Finance/econonomics question: Can we all (mostly) live on dividends?

Flying Pig said:
Doesn't the same logic apply in today's economy though? Everyone's spending power is equal to everyone's wages - which, for the employed, might be thought of as the profit of selling their time. Can the costs not be expressed in reduced output?
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It does...which is why governments actually have to run at a deficit.
 
Timsup2nothin said:
Aggregate profit is aggregate sales minus aggregate cost. A business purchase adds equally to aggregate sales and aggregate costs, since it is a sale for one company and a purchase for another. Since it affects both equally it doesn't affect the difference and aggregate profit is unchanged.
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The problem isn't in costs though because it cancels. The problem is rich people hoarding money making aggregate demand lower than total profits but my phone is about to die.
 
Perfection said:
The problem isn't in costs though because it cancels. The problem is rich people hoarding money making aggregate demand lower than total profits but my phone is about to die.
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:lol: not expecting that
 
Perfection said:
The problem isn't in costs though because it cancels. The problem is rich people hoarding money making aggregate demand lower than total profits but my phone is about to die.
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Agreed wholeheartedly, but that doesn't change the realities of the by definition answer to the question at hand.
 
I realized we're also missing business spending. They will spend to complete aggregate demand. Our problem seems to be demand for shares driving down yield.
 
We're now in the realm of macroeconomic accounting identities and it begs the question, what are we actually trying to figure out?
 
El_Machinae said:
Could nearly everyone eventually retire if they earned enough money?
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If there's enough stuff still being produced and distributed via markets with everyone retired, then yes.

Otherwise no. You would get hyperinflation and the savings would be worthless.
 
El_Machinae said:
Could nearly everyone eventually retire if they earned enough money?
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Not at once. Individually, on a rotating basis, sure. The issue is to raise the income of the lower earners enough in their earning years so that they can put away money for retirement. That's doable.
 
El_Machinae said:
Could nearly everyone eventually retire if they earned enough money?
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El_Machinae said:
Yeah, I'm assuming sufficient production. I'm mostly wondering if there are enough shares for everyone.
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Hm, these are different questions. If institutions held all the firms and we bought shares from these institutions (like, Earth Peoples' Sovereign Own All the Things Fund) then why not?

You got robots doing all the work. You got government running an appropriate deficit to stop demand leakages, and you have all the people own all the capital.
 
Only the richest live off only dividends/bond coupons. Most retirees with investments live off of dividends and by selling 3-5% of their portfolios annually plus pensions or SS.

If everyone earned a well managed stock portfolio from age 20-50, there might be a way for them to stop working at 50.

I think that dividends are too limited to be a sole source of income across a broad population.
 
Being able to retire is a function of how little you can spend, not how much you have saved.
 
Hygro said:
Hm, these are different questions. If institutions held all the firms and we bought shares from these institutions (like, Earth Peoples' Sovereign Own All the Things Fund) then why not?
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Well, that's the problem. Institutions don't hold the shares. Company owners do.

The current S&P 500 is worth ~$15 trillion, and it pays about 3%. That's about $450 billion. Maybe enough for all Canadians to retire if they're terrifically frugal, but certainly not all Americans. But I'm not worried about that. With a 2% growth rate, eventually lots of people can retire, as long as population growth stabilizes.

I just don't see a way for ownership to transfer downwards. The price of those shares will climb and climb as more people try to get them, putting them further and further out of reach, driving down yields.

Mulling this, I don't think we can get the median person to sustainable retirement without a direct seizure of profits and redistribution. Sigh.
 
El_Machinae said:
Suppose I'm way prescient, lucky, hardworking, and clever.
Say I've arranged to accumulate enough capital (in the stock market) to live quite comfortably purely on the dividends.
Post-tax, that is. I even have enough for reinvestment and a fairly respectable charitable donation.

So, other than burning through TV too fast, my life is pretty set.

How expandable is this? Can a clear majority of citizens do this?

Of course we'll still need workers, but we're becoming increasingly automated. And there will still be upper-level management making decisions and raking in mad cash. But if I can live purely on accumulated capital, can nearly everyone? I'm asking if it's scalable, if only in theory.
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I would say certainly not.
Society will have enough trouble getting enough young workers to support the elderly.

It would take some kind of robotic revolution for everyone to live off interest and dividends and the like.
 
I've been thinking about it more and arrived at the following: Tim's business costs argument is irrelevant as any cost is income for another business. If consumer spending rate and consumer saving rates are balanced the math works out. Now there is the problem of rich people saving too much. That results in two problems: deflation (causing economic stagnation) and increasing wealth disparity (wealthy people can reinvest a larger portion of their income).

These can be solved with a central bank injecting money into the system and progressive capital gains taxes that funnel money back into businesses (say for infrastructure).
 
Perfection said:
I've been thinking about it more and arrived at the following: Tim's business costs argument is irrelevant as any cost is income for another business. If consumer spending rate and consumer saving rates are balanced the math works out. Now there is the problem of rich people saving too much. That results in two problems: deflation (causing economic stagnation) and increasing wealth disparity (wealthy people can reinvest a larger portion of their income).

These can be solved with a central bank injecting money into the system and progressive capital gains taxes that funnel money back into businesses (say for infrastructure).
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Simpler solution is to get away from income completely and go with a straight wealth tax.
 
Timsup2nothin said:
Being able to retire is a function of how little you can spend, not how much you have saved.
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That only applies if you are poor. If you have saved "enough", then your spending constraints are life expectancy and contingencies.

Timsup2nothin said:
Simpler solution is to get away from income completely and go with a straight wealth tax.
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I agree; a tax on assets would be a positive game changer.

5% tax on income over $100,000
20% tax on assets over $20 million.
30% tax on assets over $100 million

Of course, asset valuation might be a problem.
 
Timsup2nothin said:
Simpler solution is to get away from income completely and go with a straight wealth tax.
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I had considered that as well, and went with capital gains tax because it's generally more common.
Birdjaguar said:
20% tax on assets over $20 million.
30% tax on assets over $100 million
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Asset tax rates shouldn't be over a few percent annually or people would very quickly lose all their wealth.
 
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