Definitely. I think there's way too much money invested (basically) in money on Wall St. and not enough going to the capital goods on Main St. that produce actual value.

Saving or investing doesn't mean hoarding. The money is still spent but instead of being spent on consumption it's spent on production. For example, if instead of spending $5K to get my house painted I spent it instead on final consumption like a ice cream, the overall wealth of the nation hasn't increased much beyond the profits of the ice cream producer. On the other hand look what happens to the overall wealth of the nation if I did get my house painted and the painters spent the $5K on ice cream.

Maybe, but let's look at the Nordic countries that you are so fond of:

To help understand what this means:


a bit more:


The US has a relatively high consumption rate. I don't buy the argument we need to increase consumption (except for recessions, i.e. short term stimulus spending funded by government). I know some of you might want to move some of that consumption to government, as opposed consumer (i.e. health care), but I don't think you grasp just how much consumption the US has.

There is no other hand. Either way you've consumed 5k worth of goods and services. Someone invested in that ice cream shop and ice cream is produced using capital.

And of course investment is a part of the cycle. Investment isn't hoarding. Savings may or may not be a part of the cycle as the money is neutral at that point. If it's eventually put into the economy it also becomes part of the cycle.

Hoarding is money that's taken out of the economy. Only the very wealthy have the capacity to do that, but they can and do. Now that money may be a passive part of some OTHER economy but it's taken out of the economy that created it. Hence it's a drain.

I'm merely noting a con of a tiny, super wealthy investor class by saying they tend to hoard. Obviously they still allow the lesser humans a bit of wealth to use in the economy they rely on to survive.

LOL

The consumer isn't investing. They're consuming a product that is the result of an investment.

You seem to think investment and consumption are distinct when, in fact they're directly related.

Also, innovation can be very slow in traditional companies where there is a small highly paid board running the show. I can imagine some industries would be better for the coop model but your main argument is that no one will work for 30 times what the lowest paid guy in the company will or that someone needs complete control over people to get them to be productive.
I'm not convinced of either of those things. Not every human being wants to be idle. Many of us actually enjoy working and using our talents. You're assuming a small subset of individuals represent the whole.

Banks using saving to fund investments is basically not true and is a common misconception even amongst economists about how money/investing works.

Banks invest primarily via money creation, e.g. the creation of debt.

Capital reserves form a basis but lending will be several ratios of the reserve.

Also talking about socialism.

The federal reserve recently printed several trillion dollars so as to purchase pretty much any debt banks wanted to exchange in return for the printer go brrr money.

Having removed liabilities from their books they are now able to lend that brrr money into the economy.

The fact that we keep printing money and even propping up the stock market and can't get a rise out of inflation seems to indicate that supply side economics has run it's course. Now that all the purchasing power has been plundered the 'wise investors' are trying to figure out how to keep the host alive for a while longer.

I hope they do. But only because I'm part of the host.

There is no rise in inflation because of the propping up the stock market + (real estate).

The money goes into assets not main street.

Low mortgage payments, thank socialism is a line Im going to start using more often.

If IRs were purely market driven they would be several magnitudes higher.

Which is fine as assets are needed.
It just seems like consumption needs a big boost at the moment and man some people don't seem to like that idea. lol

No, I didn't. It was an expenditure, sure, but it wasn't a consumptive expenditure but rather a productive expenditure since by selling the capital (my home) that underwent the capital improvement (painting) I can recoup the $5K and either consume or reinvest it, hence I didn't consume it.

Even if we wanted to... (a) how are we going to increase consumption without first increasing production; and (b) how are we going to increase production (if/when we're back at full employment and operating at full productive capacity) without increasing productivity; and (c) how are we going to increase productivity without increasing investment in productivity; and (d) how are we going to increase investment in productivity when we're diverting money away from investment and towards consumption?

No, you consumed it. I promise you that purchase is in the numbers that are reported as consumption in the BEA report.

The sale of the house is a capital gain of course. But you still consumed.

Dirty bugger !!!!!

I think you might be confusing personal outlays with personal consumption:

Table 5.1 shows the kinds of transactions that are included in and excluded from PCE.

