Re: how to compare living standards


"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message
news:foe312hqf3o6hg66p2llbvtad61r296a2a@xxxxxxxxxx
On Fri, 10 Mar 2006 09:39:12 -0600, "Jim Blair" <jeb@xxxxxxxx> wrote:


"Jim Blair" <jeb@xxxxxxxx> wrote
.....

I say that when people invest in stocks and bonds rather than spend on
immediate consumption, economic expansion is enhanced which generates
revenue for both state and the federal governments. And even when the
money
is invested rather than being collected by the US government, the economy
is
enhanced. But you two probably don't agree.

WFH::

"Investing" in the sense of buying stocks in the secondary market is
merely trading, not investing. Only the purchase of new issues can be
thought of as investing, although those funds often go to paying down
debt, buying other companies, or issuing bonuses to employees rather
than adding to the productive capacity -- which is what investing
really means.

Hi,

But people buy stock in the first place because there is a market where
they are bought and sold.
And the debt a company is paying down was caused typically by expansion of
capacity or improvements.
Employee bonuses are a form of compensation, to retain or reward.

Do you say that the "capital market" does NOT supply capital?


There must be a balance between consumption and capital spending if
the economy is to grow.

I agree.

.....Firms will not expand productive capacity
unless there is sufficient demand. The problem is that one person's
consumption is another's income, and demand ultimately depends on the
national income. A net reduction in consumption can actually depress
economic growth.

But do you think "under-consumption" is a problem for the US economy today?
Are Americans currently spending too little of their income and saving too
much?


But note that since Reagan lower tax rates are producing much higher tax
revenue.

And a much higher national debt.

Because of increased spending.

Reagan's deficits were largely to win the Cold War and build up the military
that was used to win the First Gulf War.

Rather like FDR's much larger deficits (relative to GNP) were to win WW II.

The federal deficits between 1990 and 9/11/2001 have no such excuse.

....Shifting some of our saving out
of the "Social Security Trust Fund" and into "IRA"s does nothing to
ameliorate that problem.

That is not obvious to me. Do private companies make better use of money
than the US government does?

It's not at all clear. Enron, WorldCom and the like would suggest
that private companies often make much worse use of the money. And
many businesses fail due to bureaucratic sclerosis causing costs to
run out of control.


I agree that private companies can also waste money and make poor
investments. But they don't do that on the same scale as the federal
government.
What private company pays employees to not work for generations, like the Ag
Dept pays farmers to not grow crops? Or to grow things that no one wants to
buy?

Or as appears to be on the horizon, spends billions of dollars to build
houses below sea level in a hurricane zone even as the land is sinking, sea
level is rising, and hurricanes are expected to become larger and more
frequent?



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jim blair (jeblair@xxxxxxxx) Madison Wisconsin USA.
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