Comment by PrairieFire

Comment by PrairieFire 18 hours ago

19 replies

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agree the capital could be put to better use, however I believe the alternative is this capital wouldn't have otherwise been put to work in ways that allow it to leak to the populace at large. for some of the big investors in AI infrastructure, this is cash that was previously and likely would have otherwise been put toward stock buybacks. for many of the big investors pumping cash in, these are funds deploying the wealth of the mega rich, that again, otherwise would have been deployed in other ways that wouldn't leach down to the many that are yielding it via this AI infrastructure boom (datacenter materials, land acquisition, energy infrastructure, building trades, etc, etc)

amanaplanacanal 18 hours ago

It could have, though. Higher taxes on the rich, spend it on social programs.

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  • ayaros 18 hours ago

    Why is this so horrible. Put more resources in the hands of the average person. They will get pumped right back into the economy. If people have money to spend, they can buy more things, including goods and services from gigantic tax-dodging mega-corporations.

    Gigantic mega-corporations do enjoy increased growth and higher sales, don't they? Or am I mistaken?

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    • 542354234235 17 hours ago

      The shift in the US to the idea of “job creators” being business owners is part of it. It was just a way to direct money to the already rich, as if they would hire more people with that money. When it is plainly obvious that consumers are job creators, in that if they buy more goods and services, businesses will hire more people to make or provide more of those things.

      Or maybe it was trickle down economics. Trickle up economics still end up with the rich getting the money since we all buy things from companies they own, it just goes through everyone else first. Trickle down cuts out the middleman, which unfortunately is all of us.

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      • panick21_ 16 hours ago

        The framing of X or Y are job creators is idiotic. Its literally the most basic fact of economics that you need producers and consumers, otherwise you don't have an economy.

        The more economically correct way to express this would be that entrepreneurs and companies who innovated increase productivity and that makes the overall economy more efficient allowing your country to grow.

        > Or maybe it was trickle down economics. Trickle up economics still end up with the rich getting the money since we all buy things from companies they own, it just goes through everyone else first. Trickle down cuts out the middleman, which unfortunately is all of us.

        This just sounds like quarter baked economics ideas you have made up yourself. Neither 'trickle down' nor 'trickle up' are concepts economist use. And that you confidently assert anything about the social outcomes of these 'concepts' is ridiculous.

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    • thmsths 17 hours ago

      Because the entire western culture has shifted to instant gratification. Yes, what you suggest would most likely lead to increased business eventually. But they want better number this quarter, so they resort to the cheap tricks like financial engineering/layoffs to get an immediate boost.

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    • coliveira 17 hours ago

      Because government is always a fight about resources. More resources in the hands of common people and to make their lives better is less money in the hands of powerful corporations and individuals, be it in the form of higher taxes for the rich or less direct money going to their enterprises.

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      • QuercusMax 17 hours ago

        One of the big issues is money in politics. Our congresspeople make a killing off of legal insider trading, they take huge donations from companies, and the supreme court has even said that it's cool to give "gratuities" in exchange for legislation or court rulings you like.

        Corruption is killing this country.

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    • panick21_ 17 hours ago

      I'm not saying you are wrong that some redistribution can be good, but your analysis is simplistic and ignores many factors. You can just redistribute and then say 'well people will spend the money'. That's literally the 'Broken Window' fallacy from economics. You are ignoring that if you don't redistribute it, money also gets spend, just differently. Also, the central bank is targeting AD, so you're not actually increasing nominal income by redistributing.

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      • 542354234235 17 hours ago

        Take a million dollars, give 1,000 poor people $1,000 and every dollar will be spent on goods and services. The companies running those services and making those goods will need to have their employees work more hours, putting more money back in poor people’s pockets in addition to the money the companies make. Those employees have a few extra dollars to spend on goods and services, etc.

        Give a rich person a million dollars, and they will put it in an offshore tax shelter. That’s not exactly driving economic activity.

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        • panick21_ 16 hours ago

          You are simply disagreeing with 99% of economists.

          Money in tax shelter doesn't go threw a portal in another universe. Its either invested or saved as some kind of asset and in that form is in circulation. And again, even if you assume it increases monetary demand (decreases velocity) the central bank targets AD and balances that out.