It's not under PCE it's under Housing Consumption Expenditures.

https://apps.bea.gov/iTable/iTable.c...ying&thetable=


A house is sometimes considered consumption and sometimes an investment but there's no question that the services used to maintain a house are 'consumed'.

Based on that list, and an absence of a definition, it appears the list is talking about stuff like paying somebody to cut your grass. Capital investment is not consumption. Remodeling a home is certainly considered capital investment, and that includes painting.

Yeah, I'm pretty sure "routine household maintenance" basically refers to things a tenant is required to perform as opposed to items landlords typically cover. But either way it's a trivial point to belabor since there are plenty non-consumptive examples that can make the same point.

A house isn't capital because it doesn't produce anything.

You guys are funny though.

Sure, your point was (I think) that it's better for the economy to spend on production than consumption.

But you define things that are considered consumption by economists as production (capital ) so maybe we don't actually disagree in concept. Only semantics.

Essential Processes of an Economy: Production, Consumption and Investment

RF, you really should read this. A house is an asset. It produces a living space which has a value, and it's value tends to increase with maintenance and upgrades. Which makes any upgrades you do an investment, not production, or consumption. The person receiving the investment capital uses the capital they receive to produce the upgrade with their labor and supplies, and any remaining amount for consumption and/or investment. Capital is a tool that facilitates economic activity.

LOL

From your link :

"The late Lord Keynes, an eminent economist, showed that the level of national income and employment depends upon the level of aggregate effective demand. Consumption is one constituent of this aggregate demand. Changes in propensity to consume of the people will bring about changes in income and employment in the country."

I didn't take you for a Keynesian. But that sort of makes my point itt.

As far as what capital is :

In economics, capital consists of assets that can enhance one's power to perform economically useful work. For example, a stone or an arrow is capital for a hunter-gatherer who can use it as a hunting instrument; similarly, roads are capital for inhabitants of a city. Capital is distinct from land and other non-renewable resources in that it can be increased by human labor, and does not include certain durable goods like homes and personal automobiles that are not used in the production of saleable goods and services. Adam Smith defined capital as "that part of man's stock which he expects to afford him revenue". In economic models, capital is an input in the production function.

https://en.wikipedia.org/wiki/Capital_(economics)

No one is arguing a house is capital (it's a an asset), except you, and you would be wrong. Economically useful work consist of investment, consumption and production. Capital and a house are mutually exclusive entities that interact with each other for various ecnomic activities including, investment (remodeling the house, purchasing a house), consumption (paying for grass to get cut), and production (producing a living space, or rental income).

read this:

https://en.wikipedia.org/wiki/Capital_asset

No I'm not.

I'm merely pointing out that the example of painting your house is considered consumption by the BEA (and most economists).

You don't like that for some reason so you're trying to argue that it's not.

A house is a capital asset and when you sell it at a profit you have to declare capital gains. That doesn't mean you didn't consume items while maintaining it.

For example a mutual fund is a capital asset. If it has a yearly maintenance fee that's counted as consumption.

Also, it's not very hard to find an economist who will argue that a house isn't even an investment. I'm agnostic on that. I figure it's a better personal finance decision than renting because you can get at least some of your cost back when you sell it so it's the +ev choice.

But it's kind of naive to think that because you're a homeowner you're a capitalist.

Well I chose a horribly ambiguous example to use, so there's that.

I think we agree that expenditures divide between productive/capital expenditures and consumption/unproductive expenditures. Where we might differ is that I don't consider the type of good purchased as the qualifier but rather the 'intent' for which the good was purchased. For example, buying lemonade with the intent to consume is a consumptive expenditure whereas if the intent was to resell (presumably for a profit), it's a capital expenditure; buying a tractor to be used on a commercial farm is a capital expenditure but a consumptive expenditure for a non commercial farm; etc.

As far as I know most economists will agree with that in a theoretical or technical sense but in a practical sense the BEA doesn't drill down that deep into motive especially when it comes to non-business entities.

This would have been funnier if it made sense... come on, napoleon and snowball have totally opposite rhetorical styles