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> capital. We apparently have more of it than we know what to do with (see, e.g., the real estate bubble, the tech bubble That tends to happen when the central
by justinmk 14y ago
> capital. We apparently have more of it than we know what to do with (see, e.g., the real estate bubble, the tech bubble
That tends to happen when the central bank dumps false signals (ie, low interest rates) on the market.
- eli_gottlieb 14y agoIt also happens because capitalists make "more money than they know what to do with". Scare-quotes because they think they know what to do with it: invest it! However, if they all have lots of profits and all invest looking to make additional profits... you get the problem that more and more money goes chasing the same amount of productive assets/investments. The supply of capital has increased versus demand, which will naturally lower the price of capital (ie: return-on-investment). The best thing the rich could do for their own rates of return would be to consume or donate large fractions of their wealth, returning wealth into the economy as something other than capital. This would reduce the oversupply of capital and thus increase its price back up to where capital investment becomes worthwhile again.
- justinmk 14y ago> returning wealth into the economy as something other than capital. This would reduce the oversupply of capital How does one return capital as something other than capital? And how would that decrease the aggregate supply of capital?
- eli_gottlieb 14y agoYou convert capital into ordinary purchasing power by using the money to buy something. This shifts the money from the column labeled "aggregate capital stock" to "aggregate demand for goods and services."
- justinmk 14y agoGiving money to consumers doesn't lower the aggregate supply of real capital, it just sends false signals to producers (and consumers).