Food for Thought! I wonder how many understand that the rents collected by intermediaries that convert our uncertainty into their own private risk supported with liquidity by the monetary authority tend to aggrevate the declining share of productive profits and via profit margins the share of wages in GDP and this tends to support and enhance the productive gap from an insufficient effective demand to bring productive activity to its full capacity! This is more clear if we realize that intermediaires do not spend but save as their marginal propensity to spend is small and do not employ much labor as their employment elasticity relative to income is miniscule. These intermediaires are not only financial and wholesale but extend to information technology and other services whose supply is based on fixed resources or once constructed could be reproduced with little cost of production (power law). Although the problem is expressed in the productive and spending sector the financial sector, overt and shadow, tends to make it unsustainable!
Posted on: Fri, 21 Jun 2013 19:09:42 +0000
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