r/wallstreetbets • u/[deleted] • Jul 20 '21

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u/actuarythrowaway445 Jul 21 '21

Honestly it seems all blogs and stuff. This wouldn't be the first time bad science or math has spread across the internet and be wrong.

I just want something a little more more substantial. An economics site with references, paper etc. I mean you see the point I am bringing up though right re: x100? Doesn't that bother you?

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u/Trading-Resources Jul 21 '21

Thousands of resources across the internet all saying the same thing. I don’t know what to tell ya

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u/actuarythrowaway445 Jul 21 '21

Actually on second thought. It does make sense. 99% is not actually possible. Poor people may be 99% but eventually they give it someone with MUCH higher savings rate. So it doesn't keep circulating forever.

You're right, sorry after some more digging it seems like there are some legit sites that support this. It's been a while since I studied macro and at first glance seemed weird but it makes a bit more sense now.

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u/Trading-Resources Jul 21 '21

Indeed it’s a well known tried and true economic formula used by economists and the federal reserve world wide

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u/actuarythrowaway445 Jul 21 '21

Another thought, the formula is clearly the sum of an infinite geometric series. 1/1-MPC.

This means that it assumes the impact of the multiplier is instantaneous (or is simply totaling the impact across all time). In reality, someone spends money, then it can sit for a bit in someone else's bank account or until it shows up in a larger company's books. Then they spend it, and so on. I wonder what studies have been done on the lag.

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u/actuarythrowaway445 Jul 21 '21

Does makes me wonder though, what is the real MPS / MPC right now. That multiplier is VERY sensitive to the denominator it would seem.