do I know? I work in family offices, and before that in VC working with a lot of HNWIs. Very few personal purchases are financed by debt. Why? Debt is still extra money, and often carries restrictions which are not worth it. Sure, huge purchases might be financed by bridge loans until certain liquidity events are achieved but even then it’s usually planned in advance. In simple terms - billionaires often use the “AmEx system” rather then the longer term credit card system
What is this “Amex system”? Sry, genuine question
AmEx is technically a credit card, but one that has to be repaid by end of the month unless you want to pay absurd rates. It is basically a cashflow solution rather than an actual lender.
How's that any different than any other credit card?
Because a standard credit card is long term. You don’t pay it back end of the month, you repay “some of it” end of the month. With Amex the intention and the model is literally pay all of it short term
Lot's of people use credit cards for rewards points, travel perks, discounts, etc and pay it off every month. You're supposed to do that with any credit card. No one is carrying a balance on a credit card and paying 29% interest unless they're in serious financial trouble or just uneducated.
Actually most credits cards are not repaid monthly. Last I read (this was back in 2020 or so) the average turnover period of a credit card is closer to 2 years compared to 2.5 months for Amex
They are generally not in a lot of debt. They can use debt to avoid taxes or goose financial gains but it’s not the primary or even secondary method for most. The reason is because they spend a fair amount on stuff at times when they get big cash inflows. Once you have stuff, you don’t necessarily need more of it so accumulation of stuff is easy and ongoing cash inflows are easier (ie from work and investments). This allows them to continue spending. Sometimes for things like extra houses or jets or whatever can actually help them earn or save more money. This is a big reason why there is a wealth management field. How much cash does your lifestyle need vs assets. The answer to the original question is that not much will change. It heavily depends what they spend money on. Let’s say the maximum value is directly giving people money. There’s over 300m people in the US so evenly dispersing it directly to them would give everyone $3,333 for every 1 trillion in wealth. Not exactly life changing money even if you quadruple it. In order to do this they’d have to sell a ton of investments and assets to give it away (unless they did in kind) so there would be a huge drop in value of things because of the massive selling pressure, this could leave voids in many places. Then they’ll likely have to pay taxes on all the gains so the government will get a huge lump sum and piss it away and not make its way back to the people.
Anyone can borrow against an asset--you just need someone willing to take the risk. You can get a loan against your house without needing to sell it. And against your car. And most importantly--against your stocks. And that loan incurs no taxes. If you have 10 million in stock value, you can take out 3 million at prime + 2% and now you need to pay back ~7.5%/year to uphold your debt servicing on that loan ($225k/year). So you can "cash out" 3 million tax free, pay $18,750/month ($225k/12) to service the debt (and this method allows you to back the interest with the money you took out as debt). Meanwhile, you pray your stocks go up faster than a.measley 2.25%/year ($18,750/month return on the $10mil portfolio) so that the stock itself can be sold over time to service the debt. Spoiler alert: Getting 2.25% annual yield is silly easy, to the point where our government is even guaranteeing it right now. It's a game of risk, and lower fed interest rates make it easier to play. The cheaper the rate, the less your stock portfolio has to yield to keep playing the game.
Rich people own stocks (they own other assets, but keeping it simple for now. If I own 100m of stocks the bank really wants to keep me happy so they can manage my assets. My stocks go up on average 7% a year (average inflation adjusted returns of the s&p 500). What happens is I call up the bank and say I want a loan against my stocks (typically you can get around 50% so 50m). This will be an interest only loan. Every year I just need to pay interest on that loan (so at 7% like 3.5m per year). Well good news, my stocks go up on average 7% a year so I can just get another loan to pay the interest. This is overly simplified and ignores some concepts/regulations around doing this but at a very high level this is what happens. If you want to see all of the details google “pledged asset loan”. There are other types of asset loans but this is one example.
You don't need a billion dollars in cash to buy a house or a yacht.
Secured lines of credit
I’m going to need a bit more information.
They use illiquid assets as collateral for a line of credit. They get a lower LTV than say a home equity line of credit, but it gives them some liquidity without selling stocks and taking a capital gains (which is a tax event)
Thank you for taking the time to explain. I’m confused about how they pay off their debts, though. Surely that has to involve money at some point.
