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Comment by romwell | Hacker News Reader

>Where do you think that money goes?

Offshore. I think that money goes offshore. I even said it in the previous sentence, which you didn't quote.

>Another word for that is investment.

Well let's entertain the fantasy that the money doesn't flow away into offshore accounts for a second.

So you're saying that investing is good? Then instead of giving money to rich people (e.g. by tax cuts), the government should do what rich people do and invest. Domestically.

What do we have here? Ah, stocks and real estate. Got it. The government should buy companies and houses, the way the rich people invest.

Didn't expect HN to argue that we should socialize housing and nationalize corporations, but I'll take it.

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I'm curious as to what you even mean by "money goes offshore" and how does that cause it to appreciate?

And of course investing is good - how could you even argue against that? Businesses need funding. And yes, governments in fact do invest in both companies and private housing, I don't understand why you think this is some gotcha. It's just that on average governments tend to do worse at investing, so it's generally restricted to areas where the private market fails to provide.

>how does that cause it to appreciate?

Seems like you missed a step. The thing that appreciates is the financial product that this money buys.

>I'm curious as to what you even mean by "money goes offshore"

Buying stock in an IPO in a multinational corporation based in Taxhavenlandia would be one example.

A financial product is ultimately a claim on real assets. That is their essence.

Buying stock in an IPO in a multinational corporation based in Taxhavenlandia is capitalizing a presumably enterprise which will generate a positive return. I can understand that you might be concerned about capital leaving the country rather than being invested domestically, but I'm not sure you've been advocating capital controls.

>A financial product is ultimately a claim on real assets. That is their essence.

Laughs in pump and dump schemes

So you're just talking about buying stock/assets then? I don't know what other financial products you mean.

>Buying stock in an IPO in a multinational corporation based in Taxhavenlandia would be one example.

Even if this were the case, the only bad part would be evading taxes. To generate a profit, it still has to be an investment in a profitable venture, which increases overall economic productivity. (I also don't think there's any indication that this happens on a large scale, otherwise the stock index of any such Taxhavenlandia should show this)

>Even if this were the case, the only bad part would be evading taxes.

Ah, the little things.

>To generate a profit, it still has to be an investment in a profitable venture

Like Twitter? Which got a tax break recently, BTW

>I also don't think there's any indication that this happens on a large scale

Did you try looking?

https://en.wikipedia.org/wiki/Panama_Papers

>Offshore.

First, what tiny fraction of US money goes offshore versus for US investment? Ridiculously tiny. The total value of US investments dwarfs any offshore boogeyman.

And, offshore isn't a dead end. It invests where it's worthwhile, which, again, is incredibly US based - look at our bond rates and market caps.

>that investing is good

What allows new companies, large and small, to form and employ? What allows small companies to make payroll during slow seasons? What allows people to get college loans, mortgages to help build wealth, people to get loans for things that allow them to create and plan? What allows farmers to farm all year and only sell in a small window?

Oh yeah, investment.

Offshore companies are very popular in countries with unstable economy, like Russia, because oligarchs can confiscate your money at any time, so people in Russia are fighting with offshores with help of oligarchs. This is the real problem for them.

Governments are notoriously bad at investments. Rich people will not keep money frozen in offshore accounts forever, to be eaten by inflation. They will invest at some point, and when they do it's going to be much more efficient than whatever the government can do. All the former communist states had the government make all the decisions where the money is invested, and they fell further and further behind in economy. They even had long term plans - 5 years, much better in theory than the quarter to quarter sprints that modern companies have, and it still didn't help.

You could say that once in offshore accounts, money will maybe be invested in other countries rather than domestically. That might be true, but that is a different problem (globalism) rather than trickle down.

There is a picture of Elon Musk on the article. Do you really think a government would have ever been able to create Tesla?

I'm not sure everyone here is arguing that the government should make investments. Many are arguing that the poor and middle class must be capitalized to increase demand and that an economy with nothing but rich people trading vanity goods with each other is a recipe for stagnation and societal collapse.

There should not be a picture of Elon on the article. That speaks to ignorance. Elon gets a lot of flak because he's highly visible but he's nowhere near a poster child for the idle rich. The idle rich who sit and extract rent know to keep out of the limelight.

> Governments are notoriously bad at investments

Not all governments, check Norway for a great example of great investment.

Didn't Norway just bought into the stock market via their pension fund? That is literally the opposite of investing it themselves. They take the largest part of the money and put it on the market, believing that the private companies can grow those money better than they can. And they were right...

"Didn't Norway just bought into the stock market via their pension fund? That is literally the opposite of investing it themselves."

A pension fund is payment to a group of people over a period of time. Traditional investment from a government into a country comes in the form of building infrastructure and military. Dollars spent on infrastructure and the military will not pay yearly cash dividends.

A factory can take it's payroll budget and "invest" it on machines, but it will not be able to pay it's employees, which defeats the purpose of a payroll budget.

Norway has a yearly budget and it invests in traditional things like infrastructure and their military. This is what the GP means when they say that governments can make good investments. [1]

[1] https://en.wikipedia.org/wiki/State_budget_of_Norway

Doing a quick lookup over the budget of Norway, it seems like they invest directly about 4 billion USD each year (this is for year 2007, but it can't be be wildly different today). Compare that to the government letting the pension fund invest 1400 billions on the open market. https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...

I would say even the government of Norway recognized that the free economy will do better with the money that they can (and how right they were!)

I don't get it. Can you explain to me what the ROI would be if the pension fund invested their money into public infrastructure?

Not sure how to calculate ROI on infrastructure. There is a limited amount of infrastructure a country needs, once that is built the government can decide to keep pumping money into the economy (say state operated oil machinery factories, armament factories, furniture factories etc.) or they can do what the Norway government did and just dump the money in the stock market, letting the market decide what works and what doesn't.

So you're saying that we should take all the money the government spends and put it in stocks? What about infrastructure and public works? Schools? Research?

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