[PEN-L:430] Re: Re: Re: Re: Naive question on Japanese Debt

["AK Sinha" <aks1v@xxxxxxxxxxxxxx>]

> Michael wrote:
> >
> >So I still want to continue with my naive question.
> >
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>         I've begun to think of a bank loan as a permission slip to use real
> assets -- like steel or wheat, or cotton, or even the labor of people or
> machines.  And when those assets  are used (up) they're gone.
>
>         The piece of paper, the IOU, is a claim to have the real things
> back.  But they're gone.  They have to be produced anew, somehow.  So what
> is a bad loan?  Just a piece of paper that no longer can deliver the
> production?  But the ability to produce -- the steel, wheat, whatever --
> exists whether the paper IOU exists or not.  So a bad loan just means the
> lender is poorer than it thought, but the society isn't -- or is it?
>
>         Was the S&L bailout just taxing everybody to make the lenders whole
> again? But that would be a transfer, wouldn't it?
>
>         Gene Coyle
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I think here the concept of productive and unproductive labor can be
used profitably here. A bad loan could mean that the surplus was
used more like a revenue and failed to be reinvested as capital. We
should also keep in mind that the output structure at any given
time t reflects the decision to save (invest) or consume made in
time period t-1and before. I think, in a growing economy a simple
change in taste (which probably would take place with change in
income) would lead to short term crisis. Just an
hypothesis. Cheers, ajit sinha
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