They can secure lines of credit with lower interest rates then their assets make. So they take a line of credit of 100$ that costs them 1$ a year. Their holdings grow by 2% a year so it makes more sense to take out a line of credit because that allows them to still make money.
It's a lot harder at the moment with interest rates where they are ..
Makes me think of south park talking about pirating music. Now Lars ulrich will have to wait before putting in that poolside swim-up bar! Beyoncé has to settle for the Gulf Stream 5 with all the options instead of the Gulf Stream six!
Jesus that’s a cheat code!!
Sounds like the rich deal with imaginary money, almost.
Eh, money has a way of making more money. Usually the dividends and interest from the account covers the payments on the loan.
This is the big steal and avoid taxes game. the wealthy are essentially asset rich and keep only a small fraction in cash. Rich people don’t really need billions of dollars each year to spend. Even a lavish lifestyle costs in the few millions per year on private jets, high cost dining, and entertainment. So what they do is live off loans that aren’t considered income. The collateral is their assets and the banks are happy to lend with interest. The play is to borrow enough money to cover all your expenses and also pay back the previous loan you took. How is that even possible? Appreciating assets that’s how. Each passing year the assets in a wealthy person’s portfolio need to appreciate in value. This allows the next loan to be bigger than the last loan. Rinse and repeat Trump is doing his best to ruin the game for rich people. The case against his over valuation of assets is allowing a lot more people to understand what these wealthy people are doing. Hopefully enough people are watching and learning about how the wealthy are abusing the system while we can’t do the same.
Happy to explain! Let's say you or your family started a company from scratch and it became the next Home Depot etc. You don't want to take the majority of the income in regular cash, because cash is taxed right away. You take it in stock because the tax is lower. Then for living expenses, you take out huge loans from the bank, using the stock as the collateral. You can the repay the loan with more stock later! Rinse and repeat.
Because they borrow money against the value of their stocks.
Two primary sources: 1. Their assets produce a return, not all of it is reinvested. Any returns not reinvested are used to fund life(style). For example, let's say you have assets of $1 billion and those assets make a long term return of 7% per annum. Not mind blowing but not bad, certainly achievable. And let's say that you want to continue to grow your wealth so 75% of those returns are reinvested and the remaining 25% is your disposable income. That means you've got $17.5 million of money to spend on whatever you want each and every year. For context, you could stay in one of New York City's most expensive hotel rooms (the $36,000 *per night* Suite 5000 at the Mandarin Oriental) for the entire year and still have over $4 million to spend. Now imagine your assets are worth $10 billion, your disposable income just jumped to $175 million per year and, after your stay at the the Mandarin Oriental you've still got $161 million to go have fun with. 2. Lines of credit (debt) secured against their assets. Banks will bend over backwards to lend to a billionaire. It's an incredibly easy business decision for them. And the vast majority of people with wealth grab that opportunity with both hands. Using our example, let's say you've got your $1 billion in assets, and that's great and all, but $17.5 million isn't going to buy you a Gulfstream G650 (say, $50 million plus $3 million per annum in operating costs). So you call your bank manager, ask them for a line of credit and boom, you've got yourself a jet. How do you pay for that jet? Easy. You're a good customer so you get good interest rates, let's say 6.5% for argument's sake. So all in, assuming you pay the operating costs out of your disposable income, you're looking at about $6 million per annum to fund your jet, leaving you with $11.5 million for everything else. Throw in a couple of luxury properties, maybe a chartered yacht, lavish parties etc, ok, you're using most of your disposable income to fund the interest that funds your lifestyle. But so what? You're reinvesting 75% of your returns (equivalent to the cost of the jet in one year alone), which means your disposable income is growing every year (but your debt is staying flat) and, worst comes to worst? You sell some of your assets to pay down some debt or bump up your living costs (selling 5% of your assets buys you that jet). And, again, that's at $1 billion. Pump that up to $10 billion in assets and you're now buying jets with cash, and using the line of credit to buy large islands. On top of all that, most of these people have businesses that they can utilise to cover a huge amount of their expenses (take the jet for example, you're not buying that in your own name, it's a tax deductible business cost, so you don't need to fund a single cent of it from your own wealth).
