Bill Gates wakes up some morning and decides he’s going to invest $2,000,000 in a CD(or whatever type of account where the balance isn’t able to be withdrawn) for each man, woman, and child in the USA. He instructs the banks to pay out the dividends on a weekly basis, as a paycheck would be paid out.
Would this harm the US economy? Would each person making an additional $50,000 a year help the economy? Would the interest rates plummet and thus make the whole thing fall apart and not work? Is this legal?
Bill Gates has about $30 billion. With that, he could only give 15,000 people in the U.S. $2 million dollars. Have would have extremely limited impact unless they were all concentrated in one location.
That would require 600 billion dollars or way more than 10 times as much as Gates would get if he liquidated his entire Microsoft stock. And the bureaucracy needed to make this happen would require many additional billions.
Not going to happen. Nobody is near rich enough to send out enough money to do this even for a thought exercise.
$2,000,000 x 300,000,000 = $600 trillion. He ain’t got that kinda cash. The most he could stump up would be about $200 each = $60 billion which wouldn’t make a ripple.
I assume you are going to say next that the U.S. Treasury just prints out 2 million for each person and hands it out. That was cause massive hyperinflation. 2 million dollars would not be worth all that much anymore.
The questions I think that the OP is asking is what would happen if half the world didn’t need to work anymore because they had just “won the lottery”.
In that case two things: gigantic inflation as everyone drops their recently minted 2 million fighting for the same comities that retailers were happy to unload at a fraction of the price two weeks ago but now they can charge a king’s ransom for, and stemming from that just general social chaos as everyone realizes that they need the jobs that they quit after the lottery winnings and before bread cost $1,000 a loaf.
In any case large sums of liquid money dropped on an economy are bad news unless the interest rates and available monetary supply can adjust to compensate for them, otherwise that new money will quickly become worthless as “everyone has it”.
The other questions is how does Bill come up with more cash that everyone combined can hope to make over their entire lives plus some, without starving the economy terribly by hoarding that much liquid cash.
Yet you didn’t know that Bill Gates had somewhere between 30 and 60 billion dollars and it needed to be divided up among the close to 300 million people in the U.S.?
How about this? At one time Bill Gates was worth 90 billion. Let’s round this up to 100 billion. Not entirely unrealistic, the world is full of money.
Last time I checked, the US population was around 260 million. Let’s round that up to 300 million, then subtract 25% for dependent minors. So that’s 225 million.
What’s 100 billion divided by 225 million? $444? I hate math. Feel free to call me an idiot. Anyway, not much would happen.
It’s like that tax refund we got awhile back. I think I got something like $300. Didn’t change my life, and I don’t think it affected the economy.
Here’s a variation on this question that I think might be a bit better: the percent of households in the US that are poor is roughly around 10 percent if you use the official threshold or thereabouts. There’s about 120 million households in the US. So let’s just say 15 million poor or near poor households to ignore numbers of people and their ages. Twenty thousand bucks each won’t make them rich, but it could be used to invest in something that would help a lot and help neighborhoods a lot, like small business loans, home purchases, schooling, etc. So that would be about $300 billion, or about what the Iraq war is costing, so far. Not sure what the Bush tax cuts have cost, but there’s that, too.
Oopps, sorry, the question would be the same as the OP: what would THIS do to the economy? Assuming that people can’t spend it immediately on anything, but could use if pretty quickly, if they wanted, on human or physical capital to develop wealth.
In principle this question is the same as an alternate history speculation, and the answer is also the same: any answer that is physically possible is equally as likely as any other answer. You can’t argue plausibility, that’s a chimera. How much of past hisotry has ever been pluasible before the event? Things are only plausible after the fact, and only to certain extents when we try to simplify the causes and effects. Even rationality isn’t a narrower: give 15 million people a windfall and you’ll see all the irrational behavior you can pile in a mountain.
And you also can’t just answer one half of the equation. Remember double-entry bookkeeping. Any money that is a credit is also a debit. You have to answer where that $300 billion is coming from and what might be lost by those people not having it to spend. So now you have two impossibilities to account for.
Sorry, but this is about as meaningless a question as is possible to ask.
Well, ignoring the OP’s overestimation of Bill Gates’ wealth for a moment, there is one real world example of this kind of phenomena: The oil rich states of the Persian Gulf.
From this example we can speculate that if everyone in the U.S. became steenking rich, we would start hiring alot more foreigners to do the grunt work. We would also start implementing more repressive laws to keep an eye on said foreigners. American innovation would collapse, as few people would have the incentives to take risks or develop things. There would be a large pool of underemployed youth who would need to be amused somehow.
The gross world product is only about $51.48 trillion, or less than a tenth of what it would take to give all 295,478,597 Americans $2,000,000 each. I think the effects would be somewhat inflationary. (Hey, brother, can you spare a 100 million B-pengoes?)
Quite a bit. That’s called science. I can plausibly predict that releasing my mug from my hand will result in it’s dropping. I can plausibly predict that the sun will rise tomorrow. To whatever extent that economics is a predictive science, a prediction can be made. Change the inputs, predict what the outputs are.
(My personal opinion is that economics is solid science on the micro level, still stuggling on the macro. But that’s just my opinion, the point is that making predictions from economic data is a perfectly valid past time, certainly not