          Based on your logic, a country that taxes 100% of all income and redistrubtes it would become infinity rich. Your logic is basically 'if nobody saves and everybody spends all income' everybody will be better off.

          This is not how the economy works even if it feels good to think that. Its a fallacy.

          Where you could have a point is that potentially the tax impact is slightly different, but that's hard to prove.

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      • coliveira 17 hours ago

        There are many ways of spending money in the population that don't include just "distribution of money", as it's portrayed nowadays. Child care, free and high quality schools, free transportation, free or subsidized healthcare, investment is labor-intensive industries, these are all examples of expenditures that translate in better quality of life and also improve competitiveness for the country.

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        • panick21_ 16 hours ago

          That has literally nothing to do with the point I have argued.

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      • QuercusMax 17 hours ago

        Stock buybacks don't build anything. They're just a way to take money from inside a company and give it to the shareholders.

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        • panick21_ 16 hours ago

          I don't know what that has to do with the point discussed.

          Do you think shareholder don't spend money, but employees do or something?

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  • phkahler 17 hours ago

    Let's pay down the debt before increasing social programs. You know, save the country first. If a penny saved is a penny earned then everyone -rich or poor- is looking for a handout.

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    • amanaplanacanal 14 hours ago

      The only person who has come close to balancing the federal budget was Clinton. But Republicans still try to position themselves as the party of fiscal responsibility.

      If the voters can't even figure out why the debt keeps going up, I think you are fighting a losing battle.

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Atheros 16 hours ago

> likely would have otherwise been put toward stock buybacks

Stock buybacks from who? When stock gets bought the money doesn't disappear into thin air; the same cash is now in someone else's hands. Those people would then want to invest it in something and then we're back to square one.

You assert that if not for AI, wealth wouldn't have been spent on materials, land, trades, ect. But I don't think you have any reason to think this. Money is just an abstraction. People would have necessarily done something with their land, labor, and skills. It isn't like there isn't unmet demand for things like houses or train tunnels or new-fangled types of aircraft or countless other things. Instead it's being spent on GPUs.

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  • PrairieFire 16 hours ago

    Totally agree that the money doesn’t vanish. My point isn’t “buybacks literally destroy capital,” it’s about how that capital tends to get redeployed and by whom.

    Buybacks concentrate cash in the hands of existing shareholders, which are already disproportionately wealthy and already heavily allocated to financial assets. A big chunk of that cash just gets recycled into more financial claims (index funds, private equity, secondary shares, etc), not into large, lumpy, real world capex that employs a bunch of electricians, heavy equipment operators, lineworkers, land surveyors, etc. AI infra does that. Even if the ultimate economic owner is the same class of people, the path the money takes is different: it has to go through chip fabs, power projects, network buildouts, construction crews, land acquisition, permitting, and so on. That’s the “leakage” I was pointing at.

    To be more precise: I’m not claiming “no one would ever build anything else”, I’m saying given the current incentive structure, the realistic counterfactual for a lot of this megacap tech cash is more financialization (buybacks, M&A, sitting on balance sheets) rather than “let’s go fund housing, transit tunnels, or new aircraft.”

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    • Atheros 7 hours ago

      I really don't think any of that is true; it's just popular rhetoric.

      For example: "Buybacks concentrate cash in the hands of existing shareholders" is obviously false: the shareholders (via the company) did have cash and now they don't. The cash is distributed to the market. The quoted statement is precisely backwards.

      > A big chunk of that cash just gets recycled

      That doesn't mean anything.

      > more financial claims (index funds, private equity, secondary shares, etc)

      And do they sit on it? No, of course not. They invest it in things. Real actual things.

      > buybacks

      Already discussed

      > M&A

      If they use cash to pay for a merger, then the former owners now have cash that they will reinvest.

      > balance sheets

      Money on a balance sheet is actually money sitting in J.P. Morgan or whoever. Via fractional reserve lending, J.P. Morgan lends that money to businesses and home owners and real actual houses (or whatever) get built with it.

      The counterfactual for AI spending really is other real actual hard spending.

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