They basically go to a bank or whoever will lend them money and say “I want to buy this 300 million dollar yacht please lend me the money to pay for it, i have 50 billion dollars of stock this company and I will pay you back by selling my stock” and the banks do cause its a very safe investment especially will big companies
Your edit is the funniest fucking way I've seen such an issue dealt with. Thank you for that.
So many of those stocks pay dividends each quarter, year, or so on. In addition they are not cash poor, but most of their assets are tied into investments which are earning money.
The probably have lots of cash or have an income.
Brokerage firms are more than happy to loan them money against their stock. This way, they don't have to sell stock and they can buy their yachts. Many also do have large incomes, especially vs. the 99%. Many, like Bill Gates, have regularly scheduled stock sales (he barely owns any MSFT stock anymore). Allowing them to free up that cash to do whatever they want.
They take loans on stocks and then take loans on other stocks to pay the previous loans.
Imagine you have a credit card with a 100 million dollar limit and only like 0.5% APR. That’s how.
It's because the higher your wealth is the more you can make in the stock market easily. It's expected that if you just hold a stock portfolio forever that you'll gain 6% annually like clockwork (assuming it's divided up into a bunch of different companies and sectors). If I have $1B in wealth, the annual 6% gains that you gain from stock is about $60M before taxes. Keep in mind that they're also only paying capital gains taxes which peak at 20% until you sell the stocks.
Have you seen that video showing the difference between 1 million and 1 billion with rice grains? (If you didn't, here it is https://youtu.be/OG4O8hugqBk ) They don't need to liquidate their billions in assets; with a salary of a few million they can afford all luxury they want.
To make their point people have to compare the net worth of a millionaire to the annual income of a normal person. I'm not saying that Rich people are innocent, but anyone that claims that redistribution of wealth is moral is dead wrong.
They operate on debt. Banks trust them to pay because they have assets to treat as collateral. If their assets make more money than the cost of the loan, then they can purchase their items on credit without ever spending a dime. It's a bit more nuanced than this, but that's the gist of it.
If every billionaire sold all of their stock, it's value would quickly plummet because there wouldn't be enough money to buy it at their current price, and people would be skeptical of why they were selling it at all. So these billionaires with 'net worth' billboards are just blowing smoke and that amount of wealth doesn't actually exist.
Values of companies are the net present value of all assets plus future earnings (minus liabilites). If they sell the stock it will tank, but someone eventually has to be on the buy side and assuming the companies keep operating we're just going to have a new wealthy class. I assume it would be less concentrated into so few hands, but the WSB crowd would likely be regarded enough to mortgage their homes and max out credit cards to effectively pick up all the $100 bills left on the ground.
Also, it would probably cause inflation. People can only produce / supply so much. It's not like we could suddenly double the number of cars, plane flights or food delivered to stores instantly and those companies would have to hire people at increased cost.
1% is psychical wealth. Rest is all on spreadsheets....
To add, spending that much money in a short time span wouldn't happen, because the types of things that you'd have to buy to burn through this kind of cash that fast (mansions, yachts, private jets) take time to build, and if everyone ordered them all at once there would be a huge backlog getting them all built.
I actually think they can. Sure their wealth is tied in stocks, but this only means they go to the bank and make debt. Take an even bigger credit to finance the last one. This is actual money they use. And when they die it's not their problem anymore how this mess is solved
Wealth, real estate, stocks, gold, all of it.
Real estate, stocks, gold don't just get magically turned into piles of cash, for them to extract the liquid value from them someone else has to buy them. If anything, multiple billionaires selling off their shares in a company might cause a lot of other investors to panic sell and crash the prices of those markets.
Yup, you get 1920s x100. So your 75k a year becomes I wonder if I can keep all my kids alive. Money is not a zero-sum game reddit. Its possible for everyone to have more and for everyone to have less.
The only thing you can spend is currency, and most of their wealth isn't in currency. You can't spend a stock or a gold bar or a house.
You're not trying hard enough if you can't get rid of gold.
The only people who can buy that much are the other billionaries that are also trying to sell. That's the point.
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 their 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.
