alt Hacker NewsIn a healthy economy flow of money is like the flow of blood in the arteries. It is what stimulates the economic activity. You can't earn a dollar without someone spending that dollar. Spending = earning = economic activity.
People are always defending rich people (capital owners) that they invest their wealth. But actually if someone has a billion in the bank the fact that they have that billion is a proof that they didn't invest it. (If they did spend it or invest it the would not have it, now would they?)
A billion that circulates in the economy is much better than a billion that sits in someones bank account. Someone who spends 100% of their income is much better economic citizen than someone who doesn't.
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A billion in the bank is invested - that's how fractional-reserve banking works. And people that wealthy don't really just put their money "in the bank". They usually invest it in riskier things.
I would hesitate to call consumption "better" than investment.
There are literally two economies - the one most people live in, and the asset owning economy which deals exclusively in land, property, resources, and shares.
The health of an economy is defined by the permeability of the border between those two classes, and the direction of flow.
If the flow is mostly one way, you're getting wealth extraction, not investment.
But assets are not easy to move. So if you tax assets and not income, it doesn't matter where the owners are. It only matters where the assets are.
Sort of, with at least two caveats.
1) velocity of money matters, some spending creates more economic activity than others due to re-spending.
2) Investment is not the same as having your money sitting idle. Investment makes certain activities possible because of scale, payment made with the expectation of future value, financing capital goods or R&D, etc.
Most wealthy people aren’t sitting with their money in the bank but in investment assets like real estate and stocks.
Banks don't just keep your money in a vault when you store it in a bank account - that would be stupid both of both the bank and of you. Money looses value over time due to inflation, so banks reinvest 90% of your stored balance into loans, stocks, bonds, etc. This means that a theoretical 1B account, would allow someone else to take a 100M loan to fund a new venture. This is how banks make money, and they pay you a small portion of their profits as interest on your money (since they're profiting off it).
This is still not a good idea for you, as the interest doesn't make up for inflation. Most people keep a small portion of their wealth in the bank, as easy access for emergencies (this is called dry powder[0]). The rest is typically invested into private equity, which allows new ventures to be created.
It's very rare for anyone to have more than $50m in the bank. The money is usually out in the market doing it's work.
[0] - https://www.investopedia.com/terms/d/drypowder.asp