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What you're saying doesn't make sense. Why would anyone invest without expecting more consumption? The economy cycle doesn't start with investing, it starts at

What you're saying doesn't make sense. Why would anyone invest without expecting more consumption? The economy cycle doesn't start with investing, it starts at consumers having money and giving them to someone in exchange for a service or product. How could you know what to invest in before there is even demand?

yummyfajitas 11y ago
There is clearly demand present, given that we have not (as an economy) reverted to 100% subsistence farming. In any case, you don't need to expect an increase in consumption to invest - one can simply expect to steal customers from the other guy. Uber's investors didn't expect Uber to create new rides, merely to steal riders from the cartels. Of course, if you are correct that no one will invest, then all the money from QE will be funneled into consumption. This will have the same effect as the helicopter drop, modulo distribution.
- asgard1024 11y ago
  What I mean is that there can't be more investment without more demand. In the Uber example, there won't be more investment either - if you expect Uber to grow on behalf of other companies, these will be divested. In fact, you could expect decrease of investment with Uber, like with any other new technology (disputable in Uber's case, but for the sake of argument), because the whole point of moving to new technology is to decrease investment needed to maintain the same level of consumption (that is, increase productivity). > all the money from QE will be funneled into consumption They are, after sitting there idly for a while. The bank CEOs have to pay their mistresses and so on. And distribution is important too. The whole problem of debt deflation is that you have money sitting idly (or better say idly circulating in an endless vortex of financial machinations), not being spent on goods and services.
  - yummyfajitas 11y ago
    I think you are confusing investment and cost of operation. Investment is building the new technology, cost of operation is the cost of providing consumption. Increasing investment today will indeed increase production in the future - that's the whole point. *They are, after sitting there idly for a while. The bank CEOs have to pay their mistresses and so on...money sitting idly..." The production is either consumed, invested, spent on government or exported. P=C+I+G+NX. You seem to believe it can be neither C nor I (well sometimes), so are the wealthy spending all their unconsumed income on government or exports?
    - asgard1024 11y ago
      > Increasing investment today will indeed increase production in the future - that's the whole point. So you agree that for the investment to be worth it (and thus made), consumption in the future must increase (or at least appear that it will increase to the investor)? That was my point. > The production is either consumed, invested, spent on government or exported. I talked about money, not production. Money can be saved, or in today's world more likely, ran around in circles through the financial system, without ever causing more consumption to happen.
      - yummyfajitas 11y ago
        No, for the investment to be worth it the return needs to exceed the risk free rate. If your sole claim about money is that there needs to be a functioning monetary system so that the consumer can easily transfer value to the producer, I agree.
crdoconnor 11y ago
>What you're saying doesn't make sense. Why would anyone invest without expecting more consumption? Exactly. That bit was dumb. Hence why industrial machinery didn't shoot up in price like the cost of a 2 bedroom semi in San Fran did.
- yummyfajitas 11y ago
  Industrial machinery didn't crazily shoot up in price because NIMBYs haven't made it illegal to produce more. Housing prices in SF are entirely a self-inflicted ill - NIMBYs causing scarcity. Houston does it right: http://marginalrevolution.com/marginalrevolution/2015/03/houston-v-california.html http://marginalrevolution.com/marginalrevolution/2015/03/hou...

yummyfajitas 11y ago

There is clearly demand present, given that we have not (as an economy) reverted to 100% subsistence farming. In any case, you don't need to expect an increase in consumption to invest - one can simply expect to steal customers from the other guy. Uber's investors didn't expect Uber to create new rides, merely to steal riders from the cartels. Of course, if you are correct that no one will invest, then all the money from QE will be funneled into consumption. This will have the same effect as the helicopter drop, modulo distribution.

asgard1024 11y ago
What I mean is that there can't be more investment without more demand. In the Uber example, there won't be more investment either - if you expect Uber to grow on behalf of other companies, these will be divested. In fact, you could expect decrease of investment with Uber, like with any other new technology (disputable in Uber's case, but for the sake of argument), because the whole point of moving to new technology is to decrease investment needed to maintain the same level of consumption (that is, increase productivity). > all the money from QE will be funneled into consumption They are, after sitting there idly for a while. The bank CEOs have to pay their mistresses and so on. And distribution is important too. The whole problem of debt deflation is that you have money sitting idly (or better say idly circulating in an endless vortex of financial machinations), not being spent on goods and services.
- yummyfajitas 11y ago
  I think you are confusing investment and cost of operation. Investment is building the new technology, cost of operation is the cost of providing consumption. Increasing investment today will indeed increase production in the future - that's the whole point. *They are, after sitting there idly for a while. The bank CEOs have to pay their mistresses and so on...money sitting idly..." The production is either consumed, invested, spent on government or exported. P=C+I+G+NX. You seem to believe it can be neither C nor I (well sometimes), so are the wealthy spending all their unconsumed income on government or exports?
  - asgard1024 11y ago
    > Increasing investment today will indeed increase production in the future - that's the whole point. So you agree that for the investment to be worth it (and thus made), consumption in the future must increase (or at least appear that it will increase to the investor)? That was my point. > The production is either consumed, invested, spent on government or exported. I talked about money, not production. Money can be saved, or in today's world more likely, ran around in circles through the financial system, without ever causing more consumption to happen.
    - yummyfajitas 11y ago
      No, for the investment to be worth it the return needs to exceed the risk free rate. If your sole claim about money is that there needs to be a functioning monetary system so that the consumer can easily transfer value to the producer, I agree.

crdoconnor 11y ago

>What you're saying doesn't make sense. Why would anyone invest without expecting more consumption? Exactly. That bit was dumb. Hence why industrial machinery didn't shoot up in price like the cost of a 2 bedroom semi in San Fran did.

yummyfajitas 11y ago
Industrial machinery didn't crazily shoot up in price because NIMBYs haven't made it illegal to produce more. Housing prices in SF are entirely a self-inflicted ill - NIMBYs causing scarcity. Houston does it right: http://marginalrevolution.com/marginalrevolution/2015/03/houston-v-california.html http://marginalrevolution.com/marginalrevolution/2015/03/hou...