yes. so the level of savings matters. but note that from this perspective, savings in a low yield CD or Treasury is superior, because given the escalator we’ve attached to equity prices, some of the deferred consumption is offset by sharp increases in wealth. 1/

you can argue that the escalator is necessary to buy off savers from current consumption. 2/

but i’ll argue no, we dramatically overcompensate consumption deferral, the great preponderance of it would remain deferred at effective zero rates, because once people saturate their accustomed amenity level, they devote themselves to endowing and insuring their future. /fin

one way to clarify things is just by comparison with an easier case. suppose a person is paid, and exchanges the funds for bank deposits, issued from thin air. the bank in turn holds reserves issued by the Fed. 1/

it’s pretty clear in that case that in constitutes investment in the sense of deferred consumption, but not in the sense of provoking real risk investment in the economy. 2/

you can tell very indirect stories, the bank has a bigger balance sheet, perhaps at some margin becomes more likely to extend risk credit as it clears regulatory thresholds with greater padding. but it’s a pretty attenuated mechanism! 3/

now a person takes the same cash income and buys a share of index fund. it’s deferred consumption for sure! but what effect does it have on real economic activity beyond that? 4/

there are some! but again, the mechanisms are really attenuated. share prices are bid up a smidgen, which indirectly loosens financing constraints on publicly traded firms. 5/

but creditworthy publicly traded firms are generally not “capital rationed” to begin with. they can raise funds as needed for positive NPV projects they identify. so, i’d suggest, this is a pretty weak mechanism, nowhere near the binding constraints on genuinely fruitful economic development. 6/

the case is much closer to the bank-deposit-backed-by-reserves case than an investor who, says purchases stock (same form!) in a private new enterprise, which immediately devotes the proceeds to purchase capital goods for a risky, hopefully valuable, new venture. 7/

sure, the purchase of secondary public equity is somewhere intermediate between the cases. but much closer to the former than the latter, even though under the flows we’ve set up, much much much better remunerated than the former. /fin

wife and i went for colonoscopy, which our insurere chirped in e-mails was recommended and would be free. gastroenterologist asked about our health. we candidly talked about our old body digestive issues. colonoscopy is now $2500 per person, because it's no longer "screening" but "diagnostic". 1/

of course we just skipped it. we're not paying $5K for a fishing expedition when nothing is particular wrong other than old bodies with rough digestion. 2/

paying $6K more next year for "gold" insurance so it's not absurd to get the colonoscopies. (we'll have deductibles of 1K rather than I think $9K this year.) /fin

buying stock on the secondary market is investment in an accounting sense, it's not investment in the sense people like to imagine of performing information work and endowing particular economic activity that otherwise would not occur by virtue of the finance provided. 1/

in the latter sense, no, mostly buying stock is not investment. people like to confuse the S=I accounting sense with the courageous entrepreneur information-work and useful real-economic risk sense, because it makes them feel better. but they are not the same. /fin

why would a wealth tax (at levels much higher than PMS levels of wealth) raise aggregate demand? in a broken (relative to unaffordable recent norms) stock market environment, PMCs shift to where they mostly ought always have been, Treasuries, CDs, other low-information, low risk instruments.

* gack. PMC.

yeah, this whole line of reasoning is wrong. investment in the sense of deferred consumption is far from the binding constraint on economic growth and development. 1/

stock market investment largely represents consumption people do not need to be bribed to defer, a residual as income exceeds consumption at a given amenity level, where people decide insuring their future is more valuable than jumping to a more difficult amenity level. 2/

PMC equity investors like to imagine they are being paid reasonably for a useful and constructive role their investments play in the economy. it’s a nice story. it’s entirely mistaken in my view. /fin

wealth in stocks is deferred consumption sure. investment in an accounting sense, not investment in a meaningful sense. 1/

preventing price growth from already extraordinary levels relative to GDP or GVA would be a start, and I’m all for finding practical paths through this. 2/

But it’s a rock, a weight, we would be collectively choosing to bear on a road to a saner wealth distribution, which ultimately means lower private wealth relative to GDP. /fin