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Comment by changchuming | Hacker News Reader

Megacaps don't just print money out of thin air. If you have a faltering middle class, who's gonna be there to spend money? Unless you institute some kind of universal basic income, I don't see people's buying power staying the same. Remember, 70% of the economy is driven by people buying shit.

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Sounds like you’re in the minority, but I think you’re right. Mega caps are built on the foundation of a broad consumer base that has been eroded faster than at any other time in history. Even those who seem insulated will feel the effects when their mega cap customers begin cutting costs because of their exposure to the consumer markets.

That's exactly why tax cuts to the rich don't make any sense to me. Give tax cuts to the middle and lower classes, they're the ones who go out and actually buy shit, which drives everything else, really.

They make perfect sense if your goal is to enrich the wealthy in the short term.

The rich people create the value so they deserve whatever they want.

UBI doesn't produce goods, though. You still need companies (open and) employing people to make the goods that people buy. Both need to be present.

UBI doesn't stop people working. It just stops them starving if they don't/can't work. It allows them to re-skill without risking ending up on the street. It provides a safe path out of poverty traps.

People will always get bored and people will always want nicer things, so they'll always eventually be motivated to go and get work to improve their lot. UBI won't change that. In fact, it will facilitate it.

UBI doesn’t do that. Unless tied to something like land-value tax, UBI just raises rent cost. Of course it doesn’t happen immediately, but within a year or so UBI will be consumed by rent cost.

Shouldn't the free market take care of that? Rental costs in a given area are driven by supply of, and demand for, rental housing in the area.

Housing is generally supply blocked due to zoning/regulation/bureaucracy/etc. It's a severely dysfunctional market in most areas.

Doesn't this depend on the company? Demand for agriculture, petroleum, and financial services (among many other things) are fairly inelastic. People are going to consume all of that stuff regardless of how financially well-off they are.

Demand for agriculture is inelastic, but I don't think the same of petroleum or financial services.

Without travel, demand for petroleum has dropped significantly, to the point it was below 0 for a short time.

Financial services can come to a screeching halt as well if people stop buying on credit or taking loans out on housing and cars. Maybe I'm being short-sighted in only considering the consumer aspect here.

> Unless you institute some kind of universal basic income

More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs.

> More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs.

Do you have any sources for that claim?

I think we're going to see just how small the mom and pop sector of the economy is.

There was a survey that went out that said 80% of small businesses can't afford more than 3 months under the current economic climate. If that's true, does that mean we will see all small business evaporate before the end of 2020?

What's the last 30%?

GDP = Consumption + Investment + Government spending + Net exports [0]

The investment component is dependent on companies' expectations about consumption (or other companies' investment, or government spending) in the future, and obviously the net export component depends on consumption in other countries. So in that sense the ~70% [1] due to direct consumption understates the true importance of consumer spending to GDP.

[0] https://en.wikipedia.org/wiki/Gross_domestic_product#Compone...

[1] https://fred.stlouisfed.org/series/DPCERE1Q156NBEA

My guess is government and corporate spending.

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