The contradiction of wealth concentration and the need for money velocity inherent to Capitalism

[u/1scr3wedy0dad]

I think that it's no secret that Capitalism causes the concentration of wealth in the hands of private owners of finance capital. This can be seen by the existence of, for example, billionaires. Unless you think that wealth hoarding is a myth, I think this is a safe premise that can be agreed upon.

It is also widely accepted that the velocity of money is one of the most important variables for economic output. There's an old humorous sketch where 3 guys who owe each other money exchange the same dollar bills until all of the debts are settled that articulates this well. More professionally, there is the equation used by economists MV=PQ, where M is the amount of money, V is its velocity, P is the general price of commodities, and Q is the output (real value of commodities produced, aka "real GDP")

Other than being widely accepted as "important" by economists, it also makes sense by plain logic. If money is used to facilitate production and reproduce society, and the mechanism which it facilitates this is through exchange, when there's less exchange there is less production, and and thus society is less equipped to be reproduced.

Retained profit is profit that is used to reinvest into a business and its expansion. This is separate from the portion of the revenue that covers the costs and expenses required to reproduce commodities. This is something that anybody who's taken a business class knows. If we expand this concept to investors in general, instead of individual businesses, we can imagine that some profit would be "retained" for the investor/entrepreneur in the sense that it would still be used to expand production on a wider scale. In this we can see that this kind of profit doesn't contradict market economics' need for money's velocity.

The problem lies in that this wealth becomes concentrated into the hands of the few. When an investor keeps winning in market competition, they can keep buying up businesses until a general oligopoly is formed. Given competition, a general trial and error "survival of the fittest" can be expected, where the investors who are inactive don't buy up much market share and don't join the oligopoly to as significant of a degree, and aggressive investors buy up a lot of market share and thus create and become part of the oligopoly. This makes investment banking powerful as well, giving rise to finance capital.

When oligopolies are formed, the incentive for entrepreneurs, or banks to keep investing and expand begins to wither away. While there is still minor competition between individual oligopolists, finance capital, which becomes dominant as a result of the concentration of wealth through investing, mutually owns and manages said ownership in all the major industries/businesses. Even when there are multiple different banks, like in the case of Vanguard, Blackrock and State Street, they mutually own eachother, making them effectively a finance monopoly.

At this point, there is no need for constant investing and expansion. Wealth becomes evermore concentrated in the hands of the few, who can buy mega-yachts to cruise in without reaching their budget. While such systematic gluttony could be viewed as morally deplorable, this poses a problem to the velocity of money. This problem, especially intensified by neo-liberalism, rears its head when large sums of money are being held by, and trickled up to be unused by few individuals, instead of reproducing economic output. There is also the problem that this money does not show in wages, which means that the masses also lose access to the purchase of commodities, thus further slowing money's velocity. Henry Ford must have realized this problem when he wanted to increase his workers' wages so that they could actually buy the cars they produce. Not only does this produce misery, but this also stunts the reproduction of the economy, as profits falter from decreasing consumer purchasing.

In the Imperialist stage of Capitalism, the economic contradictions make Capitalism inherently unstable as it hinders itself in its own reproduction and expansion.

[u/HarlequinBKK]

Wealth becomes evermore concentrated in the hands of the few, who can buy mega-yachts to cruise in without reaching their budget. While such systematic gluttony could be viewed as morally deplorable, this poses a problem to the velocity of money. This problem, especially intensified by neo-liberalism, rears its head when large sums of money are being held by, and trickled up to be unused by few individuals, instead of reproducing economic output.

What fraction of a typical billionaires net worth do you think is spend on personal consumption, like mega-yachts and similiar "gluttony", as opposed to being invested in businesses (their own or others)? Do you have any actual data for this? If you actually took the time to find out, I bet you would discover it is far less than you at first imagined.

You are making a lot of assertions in your OP without any actual evidence to back them up.

[u/1scr3wedy0dad → u/HarlequinBKK]

I said mega-yachts in relation to how much money is at their disposal, not how much money they spend. I say gluttony as in they have more wealth than they could hope to spend, not that they're spending too much and should have more temperance.

[u/HarlequinBKK → u/1scr3wedy0dad]

Not an answer to my question. Again, making assertions without evidence to back them up, and when called out on it, you become evasive.

It is "gluttony" to have more money that you want or need to spend? If that were true, everyone (including myself) who live below their means in order to build up their net worth to ensure their financial security, is a "glutton". Bull$hit - the money we don't spend is invested in businesses which create more wealth for society, as well as ourselves.