Comments by "" (@lonevoice) on "The rich don’t spend enough – and that means they shrink the economy" video.

Our growing wealth inequality is clearly economically damaging and Labour should be addressing this fundamental problem but aren't so it will continue to get worse. As Richard indicates, the wealthy are incapable of spending enough of their income and are always left with a surplus. That surplus is then used to buy assets such as property, shares etc and with increasing numbers of wealthy chasing those assets, prices increase and so does the cost of using those assets in the active economy. Over time we see increasing amounts move out of the active economy into asset purchases and the economy suffers. Shouldn't that be obvious to our politicians?
63
@antonyjh1234 This is a side issue and subset of what I referred to. Yes there is borrowing by the general public particularly in terms of credit card debt and mortgage debt. Increases in these as interest rates rise increases the worth of the bank shares that lend and are owned by the wealthy. Significant changes here have arisen in recent years because of inflation and interest rate rises. They can also relax once interest rates and inflation return to their target levels. The changes in wealth inequality that I referred to are more of a long term problem and have been increasing for decades and are ongoing.
1
@antonyjh1234 The problem with the wealthy is that they are incapable of spending enough. They always have a surplus above their spending needs that they invest. That tends to be into assets such as property, shares etc and over time as more and more money is chasing these assets, their price increases. The other side of this is that increasing amounts are being withdrawn from the active economy of jobs, business and services into asset purchases. It is an increasing drain on the active economy and it becomes increasingly difficult to achieve growth there. Nearly all of the growth that we see is in asset prices. That in turn has another detrimental effect on the active economy because as asset prices rise, their use within the active economy also becomes more expensive, most notably in the cost of rents. The solution is to reduce this drain on the active economy so that it is manageable. That can only be done through taxation. Within limits, every £1 taken from the 1% and given to the 99% will see a boost to the active economy as they will spend whereas the 1% are unable to. Effectively what we would see is a transfer out of asset prices back into the active economy.
1