If something like Medicare is creating a steady, almost guaranteed stream of demand for pharmaceuticals, that turns into pretty reliable revenue for those companies. From there, those profits don’t just sit idle, they get reinvested, paid out, or parked somewhere, often in financial assets, but largely into interest bearing dollars.
At the same time, a lot of government spending is financed through debt, which ends up in the bond market. So I’m wondering, how much of those profits end up flowing back into the same financial system that’s helping fund the original spending in the first place.
I’m not saying pharma companies are literally funding Medicare or anything like that, but it does seem like there could be a kind of loop where government spending
creates demand –> demand creates profits –> profits get recycled through financial markets –> which help sustain government spending.
What makes me question it more is that the US is a net importer of pharmaceuticals. So some of that demand is effectively flowing outward first before any of it comes back through financial channels. Does that break the loop, or just make it more indirect?
Am I thinking about this connection correctly, or am I missing something more fundamental about how those flows actually work?
Do entitlement spending and the bond market create a feedback loop with pharmaceutical profits?
byu/GoldThenCrypto inAskEconomics
Posted by GoldThenCrypto