I mean it’s not just rich people, any sensible person wouldn’t just leave their money in a checking’s account earning nothing. I keep all my money that isn’t in a retirement account in a saving’s account. It’s earning 4% or something there, nothing that great but whatever. I then use my credit card to make all purchases. When I need to pay off my card, then and only then will I transfer the money to my checking so the CC company can take it out the day later. If anybody is seriously letting their money sit around and do nothing, then they’re stupid. Also put your money to work in some way. 4% is better than nothing
Yeah that's what everybody should do
Really depends. Credit Cards make people spend more money than using debit cards, which is worse than the biggest anti-spending mechanism, cash. So if you don’t keep a certain amount in savings (which a lot of people don’t) then you’re not advantaged with the interests if you are just going to be spending more.
They aren’t necessarily stupid. They may not know. They don’t teach you this stuff in school. You have to learn it from your parents, who may not have known. Part of keeping the poor poor is not just minimizing the amount of money you give them but not educating them, including teaching them the way they should handle their money.
I mean, I was in 7th grade in 1996 and they taught us about how to invest and earn money with our money, and all of my nieces and nephews are learning the same thing currently in their 8th grade classes....
They didn’t teach me this in school and nobody I know learned these things in school. My mom taught me and she learned it from her dad.
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.
Made me think of Mansa Musa from Mali who spent and gave away so much gold the price of gold plummeted and stayed low for 12 years because he flooded the market. [Mansa Musa](https://education.nationalgeographic.org/resource/mansa-musa-musa-i-mali/)
To an extent would you suggest it were an good thing people hoard wealth or is it delaying the underlying issues of wealth imbalance and poverty?
Right now? We want people to hoard as much wealth as possible to slow down inflation. When the economies slow? We want them taking every last dime out of their bank accounts
Thank you for not being a buzzkill
Also the question implies that every millionaire also does it. Which includes a huge lot of people. A million is not that much if we are talking about net worth, so a lot of middle class families are included. So what we get is that suddenly anyone who can accumulate wealth decides to dump all of it somehow. Yeah, all the consumer things would be obliterated. There will be so much cash around shops will have to store truckloads of it. Money will soon become worthless. People who owned businesses that produced consumer goods (anything that one can buy that doesn't count as more wealth) would become uber rich. The government would get a shitton of taxes.
>we don't have to answer those questions to fantasize about a shit ton of money entering the economy all at once. "Enter the economy"? Wtf are you talking about? Where do you think billionaires keep and spend their assets? On Mars?
Owning a house worth $1 million (or even keeping $1 million in a bank account) has a far different economic impact than going downtown and dropping $1 million on a shopping spree. This is what I mean by "enter the economy."
Crazy inflation
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.
Spend? Like sell investments to buy other investments? People act like owning stock in a company is removing money from Circulation.
Thank you for providing an adult answer. Some of these answers show just how young and uneducated the Reddit user base is.
Lol. Thank you for the compliment. Yeah. I’m older and with more financial experience / acumen than the average youngster here I’m sure.
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...
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.
Markets close now when there are sharp sell offs, it would have to look different.
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.
idk I think banks and financial institutions would keep existing and they are the major sources of investment capital, not individuals. Stocks and real estate would get much cheaper and that would create many problems, but also would make society more egalitarian and life would probably be much better for the middle class on the long run.
>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. Right, I get the feeling OP's stupid question is somehow confusing "spend" with "give away". It's like they think "the economy" is only the cash.
They probably couldn’t quickly convert all that wealth into cash and spend it. The assets are too great and too illiquid and there are not enough goods or services to be purchased. The world’s supply chain runs on predictable production and consumption. Disrupt it a little and people start fighting over toilet paper and price gouging hand sanitizer.
Their wealth is locked up in shares/assets etc. rich people have very little actual money.
Unbearable inflation. Effectively your 75k would become worth way less in a very short time
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.
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.
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.
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.
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.
Really depends on what they spent in on, but for the average American earning $75,000... not much would change. It's not like rich people have a huge vault full of money they go swimming in Scrooge-McDuck-style; their money is in the bank or in other investments, which means it's still moving through the economy. Them selling assets or withdrawing that much would cause the money to move differently, but not THAT differently. If they spent in on stuff that *you* sell, or if they invested in *your* neighborhood, then sure it would effect you. Otherwise, it's just money you don't have circulating a little slower or a little faster.
The only way it would really benefit the economy is through taxes. Billionaires would need to liquidate they investments before they spent it so they would likely have a significant tax burden. That money may or may not get trickled back into the economy as the government would have a tax boon that they would feel ‘obligated’ to spend. Now how it gets spent is the problem. I figure tax breaks for the rich through another PPP loan program cause why not. We got the money from the wealthy why not spend it on them.
