RE: "Stock Market and the Real Economy", a reply to Clifford

[Clifford Poirot <cpoirot@xxxxxxxxxxx>]

see a few comments below. The message has been snipped for brevity.

> -----Original Message-----
> From:	Olivier Giovannoni [SMTP:frencholivier@xxxxxxxxxxx]
> Sent:	Monday, March 13, 2000 4:06 PM
> To:	POST-KEYNESIAN THOUGHT
> Subject:	"Stock Market and the Real Economy", a reply to Clifford
>
>
>
> Do you think this structural change is likely to have a big impact on the
> stock market, and therefore to spread wealth -I mean money- to all the
> people of the social ladder ? If so, I think the gross marginal propensity
> to consume is going higher, boosting consumption, and therefore the
> demand-side and growth ?
	[Clifford Poirot]
	I agree, at least in part, about the structural change in equities.
Much of this seems to be driven by the flow of money into 401K's and pension
funds. Curiously, this is not counted as savings in the U.S. statistics,
even though it is clearly deferred compensation, and thus money not spent on
consumer goods. For the most part, the beneficiaries of these plans are at
the upper part of the economy. Those who benefit from these plans are
professionals, and some union workers. Those at the bottom, are not
benefitting.

	Incdentally, Douglas Orr has an article in the Journal of Economic
Issues, September, 1998 "Strategic Bankruptcy and Private Pension Default"
that is well worth looking at and addresses some of the deficiencies in
ERISA (the U.S. law that governs private pension funds).

	I think that a lot of the consumer growth is led by 1) an increase
in employment and rising real incomes and 2) the expansion of credit by
credit card companies.

> Or do you still think the main impact of the recent rise in the Dow is on
> Investment ?
	[Clifford Poirot]
	I don't think that I ever said that.
>
> "Let's say that an increase in labor productivity OVER WAGES leads to an
> increase in corporate profits and hence an increase in investment demand.
> The increase in spending leads to increasing GDP, and a decrease in
> unemployment."   ???
	[Clifford Poirot]
	Yes- I agree with that statement and had intended to specify it in
my original post.
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