For a tax authority the money is flowing freely out of the pipe so the idea of saving makes no sense.
Me and my frugal friend had a laugh once, that our third friend is a perfect immigrant, because he works a well-paid IT job and spends it all The guy spends like 7000-8000 per month, and he doesn’t have a family, or a car.
Why perfect immigrant? It’d be perfect if he stays temporarily here
Do I really have to explain it? Perfect, because he spends locally everything that he’s earned. So he brings added value with his work, but all the money he gets stays in the system. Plus, he lives an unhealthy lifestyle, so I wouldn’t be surprised if he dies one day after reaching retirement. Perfect citizen!
You didn’t get the joke. But you go dark with the death, so I suppose your joke is “better”.
I meant perfect would be if he retires elsewhere (“stays temporarily here”)
Joke aside immigrants and temporary workers in Europe are really needed:
Germany isn’t in a good position.
(Sorry for hijaking the thread. )
I get the irony, but on a more serious note, perfect immigrant/citizen would be one that saves a lot, invests in Swiss (or even international) assets, retires early and starts a business that improves peoples’ life and creates good jobs!
I wish the guy all the best, but he doesn’t take any advice, so it’s just an observation, not a joke.
Half-agreed. Investing locally is even better than consuming locally. Investing globally, however, what’s the benefit for Switzerland? I wonder, jokes aside, how bad for the economy mustachians really are. I mean the kind of mustachians who save a lot and then leave to consume in another country. Theoretically a job contract is a win for both sides: you get money and they get the work that they value more than the money they pay you.
I didn’t realize the situation is so bad in Germany! Of course the average age is probably a bit lower than the median, but still. I thought the German immigration policy made a difference.
We covered this topic here already. I’m not sure if just letting anyone in is a good strategy. Plus, countries like Japan heavily rely on automation filling in for missing workforce.
Honestly, I have a serious fear of the aging society + socialism. I think we should all avoid countries with aging populations, high taxes and high level of social care. They will need more and more money. They will tax the shit out of any rich person to finance the elderly who relied on state pensions instead of saving themselves. I don’t know if any country in Europe is gonna be safe in 30 years. Switzerland comes first to mind, but it also is not immune to populist ideas.
I think there’re few advantages. (1) Switzerland will have more rich and happy people (paying taxes here, investing potentially in real estate and consuming part of their wealth and enjoying their life here), (2) if the globe is getting more capital, it’s good of Switzerland because Switzerland is trading a lot with rest of the globe, (3) Mustachian framework and culture will attract like-minded entrepreneurial people from other countries (just like US reaps enormous benefits by accepting entrepreneurs from all over the world). I think that current wealth Switzerland enjoys is to large extend product of its liberal and responsible culture and openness to international trade - Mustachianism is just radical extension of this good bits of Swiss culture.
I wonder other way round - what harm to the economy (and culture) are people who don’t save and invest. Job demand is produced by capital accumulation and this one in turn is a product of savings, knowledge, technology and entrepreneurship. Society of morons who irresponsibly overspend is completely unsustainable.
PS. @Julianek, we should probably split the thread.
I tend to disagree with you, I do believe that the consumption stimulates much more the economy than people saving and investing. Consumption flows through the entire economic system while investing can artificially push the price of assets higher without stimulating the economy that much.
I agree with you final conclusion, overspending is completely unstainable but spending most of your salary is indeed the best you can do for the capitalistic economy
In a mustachian economy, a lot of companies would go bankrupt! I do wonder how this mustachian world would look like… Any idea??
In a Mustachian economy where everybody is encouraged to save and invest(sometime it is forced by the government), you go from third world to first in 40 years, as did Singapore.
Sure, in a consumer society a lot of money is moving around, but ultimately most of it is misallocated capital.
I used to think like you but Ron Swanson convinced me to change my mind.
I will give you an example. Imagine there is a village of 10 villagers. Each villager can produce 1 bread in 0.9 days. 1 bread is actually the minimum a villager needs to survive, so there is no surplus. The rest 0.1 of the day they do nothing, just relaxing. The GDP per day of such economy is 10 breads and, you could say, 1 free person-day.
One day villagers discover, that if day dedicate 1 person-day into research, they can speed up bread production by 1%. That means searching for better seeds, experimenting with the whole process, making better tools etc. So that’s what they decide to do.
After some time it only takes 0.5 to make bread. At this point the villagers have 3 choices:
- only work half a day for 1 bread. The GDP will be 10 breads with 5 person-days to spare
- work 100% to get 2 breads for extra consumption. The GDP will be 20 breads, with zero free time.
- keep researching until you can produce 1 bread in 0.1 days. At the beginning the GDP will be lower, but eventually you will be able to produce 50 breads and still have 5 person-days to spare.
You’re fond of option 2, but as you can see it only gives a short-term boost to GDP.
If you keep investing and progressing your technology, eventually you’re able to produce more goods and services with fewer resources (time, minerals, etc). In my example, option 3, the people would be able to afford many more breads eventually. So yes, maybe in the short term, shifting from consumption to investment would bankrupt a few businesses, but the ones that would get the resources to improve, would be after a while able to produce even more goods!
Very nice example! I see your point, it all makes sense. Thanks for taking the time to explain your rationale
My example was that if you have high saving/investing rate and it takes Singapore from 3rd World to 1st in half of the century. Then if everybody does that in all other countries, you will have less McDonalds, Netflixes, and other consumption/entertainment-based companies, but (eventually) you’ll have more flying Teslas, construction companies on Mars and entire Earth run on solar panels. You give up dumb short-term consumption, but you get more intelligent long-term consumption (investment is by definition delayed consumption). You bankrupt McDonalds, by stop eating-out, but provide more capital to companies for long-term investment and expansion.
I’m not sure I fully agree here. Consumption is consumption, don’t be judgemental, don’t decide which consumption is good and which is bad. A Big Mac can satisfy someone’s taste as well as a fillet mignon.
You have a limited amount of resources at your disposal, and you can either instantly consume it or put it to work. Doesn’t matter if the extra investment funds come from an unordered Big Mac or an unsold book.
And honestly, if someone needs to reduce his consumption, then I don’t think he should start with cutting back on McDonald’s or Netflix. Can’t imagine how could you overspend on McDonald’s. The top overconsumed items would be, in my opinion:
- cigarrettes, alcohol
- luxury goods and services
Anyway current consumption is possible thanks to former investments. Imagine people 200 years ago believed that there’s no point in starting industrial revolution because they need to consume everything to keep the economy going.
And what if they decided they don’t need to consume any more and just embraced the simple things in life?
Like dying of childbirth?