Re: Why (new) investments rob Peter to pay Paul.

["William B. Ryan" <william_b_ryan@xxxxxxxxx>]

***a redistribution of realized profits amongst
employees keeping pace with their productivity
increases maximizes demand for final output; and
would thereby minimize any involuntary unemployment
from occurring in the first place.***
-----

Such "redistribution" is impossible.  Profit is the
operational increment to the statistical firm's net
worth, not its cash account.  Depleting the
statistical firm's cash account to pay dividends
would cripple it since its cash account is working
capital necessary for the firm's continued operation.
--

***the bulk of realized profits are obtained at the
cost of losses elsewhere in the system***
-----

This falsely assumes it is a zero sum game, which it
is not in either real or financial terms.  Firm A
sells the machine it has manufactured to firm B at
price X.  Price X includes reimbursement for its
costs of production Y, so the firm books profit on
the transaction in the amount X minus Y.  Firm B
books the transaction as an equal exchange of assets
with neither profit nor loss:  the machine priced X
is exchanged for cash in the amount of X.  If the
transaction represents net new investment to the
economy at large, rather than the mere replacement of
a worn-out machine, the transaction is accommodated
by the net increase to bank credit broadly defined.
--

***New money, advanced through the banking system for
novel ventures, bears no relationship whatsoever to
any already available final output, nor to in-
pipeline growth.***
-----

It does have some relationship though the
relationship is not automatically linear.
--

***At first blush it would therefore seem obvious
that its distribution into additional demand for
final output must be robbing those who already hold
their allocation rights in full.***
-----

What might seem "obvious" at first blush might not be
so obvious upon reflection.
--

***the extending of new money to cure involuntary
unemployment has to be the way to go, as there can be
no doubt that employing the unemployed raises the
overall standard of living.***
-----

Not if it's "busy work" for the sole purpose of
distributing incomes.  While it is true that the
income so distributed allows you to live, which is
ipso facto better than the alternative, it would
seem, it is also true that the wasted effort detracts
from your standard of living as compared to what it
would be without the wasted effort.  That should be
true for the whole economy.  The "new money" could
more rationally augment effective demand if it were
distributed by means of dividends not tied to
employment.
--




____________________________________________________________
Enter for a chance to win one year's supply of allergy relief!
http://r.hotbot.com/r/lmt_clrtn/http://mocda3.com/1/c/563632/125699/307982/307982