Thursday, November 8, 2012

Supply and demand revisited

Adam Smith would be appalled at the charade that we know as "capitalism" today.

As the leading edge of our capitalist class gradually got hold of more and more levers of power, it has become less and less probable that anyone will call their bluff.

There is a reason that the effective interest rate is zero and that corporations all over the world are sitting on trillions in cash.

It's all about supply and demand.

There is an over abundance of capital and an undersupply of demand in the economy today.

That is the result of our shaping the economy in favor of the capital accumulators.

Lower taxes mean quicker capital accumulation on one hand and deferred public spending on the common good on the other.

We've been cutting taxes to the point where the capital accumulators have simply accumulated so much capital that they've run out of places to put it.

Which is why the cost of money is next to nothing.

Which, ironically, is why the banks have so little incentive to lend it out.

But they do have a powerful incentive to back those hedge funds that can return 100% a year.

What they're forgetting is that real wealth ultimately comes from real people doing real stuff that other people will pay for.

We're not the tail.

We're the dog.

It's time we acted like it.


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