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No. More like a FED sponsored 401k match for wages. If a company thinks it can earn more by producing more goods, it will hire more people and give them wages.
by NTDF9 7y ago
No. More like a FED sponsored 401k match for wages. If a company thinks it can earn more by producing more goods, it will hire more people and give them wages. The FED will match it, effectively bringing money into circulation.
As company gets more and more efficient, they wouldn't need employees. But this would cause lesser money to be brought into circulation, thus eating up the companies earnings itself.
If the company wants more debt, they can go borrow from others (rich institutions, individuals etc) but this activity will not create new money. Thus, total money in circulation remains the same.
If an individual wants to buy a house, the house price will effectively be closer to the median affordable income of population. Thus, it will incentivize individual to produce more goods and services to reach median income at least. The only way to become richer is to produce more.The rich can try to buy more houses but it wouldn't be possible as much since leverage and speculation is much harder.
- harryh 7y agoYou have essentially described a world with extremely high interest rates. We have empirical data on what happens in such worlds: economies tumble into recession and there is mass unemployment.
- NTDF9 7y agoSo a world with lesser speculation? Economies that move steady in the first place so that recessions aren't these massive downturns causing so much grief?
- harryh 7y agoNo, not like that at all. An economy where new business formation is radically more difficult so the economy is far slower to adapt so there is mass unemployment and human misery. Go talk to someone who actually runs a real business. Especially a business with capital costs. Ask them if they could run it without access to credit. The answer is no.
- NTDF9 7y agoWhy would business formation be so difficult if the cost of production will be so low (because there is close to zero speculation?) Why would capital requirements for capital intensive businesses be so high when the equipment they are trying to buy will be cheap? If they need to buy lots and lots of equipment right now, they could issue a bond, investors looking to make a dime will lend. Since inflation is low because of no speculation, interest rates would be low as well. The one big caveat I see is slow growth but that's exactly what I'm looking for. Slow sustainable growth directly proportional to labor.