Tag Archives: borrowing
The Great Depression of the 1930’s has been very thoroughly gone over in the literature and there would be no need to mention it here except that it is necessary to describe it in terms of the concepts presented in these posts and to link it with the present day. ... Read more
It is necessary for a lender of money to charge interest because the purchasing power of each money unit is generally expected to fall with time. This has been the trend historically and the very operation of the economy tends to make it so. ... Read more
The direct addition of value inflation to the rate of price increases is quite small. The larger effect arises from secondary influences, in whose shaping human psychology plays an important part. These influences are triggered by the small value inflation component and its corollary, a slowing of the rate of net throughput increase relative to gross throughput increase. ... Read more
Another misconception held by many in both “rich” and “poor” countries is that the “rich” should go on making and using ever more goods and services, thereby “creating wealth” that can somehow find its way to the “poor” nations, making them “richer”. ... Read more
The plan which eventually became acceptable, more readily under pressure of the Second World War, was that of deficit spending, whereby the government deliberately set out to spend more than they received through taxes, duties, and charges. The gap could be filled by borrowing, thereby mobilising stagnant funds. ... Read more
The statements in this post apply particularly to the economic predicament of the 1970’s and 80’s, which may recur under the pressure of modern problems. They do not necessarily hold true for every form of economic malaise; for instance, they would have been inaccurate for the Great Depression of the 1930’s. ... Read more
Governments in many less perfluent countries have borrowed thousands of millions of dollars in attempting to achieve permanent increases in the level of national economic activity and living standards.
The belief was that by borrowing “wealth” from the “rich” nations, they would be able to use it to generate more “wealth” of their own, enough to pay back the original “wealth” with interest and still leave enough to make their own country permanently wealthier. ... Read more
Someone asked me the other day if I thought the world economy would get back to ‘normal’ this year.
By ‘normal’ this person meant the familiar unsustainable economic pattern of ever-growing consumption. I explained that this might well happen for a while, but because it was not sustainable it would run into trouble and be stalled again in some way, as it was late in 2008 and has been before in recent history. ... Read more
Before and during the Great Depression there was under-consumption due to chronic under-payment of workers – fewer goods and services were being consumed than available workers and plant could structure. But what of the stagflationary situation, when chronic overpayment of workers was the distortion affecting more perfluent economies? ... Read more
Before going on any further it is necessary to discuss the term aggregate demand.
Aggregate demand is the sum of two components – investment spending and consumer spending. It would be better if these were treated separately as independent channels through which money flows, since the relation between them is by no means constant in the sense that they can be lumped together and boosted or damped down together. ... Read more