Dr House wrote:Is available capital a better word? The point I'm trying to make is that we need as high a store of unconsumed resources as possible, to direct them to investment.
We don't need
unused capital, we need
available capital. Capital availability is best tailored to demand when the money supply can be raised quasi at the point of delivery, i.e. through credit refinancing if necessary. Note that not every credit has to be refinanced.
The danger being that banks are liable to use the money for unproductive speculation (see: the current derivatives mess), crank up the returns available from it and divest the economy from fixed capital formation.
I would have thought that this danger is much greater if banks have their hands on a large amount of unused capital. I don't see how they are going to use
refinanced capital, i.e. money that
is already invested and that they are now reimbursed for (if at interest), for unproductive speculation. I'd say the less money a bank actually has available, the less it tends to invest in harebrained investment schemes.
Savings here includes any store of money available to be lent or invested.
But again: your definition of "savings" here also covers refinancing in the status quo? Earlier you used a narrower meaning of the term, if I'm not mistaken, namely "savings" in the sense of money actually saved, in saying that people ought to save a lot more so more capital is available for investment. I then introduced credit refinancing into the discussion. You couldn't avoid agreeing that capital can also be made available in this way, so you chose to call credit refinancing "savings" as well because both sums of money end up on the same side of the balance sheet. This seems obfuscatory to me, because earlier you clearly wished to imply that private persons or by all means companies ought to save more, i.e. actually defer consumption, or money would not be available. Now you seem to be agreeing that this is not actually necessary.
From a practical perspective I believe, as I've stated before, that the savings rate needs to be as high as possible while realizing at the same time that the poor have difficulty in saving, thus the government is to assist them in doing so in order to reduce the human cost of the policy.
Really? This is more generous than what even I would have envisaged. You're going to pay the poor enough to live
and give them something to build a savings account from into the bargain?
Why then am I so insistent on savings and not government pension programs like today? Because apart from the positive impact on the credit pool, individual savings are significantly safer than government pension programs as they are generated throughout the individual's working life.
That entirely depends on how the pension program is financed. The only thing that makes pensions safe is a vibrant economy. If pensions depend on savings and you save all your life and then mega-inflation hits, your bank account and prospective pension goes up in smoke. If, say, no drugs are produced any more, all your savings will not buy you any.
The goods that a pensioner can buy for his money are nothing but a share of the current production of goods anyway, and the distribution of goods produced could be regulated any which way; you could hand pensioners food stamps and drug stamps and RV stamps and Caribbean cruise stamps if you were so inclined and if your economy was organized so as to support that. Anything a pensioner uses comes out of current production, so there wouldn't be a fundamental problem in e.g. paying every pensioner a sum of so-and-so-many dollars a month and gathering this sum by taxation (on whatever you wish). As long as the production (and/or the trade balance) keeps up so that there is enough for the country's pensioners to live on, the distribution of goods can in principle follow any way that strikes your fancy as long as it delivers the goods to them.
This would make pensioners dependent on a government program, but then, in your model they are dependent on banks and in part on the government as well (the poor).
All the money you draw on retirement is already there, unlike with PAYG systems where the money you draw depends on the current working generation. Thus, the risk of outlays outrunning receipts (which will happen to every pension fund in the West at some point in the next 30 years), is eliminated.
I don't advocate systems that rest completely on the working population, like we have in Germany. They put the burden of paying for an increasingly elderly demographic on too small a basis, and if pensions were to be financed only through this route, the system could indeed go broke. Fortunately, there is no need for pensions to depend only on the money earned by the
workers of the current generation.
Germany has been absorbing every industry across the Eurozone since the inception of the Euro. It now enjoys the world's third-highest trade surplus (behind Japan and Germany), and if I'm not mistaken its second-highest wages behind Switzerland.
Behind the US and Japan, surely.
It also enjoys the highest population in the entire European Union. How does Germany stand in regard to the trade surplus per population relationship? The highest wages in the EU must be paid in Scandinavia, I believe. And I'm not aware that we managed to absorb e.g. the Finnish telecom industry, or Volvo, or actually a lot of very qualified industry all over Europe. There may be Germans holding shares in a lot of them, but we don't see many starving Danish migrants here looking for any cheap work they can get. Also, the other European states obviously are still able to tax their companies enough to not have gone completely broke, so that would indicate that there is some industry left in place in the Netherlands.
Given that the global inflation rate is positive, we're a long way off from that bridge. Let's cross it when we get there shall we?
So you give up any claim of proposing a theoretical general system that would work in permanence?
Capital intensity is nevertheless necessary in the sense that it increases productivity per head, which as capital expansion continues (which it does, because there are still economies of scale to be had from expanding production), means higher salaries for the new employees demanded. In the sixties Japan and the US were the most capital-intensive economies in the world, and they had extremely low rates of unemployment.
That was before the widespread arrival of information technology and at the very beginning of robotics. By the way, most jobs today get lost in the service sector currently. In the 60s, you still had typewriters, filing cabinets, forms to be filled out by hand, you had to use actual stamps for letters etc. etc. Far more personnel was required to serve customers. As a big case in point, letters in the 60s were sorted entirely manually. Now most are sorted by machines, which was only possible through fairly recent advances in scanning and information processing. Mail companies all over the developed world now need far less employees than they used to. Look at Amazon: no human is required for the ordering process, just a handful of geeks who do maintenance on the computer system. The books are automatically taken off the shelves by robots according to the orders filed in the system. The system also keeps an eye on the stocks and vastly reduces the number of actual people responsible for buying. It would be easy to find further examples.