Comments on: Milton Friedman’s Permanent Income Hypothesis http://dqydj.net/milton-friedmans-permanent-income-hypothesis/ The Intersection of Economics, Politics, and Personal Finance Fri, 10 Feb 2012 04:55:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Supply Side Footnotes | Rebel Yid - Ideas beyond the left/right, red/blue, and liberal/conservative thinking http://dqydj.net/milton-friedmans-permanent-income-hypothesis/comment-page-1/#comment-4189 Supply Side Footnotes | Rebel Yid - Ideas beyond the left/right, red/blue, and liberal/conservative thinking Tue, 28 Jun 2011 09:07:40 +0000 http://dqydj.net/?p=196#comment-4189 [...] and regulations that also burden production must be considered.  Milton Friedman noted the Permanent Income Theory which basically noted that one time stimulants do little because consumers and investors will only [...] [...] and regulations that also burden production must be considered.  Milton Friedman noted the Permanent Income Theory which basically noted that one time stimulants do little because consumers and investors will only [...]

]]> By: CameronDaniels http://dqydj.net/milton-friedmans-permanent-income-hypothesis/comment-page-1/#comment-38 CameronDaniels Fri, 26 Jun 2009 19:38:02 +0000 http://dqydj.net/?p=196#comment-38 The problem with the savings rate right now is that a major fraction of U.S debt is in mortgages, and obviously with the foreclosure rate increasing and housing prices (and thus Debt to Income ratios for those who have jobs and buy homes have decreased) so the savings rate will go up simply due to that technical issue. As for the corporations, if there is an incentive (for corporations there are often reasons to do many crazy ideas) to save, then I would expect them to either: a.) invest in their own employees to get them to stay, in programs such as education and other benefits programs b.) hand out bonuses so that their end-of-year net income decreases, which is done so that they will lower their tax liability c.) or, what the government hopes: hire more people/lower prices. As of now, I would say the majority of it would be in the case of c: lower prices, which is counteracted with raise freezes and may not be sustainable without the stimulus dollars. Otherwise, it is tough to say simply because corporate money today has a very low chance of strictly correlating with an increase in corporate taxes tomorrow. The problem with the savings rate right now is that a major fraction of U.S debt is in mortgages, and obviously with the foreclosure rate increasing and housing prices (and thus Debt to Income ratios for those who have jobs and buy homes have decreased) so the savings rate will go up simply due to that technical issue.

As for the corporations, if there is an incentive (for corporations there are often reasons to do many crazy ideas) to save, then I would expect them to either:
a.) invest in their own employees to get them to stay, in programs such as education and other benefits programs
b.) hand out bonuses so that their end-of-year net income decreases, which is done so that they will lower their tax liability
c.) or, what the government hopes: hire more people/lower prices.

As of now, I would say the majority of it would be in the case of c: lower prices, which is counteracted with raise freezes and may not be sustainable without the stimulus dollars. Otherwise, it is tough to say simply because corporate money today has a very low chance of strictly correlating with an increase in corporate taxes tomorrow.

]]> By: PKamp3 http://dqydj.net/milton-friedmans-permanent-income-hypothesis/comment-page-1/#comment-35 PKamp3 Fri, 26 Jun 2009 14:39:47 +0000 http://dqydj.net/?p=196#comment-35 $250 one-time checks were just mailed to 50 million retirees (Social Security). The US savings rate increased to 6.9% (http://www.marketwatch.com/story/incomes-surge-on-one-time-stimulus-checks). Empirically, this makes sense when framed using the hypothesis. Cameron, how would the hypothesis bear out in terms of a corporation? If a company received one time stimulus dollars, would they tend to keep the money in savings? $250 one-time checks were just mailed to 50 million retirees (Social Security). The US savings rate increased to 6.9% (http://www.marketwatch.com/story/incomes-surge-on-one-time-stimulus-checks). Empirically, this makes sense when framed using the hypothesis.

Cameron, how would the hypothesis bear out in terms of a corporation? If a company received one time stimulus dollars, would they tend to keep the money in savings?

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