Re: Banks vs Capital Markets

["John O'Donnell" <jackodonnell@xxxxxxxx>]

Basil Moore wrote:
>
> Dear Kazuhiro

<<SNIP>>

> I am sure from your point of view the effectiveness
> of monetary policy looks very different. But in my
> mind the larger question is why in the Japanese
> economy has AD not responded to the Bank of Japan's
> lowering of the short term rate to 50 basis points???

Could it be because the ASSUMPTION that printing money is a
cause of positive economic activity? After all, there is no
reason to believe that investment is so one sided as to not
account for the likelihood of success or failure that
production capacity will be met with effective demand?

Wasn't it Keynes who pointed out that those with a
"propensity to consume" but lacking the ability to consume
can have a deleterious effect on an economy. Examine the
argument closely and you may even realize that his analysis
shows it is a change in distribution of the ability to
purchase toward those with a higher consumption propensity
that can bring about recovery and not just an arbitrary
increase in money or its equivalent of low interest rates.

Certainty in changing the distribution of the ability to buy
is a fiscal activity. It is only an incidental outcome of
monetary policy. Attempting to accomplish a change in the
propensity to consume with monetary policy is just as likely
to cause a decrease in the propensity as to cause an
increase. A decrease can only lead to "stagflation" or
recession or depression. It all depends on who gets the
surplus currency.

When a few have all there is to have who can they sell stuff
to? It doesn't take much analysis to see that when an elite
come to possess the productive capacity of a society there
can exist circumstance that ends the game of accumulation.
The solution lies in the ability to increase the cost of
monopolizing the stuff that is and not just allowing the
idling of production capacity force the commoners to beg for
scraps.

This can be accomplished by charging for the society granted
privilege of limited liability at the rates that cause the
greatest rate of growth in the value of that privilege and
granting a dividend to citizen's much like the "Pass GO and
collect $200" from the game of "Monopoly" that is determined
by its effect on the growth rate of the economy as a whole.
However, such solutions cannot be seen by those who refuse
to see that their assumptions about monetary policy are
based on coincidence and not cause.

<<SNIP>>

--
			-- jbod

		Tax Privilege, Not People
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