with all due respect, if you think fractional reserve lending = wealth creation, you have no idea what you are talking about. when i deposit $100 in the bank and the bank makes $1700 worth of loans on the strength of my deposit due to the multiplier effect, that's not wealth creation. it's leverage creation. worlds apart. simultaneously you suggest that a farmer who starts with sixty acres and expands to sixty thousand acres, employing thousands of his countrymen and feeding hundreds of thousands in the process, is NOT a creator of wealth? lunacy
speaking of lunacy, i spoke with a lyndon la rouche devotee at my local post office. they would definately agree with your thinking dark and rouge. i respect both of your intellects from previous postings, but you guys are most definately lacking some basic economic theory and are stuck in the past. best, surfer
seriously, the lyndon larouce people who hang out at my local post office have much in common with your thinking dark and rouge. as a proponent of the free market, you guys worry me. best, surfer __________________ walking on a tidal wave......
how am i stuck in the past, and what do my views have to do with lyndon larouche? i am one of the most pro capitalism, pro free trade people on this board. i only stepped in here to point out that consumption does not automatically create value and that short term decisions have significant long term effects. as i think i said pretty clearly, the issue is making poor consumption choices and getting into a destructive debt cycle. WHAT does this have to do with protectionism???? please clarify the basic economic theory that i am lacking, and while you're at it maybe explain the larouche connection....
by the way, what were you referring to in aroguetrader's post when you wrote the above as reply to him? i don't see anything he said there that is foaming at the mouth protectionist either. can surfer come out to play hardball?
Here is a good example of wealth creation, taken from Trader Vic's "Methods of a Wall Street Master:" "The first net fisherman had to save in order to acquire the knowledge, time, energy, and materials to construct the net. Once he created the net and learned how to use it, he saved enormous amounts of productive energy by making each of his working hours more fruitful. He could not only provide fish for himself and his family, but could trade his surplus for the products of others. Fish became less scarce because they required less labor to attain, and therefore his neighbors could afford to specialize in producing other necessities to trade with him for his fish. This example, on a primitive scale, shows how the efficiencies gained from one man's saving, innovation, investment, and capital accumulation filter through the community and make everyone more productive." Wealth creation comes in the form of innovative productivity gains applied through hard work over time. Wealth creation is measured by actual, tangible benefit in terms of a sustained increase in output without commensurate increase of input. The fractional reserve system is nothing more than grease for the wheels- a way to put more capital in circulation without the hassle of a printing press. It's leverage, plain and simple- and leverage is a value neutral tool that can work for good or ill. The money lent still has to go back to the age old definition of wealth creation- innovation and improved resource maximization applied through work- if actual new wealth is to be created. If the money lent is invested poorly, the system contracts and wealth is actually destroyed in the process. Transferring money from one party to another is thus NOT the same as creating wealth. There is only a net gain through productivity increases via more efficient (which is usually more innovative) maximization of available resources. To suggest that "it's all the same" in terms of consumption choice is incredibly backwards. The whole reason capitalism works is because millions of free market entities, all tending to their own gardens, are able to make smarter choices individually and thus benefit the entire system collectively. Free markets are only as smart or dumb as their participants. Thus again, when you say consumption choice doesn't matter, it is only because you assume rational choices will be made by 'other' entities and cancel out the poor choice. But in selecting an 'other', all you do is pass responsibility down the chain. If consumption choice doesn't matter for any given free market entity, then it doesn't matter for the whole. If consumption choice matters for the whole, then it matters for each entity individually. Again, America's problem is not free trade. Free trade is great, and I wish it were a lot MORE free- a pox on all tarriffs and subsidies. America's problem is spending money it doesn't have on items of dubious long term benefit. And again I ask, HOW is this observation protectionist?
As I alluded to, the author makes some dubious generalizations. There may also be some theoretical problems with some of his conclusions. But he does focus on a practical issue, namely the fact that we are heavily dependent on vendor financing, as another poster put it. We run a tremendous deficit in manufactured goods trade. We also run a tremendous fiscal deficit, part of which is being used to pump up demand. Our Asian trade partners are buying up this debt with both hands, not out of altruism but to keep the dollar strong against their own currencies. So we have an artificially stimulated consumption boom, an artificially supported bond market and an artificially valued currency. I don't pretend to have all the answers, or any of them for that matter, but I cna see this is a situation that will inevitably end badly.
ok, here it goes---- consumption does not create value ? what is one consuming ?? what is value ?? poor consumption choices--according to who ?? certainly not the person you are purchasing the consumable from. destructive debt cycle ? banks, brokers, etal live off the debt cycle . it does not destroy them, it builds them. you are viewing the issue from one side--- looking at the entire picture, i see things differently. the larouche reference was based on your farm analogy and my conversation with a larouche person--- she told me that larouce wants to "save the farms" and bring back the "factories"---ok-- perhaps it was an unfair analogy on my part. it is all perception, consumption creates. your perception is that of the "old" . best, surfer