miércoles, 7 de octubre de 2009

Market evolution. Jorge de Lalama. General Theory of Employment, Interest and Money. Keynes. Chapter IV. Part VII.

The sudden cessation of new investments after the crisis will likely lead to an accumulation of surplus stocks of unfinished items. The storage costs these rarely be less than 10% annually. Thus, the lower its price needs to be sufficient to cause a restriction requiring them to absorb within a period of say three to five years at most. However, the process of absorbing the stocks represents negative investment, which also is against the occupation, and when past experience has positive relief.

A significant drop in the marginal efficiency of capital tends to adversely effect the progression to consume, because it involves a significant decrease in market value of the variable yield securities in the bag.

However, this naturally has a very depressing influence on people who take active interest in their investments in the stock market, especially if used borrowed funds, the willingness to spend of these people are perhaps more influenced by the ups and downs in the value of their investments by the state of their income. With an audience of "shareholder culture" as the U.S. today, a rising stock market can be almost essential condition of a satisfactory propensity to consume, and this circumstance, generally neglected until recently, most obviously serves to aggravate even the depressing effect of lower marginal efficiency of capital.

The duty of ordering the current volume of investment can not be left in private hands.

Overinvestment indicates a state of affairs in which each class of capital goods is so abundant that there is no new investment that promises, even under conditions of full employment gain during the period rather than the replacement cost. Any subsequent investment will be just a pure waste of resources. The investment is in unstable conditions that can not endure, because that reflects expectations that are doomed to be unsuccessful.

Avoid the depression and thus keep us in a near continuous boom.

In 1929, new investments during the previous five years had been conducted in such a huge scale in whole, that the likely yield of further additions was declining rapidly. An accurate forecast would have killed the marginal efficiency of capital to a number of record low, so that the "boom" could not proceed on a firm basis, except for interest rates very low long-term investment and avoiding ill-directed in particular directions that were in danger of being overfished. In fact, the interest rate was high enough to discourage new investment, except in those particular fields that were under the influence of stimulus speculative and therefore in particular danger of being overfished.

Thereby raise the rate, as relief for the state of things resulting from a prolonged period of unusually strong investment, belongs to that class of medicines that cure disease by killing the patient.

The remedy would be several measures to strengthen the propensity to consume, redistributing income, or otherwise, so that a given level of employment requires a smaller volume of current investment to sustain it.

An influx of money to a country means an efflux in another, so that the adverse effects of rising costs and declining interest rates in the interior can be enhanced (if the mercantilist policy is pushed too far) by decreasing costs and rising interest rates abroad.

UK, in pre-war years of the twentieth century, provides an example of a country in which the excessive facilities for foreign lending and the purchase of properties abroad often prevent the falling rate of interest that was necessary to ensure full employment at home.

An unfavorable balance may soon produce a state of persistent depression.

The desire of individuals to increase personal wealth by abstaining from consumption has usually been stronger than the inclination of the employer to increase national wealth, employing labor in the production of durable goods.

The capital is formed not by the propensity to save, but in response to consumer demand resulting from current and probable.

The main drawbacks of the economic society in which we live are its failure to ensure full employment and its arbitrary and inequitable distribution of wealth and income.

Since the end of s. XIX. has made considerable progress in reducing the wide disparities in wealth and income through direct taxation on income taxes and taxes on inheritances, especially in the UK.

Experience suggests that in existing conditions saving by institutions and reserve funds is more appropriate, and that measures to redistribute income in a way that is likely to increase the propensity to consume can be positively discounted growth of capital. It is clear that a high tax policy on inheritance tax has the effect of increasing the propensity to consume of the communit
y.

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