[harmmonica]

I always thought one of the biggest problems with modern education is not spending enough time teaching people about interest rates/return on investment. If everyone just understood what you're pointing out here--just really "got it"--I feel like the world would be in a much better place. It's not dire (I don't think?), and I know we've come a very long way, but, man, it could be so much better.

[al_borland]

Maybe. A lot of these calculations are usually based on historical averages for the US stock market. For the economy to keep moving, they need people to spend their money.

Eventually it may all even out, where people spend so much once they hit a certain point in their life/portfolio, that it allows for everyone else to be saving and investing everything in the first few decades of life. But a transition period where everyone stops their mindless consumerism would be rough on markets. Sales of “wants” would collapse and the stocks would fall right with them. At least that’s my theory.

I also often wonder if the stock performance we’ve seen is simply a result of the way the population has grown. If we are seeing slowing growth, or even population decline, can we expect the markets to contract right a long with the population. What will that mean for everyone’s retirement accounts?

[toast0]

Except for some extremists, I don't think the advice is to save and invest everything. Instead, you should try to be saving and investing a meaningful amount of your income.

[harmmonica]

I appreciate what you're saying here, all of it, and wonder some of the same, but my comment was likely overly cryptic because I didn't mean anything about consumption.

[dmoy]

> . If we are seeing slowing growth, or even population decline, can we expect the markets to contract right a long with the population. What will that mean for everyone’s retirement accounts?

Shit, the bigger scarier one is housing and ss. A huge percentage of people's retirement is either directly in housing (i.e. their house is their only asset), or indirectly in housing via their (mbs or other mortgage related bond products). If population declines housing prices may crater, and if population declines ss payouts may also crater. Gonna be a rough period of time (decades?).

[al_borland]

I have this theory that a big driver of the lack of housing, and the resulting high prices, is due to the lower rates of marriage. More single occupancy homes means more homes are required. This goes hand in hand with a declining birth rate. So this breakdown in the family structure could be at least partially responsible for both the rise and collapse of housing prices. That’s kind of interesting.

[bombela]

It seems like that in every country. If you think about it, if you are rich, it doesn't really make sense to want other people to know about compounding. They might not signup for this insurance, or credit card, or spend the money onto the latest gadgets.

[TFYS]

Where does this return on investment come from? From people working. It's not possible for everyone to live on investments, someone has to do the actual work. Imagine if everyone started investing most of their money now, and after a generation or two everyone had enough capital to live on the interest alone. Who would do the work? I think we would benefit more from letting a larger part of the returns that work creates go to the people who do the work, not to the people that happen to have a lot of capital.

[dmoy]

> If everyone just understood what you're pointing out here--just really "got it"--I feel like the world would be in a much better place. It's not dire (I don't think?),

Maybe, but it also is predicated on a market like today's market, where the average American saves approximately zero dollars and has to work until social security.

If everyone saved a lot, you'd get a different situation. Probably a better situation, but it'd definitely be different.

[anonym29]

The average American might be able to save more and work fewer years if the average American didn't make the economically self-harming and unnecessary average spending decisions that average Americans make on social status signifiers, luxury goods, depreciating liabilities, etc.

[dmoy]

Right, exactly. And that consumerism is no small part of what fuels stock growth. If that disappears, then paradoxically your investments won't get you as far.

[anonym29]

59% of Americans can't cover an emergency expense of $1000. Economically disadvantaged people developing emergency funds and basic financial solvency is not going to destroy consumer spending.

Further, consided that the top 10% are responsible for half of all consumer spending, and the bottom 50% combined control just 2.5% of all assets. The bottom 60% ceasimg all spending would barely even move the needle, they're insignificant in the macro picture.

You are also making assumptions about my portfolio makeup, chiefly regarding long exposure to US equities that are primarily or substantially beneficiaries of consumer spending. This is not true for me personally, and moreover, there is plenty of money to be made in markets with or without tiny consumer spending blips.

[dmoy]

> 59% of Americans can't cover an emergency expense of $1000. Economically disadvantaged people developing emergency funds and basic financial solvency is not going to destroy consumer spending.

Agreed, though in this thread I don't think we're speculating about just having an emergency fund, but rather going and investing a decent chunk of income going forward. Closer to China savings rate than US savings rate, for example.

I personally think it would be great if people saved more, even if it means a current small-ish percentage no longer have the ability to live off of investments without working.

> Further, consided that the top 10% are responsible for half of all consumer spending, and the bottom 50% combined control just 2.5% of all assets. The bottom 60% ceasimg all spending would barely even move the needle, they're insignificant in the macro picture.

The bottom 50% certainly spends on food, rent, etc.

If you look at the consumer market in places (like China) with much higher savings rate, there are definitely difficulties with trying a US style approach of financial independence from purely stock investments and withdrawing a sizeable 3%+ per year.

> You are also making assumptions about my portfolio makeup,

Sorry I didn't mean you specifically, I mean the royal you as in the average person in the US. Who, if they're gonna invest, are gonna be probably at least 60% in US equities.

Certainly any random specific individual can make a portfolio resistant to whatever edge case. If you go 100% crypto, maybe you make out like gangbusters if people spend less. If you go 0% crypto, maybe you make out like gangbusters if crypto totally crashes. Etc etc.