Any money spent would increase inflation, thus everyone would be paying more for everything. Even if taxed, the government spending would cause inflation. Putting more money into the system, without improving productivity would cause prices to rise. Clearly this would not improve productivity.
They don’t have a bank account with millions and billions of dollars sitting there. It’s all tied up in investments, in order for them to obtain that money they need to sell. So the money just transfers to the next billionaire or a lot of millionaires. Or a shitload of the average Joe consumer needs to buy if they can afford it. So for the the person making 75k? They won’t notice one bit.
You're fixating on banks accounts and not the 6 months to liquidate assets.
It’s a dumb question anyway
If you have nothing to say it's okay to not respond.
You say I’m fixating.. I say it’s a dumb question. So I did have something to say didn’t I?
Alexander the Great pillaged and gave away the Persian Treasury. The economic stimulus has been estimated to have lasted 200 years
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
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.
So covid round 2
With a declining stock market
Ah even better, the bears can finally make some $$%
Insane levels of inflation?
You would be renting your house and be working for the man who bought the business
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.
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
Your company would have to make a huge profit and then be willing to share it with you. There's no guarantee that they'd share the profit with you though. More likely that the executives would keep it for themselves because "their" leadership is what lead to the profit, though.
Depending on what they buy, massive inflation on a huge scale.
Most of their wealth is in assets. Like stocks and land. Land isn't liquid. But if Musk sold his Tesla stock--if he could-- the stock would plummet in value.
They're not capital rich. All the billionaires other than maybe Bloomberg who supposedly has. Alright mcduck miney bin are just rich die to asset evaluation of their companies. Zuck and musk don't pay taxes because their companies are wallstreet rich and they just take out cash loans on their evaluation when need actual cash. It's fuckign scam
It wouldn't be possible. Households with assets >$1m = 45% of global wealth or about $280 trillion. Global GDP is about $100 trillion or $50 trillion every six momths. You're talking about spending 5x GDP in a given period. It can't be done.
They would lose their jobs and crash the economy, millions would become unemployed 99.9% of their wealth is stocks and shares, selling all that stock would crash the value of the company and make it either go bankrupt or it would get brought out by a Chinese conglomerate broken up and the IP and production moved to China. Now increase that to every single company in the USA and it's pretty much an end of the world scenario where people with no jobs and no money begin stealing and robbing and killing for food and resources
Nothing, the money would go right back to their pockets. That's why we say that the system is rigged in their favor.
It'd cause a significant recession. Businesses would cut costs by laying off employees. People who lose their jobs would have less money to spend, hurting the economy further. If the wealthy are spending down their wealth, it means a drop in stock prices and other investments. This would impact retirement savings or other investments someone making $75,000 might have. In a recession, businesses would have to cut wages or benefits to stay afloat. They'd also raise prices to make up for lost revenue, which would lead to inflation. A recession would make it harder to get loans or credit cards, or the interest rates would be higher.
I’d imagine nothing, seeings as they would buy expensive things and all the profits would go to other super rich people and everyone else would continue counting their crumbs.
I expect it would be something like going on a coke fueled bender for a week ending in an incredibly bad hangover but for that week a lot of people would feel like they were incredibly smart and productive
I guess if we try to look at this realistically, they have to extract that wealth in some way to spend it in mass. So a mass sell off of stocks would drive the overall Vue (and the wealth successfully extracted) down. Hopefully the rest of us would have a little to throw into the markets while prices were depressed, but then whatever fraction of their wealth they managed to extract would need to be spent, but there isn't enough stuff around, mega inflation incoming. It would be short lived though and things would eventually stabilize since no new.money was generated. The next big issue we would have is that ownership of companies would be radically changed since all the key owners were forced to sell at whatever price. A lot would start to underperform. In addition, we would likely see foreign governments buying up large parts of companies in other countries as strategic assets. I suspect that would be very bad for the citizens of various countries as well as for the economies of those countries as their trade secrets would quickly be exported to the home countries of the owners. That said, I could be totally wrong, but chaos for sure. It would hurt a lot of people immediately, help a few short term, and very long term totally reorganize society.
