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Re: Keynesian Chickens Coming Home
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sczech
jobs and capital
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Feb 3 08 3:40 PM
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My Recent Posts
Quote: "But the problem for the working poor does trace back to the basic of economics of supply and demand. There are just too many people for too few jobs."
That can not be possibly true. There is always an infinite amount of work available. Just look around at the disintegrating infrastructure. People work and expect to be paid with the fruits of other people's labour. (It is an illusion to think that people are being paid in money. Money is only a surrogate for the work of others). To say that there are not enough jobs available means at best, people can not find work because a large number of other people does not want to work.
I believe it was Henry Ford who said that when manufacturing a product, one must make that product affordable for the workers making the product. So the conclusion is, to help the poor, develop new attractive products which can be made cheaply and which attract a high demand in the marketplace. That is the essence of a flourishing economy. Capital is not only financial capital. The intellectual capital capable of creating new jobs by creating new products is perhaps even more important for the future wellbeing of the US economy.
Quote: "Here's a question: Are today's hedge funds and derivatives actually 'Capital' in the sense that Andrew Carnegie or John Rockefeller or Henry Ford would have understood that word as part of the Land, Labor, Capital formulation of wealth? Or are the hedge funds and derivatives merely an accounting notion for a new kind of private wealth, which lies outside of the 'Wealth of Nations' that the capitalist system expects to be part of a healthy economy?"
The answer to that question is: Hedge funds do not have much capital as they operate with lots of leverage. The money they invest is credit money. Credit money represents future capital as a result of future earnings. Perhaps this is the deeper explanation for the popularity of hedge funds. They represent a business model which allows them to make money today without implementing any real existing capital. They make money in the present with capital which will be earned in the future. You can not build factories or rail roads that way. A very good example for the above thesis are the so called "sovereign funds". These funds invest Dollars which were earned by delivering to the US oil and lots of other foreign made products. Of course, these Dollars are promises to deliver US made goods and services in the future. These future US made goods and services is precisely the capital being invested by the sovereign funds. A more pessimistic interpretation of the sovereign funds is: they attempt to convert worthless dollars (since they will not be honored by the US) into claims on tangible wealth represented by stocks of non-US based companies.
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