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There is not much investment because profits are quite high. Companies don't have an incentive to reinvest when they can instead just reward shareholders. Perha

There is not much investment because profits are quite high. Companies don't have an incentive to reinvest when they can instead just reward shareholders. Perhaps what we need is more competition to drive profits down. Decreasing wealth inequality is an end, not a means to an end. If you want a stable economy, focus on prices: inflation and deflation. If you want a functioning society, focus on income and employment. If you want both, then you get the Federal Reserve. Sometimes the two goals stand in each other's way. (Stagflation). When that happens, it's now obvious that central banks prioritize the economy over society.

crdoconnor 10y ago
>There is not much investment because profits are quite high. There's no direct causal relationship between profits and investment. There aren't any companies that think "you know what? we've got enough profits for now, why do we need more?". There are plenty of companies who see tapped out markets that aren't growing and decide not to invest. Indirectly I guess the accumulation of wealth at the top via profits is party responsible for no money at the bottom to buy products and services. >Decreasing wealth inequality is an end, not a means to an end. If you want a stable economy, focus on prices: inflation and deflation. That's exactly what the fed has had its laser-like focus on for the last ~20 years. Stable the economy was not. Prioritizing inflation while inflation is under 15% is simply prioritizing the needs of those who don't work for a living over those who do. >If you want a functioning society, focus on income and employment. If you want both, then you get the Federal Reserve. The fed only really cared about inflation in the last 20 years in spite of its mandate.
- jganetsk 10y ago
  There is totally a causal relationship between profits and investment: either you reinvest the profits or you don't. And if a huge pile of profits rolls your way... you might not be able to reinvest all of it. Yes, you are right, it can be thought of as a lack of demand. But if the cost of production is plummeting, due to automation, and profits soar... then you would need equally soaring demand to meet it. In this vein, Larry Summers is right with his call for fiscal policy. He is just repeating what Keynes said many years ago -- the government should be the spender of last resort. But this is a race to the bottom (or the top?). How do we stimulate so much demand to keep up with this? Then there is Piketty -- the return on capital outpaces economic growth, and therefore wealth inequality gets worse with time. He proposes we should instate a global wealth tax. This is more along the lines of what you are saying. But his solution doesn't necessarily solve the demand problem. It just solves the wealth problem directly. We don't know, with a global wealth tax, what the impact on demand really will be. Maybe it would lead to a massive deleveraging of consumer and student debt. Demand isn't ultimately the problem... the economy is functioning pretty well. We can make the things that need to be made in the quantities they need at reasonable prices. The problem is the wealth distribution in itself. As for the Fed only caring about inflation in the last 20 years: https://en.wikipedia.org/wiki/Paul_Volcker https://en.wikipedia.org/wiki/Paul_Volcker

crdoconnor 10y ago

>There is not much investment because profits are quite high. There's no direct causal relationship between profits and investment. There aren't any companies that think "you know what? we've got enough profits for now, why do we need more?". There are plenty of companies who see tapped out markets that aren't growing and decide not to invest. Indirectly I guess the accumulation of wealth at the top via profits is party responsible for no money at the bottom to buy products and services. >Decreasing wealth inequality is an end, not a means to an end. If you want a stable economy, focus on prices: inflation and deflation. That's exactly what the fed has had its laser-like focus on for the last ~20 years. Stable the economy was not. Prioritizing inflation while inflation is under 15% is simply prioritizing the needs of those who don't work for a living over those who do. >If you want a functioning society, focus on income and employment. If you want both, then you get the Federal Reserve. The fed only really cared about inflation in the last 20 years in spite of its mandate.

jganetsk 10y ago
There is totally a causal relationship between profits and investment: either you reinvest the profits or you don't. And if a huge pile of profits rolls your way... you might not be able to reinvest all of it. Yes, you are right, it can be thought of as a lack of demand. But if the cost of production is plummeting, due to automation, and profits soar... then you would need equally soaring demand to meet it. In this vein, Larry Summers is right with his call for fiscal policy. He is just repeating what Keynes said many years ago -- the government should be the spender of last resort. But this is a race to the bottom (or the top?). How do we stimulate so much demand to keep up with this? Then there is Piketty -- the return on capital outpaces economic growth, and therefore wealth inequality gets worse with time. He proposes we should instate a global wealth tax. This is more along the lines of what you are saying. But his solution doesn't necessarily solve the demand problem. It just solves the wealth problem directly. We don't know, with a global wealth tax, what the impact on demand really will be. Maybe it would lead to a massive deleveraging of consumer and student debt. Demand isn't ultimately the problem... the economy is functioning pretty well. We can make the things that need to be made in the quantities they need at reasonable prices. The problem is the wealth distribution in itself. As for the Fed only caring about inflation in the last 20 years: https://en.wikipedia.org/wiki/Paul_Volcker https://en.wikipedia.org/wiki/Paul_Volcker