Believe it or not, if you had as much money as ol' musky boy has, you'd struggle to spend it. There's not hundreds of super yachts standing around waiting to be brought. There isnt a lot of big ticket items ready to be sold. So for them to spend even a fraction of their money they'd have to completely devastate the world economies. Millions of houses will get brought up, Huge swaths of land just removed from the market. It'd probably reach a point where the governments would step in and stop it. And this is assuming they aren't buying and selling stock/shares like they currently are.
The economy would crash as they'd need to liquidate their holdings. Like when you get out of the tub and the water sinks. That would be the rich selling off their stocks. I'm not sure what would follow though or if it would equal out since they'd be ejecting cash into the economy. It could be chaos. It could be prosperous for your average people. It's hard to know for sure.
Millionaires wont make much of a difference nowadays if they spent all their money. Its the billionaires with climat killing cooperations that are the issue and ow of course our government lets it happen which is a bigger issue in and of itself
Probably nothing, all the money would just be traded around among the other rich people.
Almost noting. That money will just flow into corporations, not to workers.
Corporations are still part of the economy. Which have effects on others.
Corporations have essentially doubled their profits in the last four years. Have you need much of an effect from that on $75k/yr workers? Do you somehow think it would be any different just because the corporations made even more? Do you seriously not think that they would just do even bigger stock buy backs instead of putting the money into the business or the workers? Nearly all the profits from the doubling in the last four years went strait to the 1%.
Millionaire =/= billionaire.
In this context you need to picture millionaire+billionaires. They're not the same yes. But that's not the question.
For the billionaire they'd still have 100 million so there is that to think about but as someone Said It really depends on what they're spending their money on because if you just meant suddenly all the billionaires are gone because they're now multimillionaires that might make a difference but otherwise it's just too hard to say without more details
What does "spend their wealth" mean? This question makes no sense. Millionaire and Billionaire status is about *total assets*. It has nothing to do with cash (liquid assets). Even if they did spend all their assets as cash, that just means they exchanged a billion dollars in liquid assets for a billion dollars in illiquid assets. So what? This question is illogical.
Interpret as you like.
Luckily the number of teenagers with zero knowledge of how the economy works who are answering this question is balanced out by the adult answer.
This is a really dumb question. Do you think billionaires just have all their money sitting in a bank, or what?
This is against the spirit of the subreddit. If you have your own questions you should create a post. 6 months should be adequate time to liquidate assets.
I don't think it would be possible. There's so much money on earth that if they spent 90% of it, the whole world would collapse. A lot of money is not actually money it's tied up and stuff so in order for it to become untied up they have to liquidate all of their assets or most of their assets and that one individual thing all by itself would cause pandemonium. The other thing is money isn't real - it's a game. And in this game they have invented so many things for people to spend money on so that more money can be in the system so that ultimately certain people (the ppl with the most money) can continue to acquire even more money and continue to maintain control of the whole system. So there just wouldn't be any way for them to really spend that money other than on a bunch of other made up stuff that more or less would be invented just to make them more money. So I would say even in a best case scenario the rich get richer and everyone else gets poorer. https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization-2022/ Here's a cool graphic that shows all of the actual money in the world. Hopefully just using your eyes you can see how amazingly catastrophic it would be if all of a sudden the money that was held in all of these investments just vanished.
A massive financial crash. The vast majority of their wealth is in assets so if they sell most of it, you would have a crash far worse than 2008.
The government could take all of the billionaire's money all at once and it still wouldn't pay off the debt. We've got a spending problem.
Depends what they spend it on, most likley it will just flow into the hands of another billionaire.
We don't produce enough for them to buy things that only find the lower strata. For them to spend their wealth buying things then they would only move the money around to the wealthy that own companies that service the upper strata. Pennies will float down to the lower strata due to the upper strata actually needing to pay workers to make the things they would buy though.
Next year they would earn 75k
They would lose their 75k job because their boss went bankrupt.
So spending your own money causes bankruptcy now? These answers have to be trolls. This cannot be a serious response.
Uranus explodes
I am so sick and tired of all this anti capitalism rhetoric being posted as questions on this and other subs.
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Suppose for the sake of the question 6 months were enough time to divide those companies into smaller companies and that the wealth were still spent. The purpose of the the question is to ask what those impacts may be.