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Andres Aullet

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Trickle down vs. trickle up

The more businesses are left alone to do what they do best (sell a product or service), free from regulations, external influences and excessive taxation, the better they will be.

Loans and extra profits can be then used for more business creation and business growth, which in return drive more economic prosperity for investors, and that also "trickles down" to workers (as jobs and better salaries) and consumers (as lower prices) and everybody benefits in the end.

Or so the story goes.

Although the theory says that when investors gets richer, they use this extra wealth to promote more businesses, and in the process creating more jobs and driving prices down through specialization; there are many examples where the extra wealth is either just accumulated, or it is invested in ways that do not create jobs nor drive prices down.


Would things work in reverse?

What if individuals rather than businesses were the recipients of loans (micro), left alone to do what they do best (which i contend is creativity), as free from regulations, external influences and excessive taxation as possible.

They would then require raw materials and more people to put their ideas into action, they would need products and services offered by bigger businesses. In the end, everybody would benefit and the economic prosperity would trickle up

Obviously, this is an idealization.

But, could we benefit from a balance of both approaches?

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    Nov 3 2012: wealth should not trickle anywhere, it should be in the hands of those that created it. we simply should stop thinking about how other people spend their money. i don't care what the goal is, balance, fairness, great society ... if you believe the world would be better if some people used their property in a certain way, tell them. convince them. but do not speculate on how should "we" use their money.
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      Nov 3 2012: Hi Krisztian (and please forgive i have not figured out an easy way to bring up accents in this keyboard to spell your name correctly)

      Several times in the past we have talked and i must say that i have learned quite a lot from those exchanges.

      In principle, I agree with your first statement, yet i don't think you and agree in who is it that creates wealth. Example: when someone misses a monthly payment on a loan, financial charges (in addition to interest) are created and the money supply grows yet a bit more, is that creating wealth? Or exchange rate speculation. I see wealth creation when investment drives new and better products and services, and I see both the investor and the people inventing and improving these are wealth creators. Who are the creators for you?

      You ask me not to speculate how should money be used. Yet, you and I have agreed that there is no country in this world that runs a pure free market economy, so in a sense when you explain what free market theory calls for, you are also speaking about how money should be used

      I am trying to talk about how money IS used, and highlight what i see wrong there. I do not think that we should simply accept that the way money IS used arguing that if we let it follow some invisible rules, a common good will be ensured. If at all, that would require (assuming the theory were indeed correct) that pure free market was allowed to function. But as i have said before, I do not recall any country that runs a pure free market economy.

      So I guess I am doing here what you suggest, I believe the world would be better if some people used property in a certain way, and i am telling so. But isn't the first step to recognize how money is actually used today? and to share that information too?

      Trickle down and trickle up are just generalizations that differ only slighlytly. In one wealth creators are assumed to be a wealthy few, in the other wealth creators are assumed to be the average individuals

      cheers
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        Nov 3 2012: "and the money supply grows yet a bit more, is that creating wealth?"

        certainly not, and it is one of the biggest problem of today. our money supply is increasing, and we overlook the question: who gets the extra money? banks get it and the state get it. we should put an end to it the sooner the better.

        " Or exchange rate speculation"

        this is a whole other issue. exchange rate speculation is in fact a forecast/appraisal job, which is extremely important. for example, what will be the exchange rate of gold vs GE bonds a year from now. to know this, you need to evaluate GE's business strategies. of course, if you mean currency rates only, it creates nothing, it is just trying to figure out how much government will dilute their money. it is important as long as they do, but it is more like a defense against destruction than creating anything.

        " Who are the creators for you?"

        anyone who has an idea that works. that is measured by profit, IF we are in free cooperation setting. any two persons come together and decide to exchange some products or services create wealth. that is the essence of a free market. we need to understand that it is easy to make someone better off by robbing someone else and handing out the loot to our preferred class. this is not creation. this is predation. only voluntary interactions create wealth.

        "So I guess I am doing here what you suggest,"

        yes, but one has to be vigilant. it always starts like this. first we agree that some behavior is good. then we proceed forward, and claim that not doing the right thing is evil, and we need to enforce good behavior. similar arguments are considered disgusting or evil. how about i argue that donorship is good, therefore it is a good idea to every now and then kill someone and use his organs to save many lives. this is horrible. but proposing that we need to tax the rich and give to the poor is okay. why? it is the same thing.
    • Nov 3 2012: "wealth should not trickle anywhere, it should be in the hands of those that created it."

      You mean the people who do actual work, like workers, farmers, engineers, scientists, sales people, etc... Well, for once we agree Krisztian.
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        Nov 4 2012: workers, farmers, engineers, scientists, sales people, marketing managers, brokers, bankers, venture capitalists, and everyone that works under the arrangement of voluntary cooperation.

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