Exponentially growing Savings/Capital v Income

cells

If the savings rate is positive, which I think it is (by savings I don't just mean bank accounts I mean all the asset classes)

And if there is a positive return on savings which there is or should be longer term. Would there not be an exponential growth in the stock of savings. Yes, right?


Then would not those things purchased by savings rather than income go up in price exponentially to match the exponentially growing savings? Eg Art?

mwpt

cells wrote: »

If the savings rate is positive, which I think it is (by savings I don't just mean bank accounts I mean all the asset classes)

And if there is a positive return on savings which there is or should be longer term. Would there not be an exponential growth in the stock of savings. Yes, right?


Then would not those things purchased by savings rather than income go up in price exponentially to match the exponentially growing savings? Eg Art?

You mean total world wealth is increasing? What about redistribution through spending, taxes, deaths, population growth?

cells

mwpt wrote: »

You mean total world wealth is increasing? What about redistribution through spending, taxes, deaths, population growth?

yes total world wealth is increasing very very rapidly. Think of china a country full of peasants now in some cases they are buying artwork for $100m apiece not paid for via income but by capital

Longer term savings/capital should increase quite rapidly. So for instance one poster here said long term equities return 6% a year so if we use that figure global wealth should increase by about that plus the savings rate is positive too.

So very limited items like artwork should continually increase in price as its paid for by capital capital which is continually increasing fairly rapidly and exponentially

Does that make sense? (Im asking myself this not just you)

Generali

cells wrote: »

If the savings rate is positive, which I think it is (by savings I don't just mean bank accounts I mean all the asset classes)

And if there is a positive return on savings which there is or should be longer term. Would there not be an exponential growth in the stock of savings. Yes, right?


Then would not those things purchased by savings rather than income go up in price exponentially to match the exponentially growing savings? Eg Art?

Doesn't that assume that the stock of investable assets is fixed? As GDP grows, the quantity and size of assets like shares and bonds will rise with it. The number of paintings simply rises over time.

cells

Generali wrote: »

Doesn't that assume that the stock of investable assets is fixed? As GDP grows, the quantity and size of assets like shares and bonds will rise with it. The number of paintings simply rises over time.

the number of shares and bonds might rise but what about fixed assets like art or other collectibles?

Im not sure me doing a painting and putting it out there will decrease the value of a Van Goghs.

Generali

cells wrote: »

the number of shares and bonds might rise but what about fixed assets like art or other collectibles?

Im not sure me doing a painting and putting it out there will decrease the value of a Van Goghs.

Haha, true but each generation a new group of collectible artists come along and they might.

There is an argument to be made that art prices are simply a function of the amount of money needing to be laundered and the ease of using other markets:

http://www.theglobeandmail.com/report-on-business/international-business/european-business/economists-urge-tighter-regulations-to-curb-money-laundering-in-art-market/article26217852/

For example. There's plenty out there if you Google for it though.

If there's money chasing assets you can bet people will produce assets to sell to them. The MBS/CDO market was a prime case in point.

Over time the total value of the stock of assets will tend to rise, you are right but that doesn't mean the value of each asset will rise.