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I cannot say this any better.

Discussion in 'Economics, Business, and Taxes' started by Woolleybugger, Jul 6, 2012.

  1. Woolleybugger

    Woolleybugger Mayor

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    "Right, Dr. K. Business is microeconomics, and has nothing at all to do with maintaining the macroeconomic system under which it operates.

    A very simple understanding of the macroeconomic requires that you understand that over the long run (the Fed's charter is to stabilize over the short run using monetary policy) the value of production has to equal wages otherwise workers cannot afford to consume what they produce. I guess this principle of Capitalism is too simple for most people to understand, even those in the financial business whose job it is to manage the money system.

    When this principle of the capitalist money system is breached - if wages paid are too small to buy the results of work - then consumers must be lent the extra money to buy what workers produce. The result, if this goes on for too long, is the kind of debt crisis we are now experiencing. The cause of this is insufficient wages in comparison to the value of production or, if you wish to use another terminology, excessive profits (not reinvested in production). Either way you try to explain it someone's ego (like Mitt Romney's) gets involved and the argument wafts off into irrational irrelevancy.

    Profits (not spent for consumption) kept by the owner and not paid out in wages MUST be invested in more productive business that create new jobs and wages. Otherwise the system of Capitalism does not work.

    And that has been going on for far too long."

    Posted by an RPW from Arizona in the NYT today in response to Krugmans article. This is so perfectly worded and clear that maybe even conservatives can understand it.
     
  2. Lukey

    Lukey Senator

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    the value of production has to equal wages

    What kind of Marxist bullshit is that? Where is there room in such a scheme for profits? Of course, there is none, which was obviously your point...
     
  3. OldGaffer

    OldGaffer Governor

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    Wingers fail to see this, they think dropping a few hundred million out of the economy and into off shore banks does not affect the economy at all.
     
  4. Woolleybugger

    Woolleybugger Mayor

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    Did you see Lukey immediately go to Marx? He sees money get concentrated in the hands of a few without any re-circulation into the economy and says...thats exactly what we want to happen. But what this man clearly explains is that in order for the rest of us to afford to buy the things we produced, we have to borrow money to do it because our shares of the profits made are not enough to keep up...
     
  5. OldGaffer

    OldGaffer Governor

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    Lukey always goes to Marx, he is like Pavlovs dog on the subject.
     
  6. JuliefromOhio

    JuliefromOhio Senator Supporting Member

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    there used to be tax incentives for business owners to reinvest in their companies. when did that go by the wayside?
     
  7. Lukey

    Lukey Senator

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    What else can you call it? It basically says if the rich won't use their wealth to create jobs we are justified in taking it from them to fund transfer payments. It's (thinly veiled) Marxism...
     
  8. Bo-4

    Bo-4 Senator

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    DING DING DING- we have winner! :D
     
  9. Woolleybugger

    Woolleybugger Mayor

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    When we dropped the high marginal rates then capital formation and reinvestment in the companies became less interesting than just taking the gains and paying a lower rate. Owners started to take profits instead of keeping them in the company and growing it....this is why Ronald Reagan got a one time spike in tax revenues when he dropped the capital gains tax rate in 83. Everyone cashed out in one giant asset sale.
     
  10. Lukey

    Lukey Senator

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    When you progressives succeeded in banishing capitalism from the US economy...
     
  11. lupehernandezdepedajack

    lupehernandezdepedajack Mayor

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    I just don't get it you are so concerned about what folks do with their property what you say is a few hundred million and its effect on the economy. Yet you defend illegal aliens and the billions upon billions they send back home not a paltry few hundred million you are wringing your hands over
     
  12. Woolleybugger

    Woolleybugger Mayor

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    I wonder how Ericsson survives in that hell hole of marxism...
     
  13. lupehernandezdepedajack

    lupehernandezdepedajack Mayor

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    Profits (not spent for consumption) kept by the owner and not paid out in wages MUST be invested in more productive business that create new jobs and wages. Otherwise the system of Capitalism does not work.

    And that has been going on for far too long."


    What no mention of the 20 plus billion disappearing out of our economy going to mexico? The lions share being sent by illegal workers and that doesn't count the drug money or money for El Slavador, Honduras, Guatemala and all points south. Big difference in holding the cash to find the best investment and sending it out of the country to prop up a corrupt regime. How do you think Carlos Slim became the richest man in the world. Mainly by his phone company financed in large part by the wages of illegal aliens sent home to families.
     
  14. Woolleybugger

    Woolleybugger Mayor

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    20 billion out of a 14 trillion yearly economy is not much but it does do the same thing for our economy as does cash hoarding by the wealthy. But at least that 20 billion gets spent somewhere in Mexico to benefit as many millions as it does. I take heart in the fact that this amount does indeed help a ton of people even if they are in Mexico. The 40 billion the Koch brothers hold...not so much.
     
  15. MaryAnne

    MaryAnne Governor

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    Wooley,even a smart old man named Henry Ford knew he had to pay wages so his workers could buy his cars they produced.

    The Right is so penny wise and lb. foolish I am amazed at how stupid they are.
     
  16. Lukey

    Lukey Senator

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    Of course it is small businesses, which account for most of the new jobs in a dynamic capitalist economy, that are the first to go. Marxist governments often turn to state support of large corporations (see GM) to keep the illusion alive that they aren't killing the economy.
     
  17. gabriel

    gabriel Governor

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    so they invest in a totalitarian china!! lol
     
  18. imreallyperplexed

    imreallyperplexed Council Member

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    Wooley,

    I have a question. It seems to me that what you are saying is that "money as money" is not productive if it justs sits, It is only productive to the extent that it circulates and spurs (or - God forbid that we use the word - stiulates) economic activity. So that money that sits on the sidelines is essentially worthless (from a growth perspective) unless it is used to buy the fruits of production, to reinvest in the means of production, or to innovate in organizing and developing new forms of economic action. Is that correct?

    The other thing that I found confusing was that it seems to me that the value that is distributed for consumption purposes could be wages - money paid to employees (including the owner if he or she works) and divedends paid to investors (also including the owner). Wages may be used for consumption, inestment. or innovation/ Ditto for divedends.

    I think that this is still consistent with much of what the author you quoted wrote but adds a few specifics.


     
  19. degsme

    degsme Council Member

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    I think you are confused with VALUE vs. COST.... but then again someone who has a degree in Economics ought not be expected to understand the difference....LOL!!!
     
  20. degsme

    degsme Council Member

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    NAME A SOCIETY THROUGH OUT ALL OF HISTORY that has not engaged in wealth transfer. You cannot.

    Now as to the rich - as Ben Franklin pointed out, their "wealth" is itsefl a creature of society and thus is forefeit to the society if necessary.



    But again you don't seem to understand the difference between COST and VALUE. The wages of workers has to equal the VALUE produced. not the COST of production. So you can have profit, you just have to share that profit with the workers OR you end up with an unsustainable economic system.

    That's simple arithemetic.

    If the worker's salary is say 0.9 of the Value created in the economy, then iteratively with each production cycle, 10% of the GDP is sequestered. That meanst that GDP SHRINKS by 10% each cycle. No it never goes to zero, but it rapidly declines.
     

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