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Corporate profitability is not a valid indicator of the vitality of the economy at all. Most actors/enterprises in the economy are not corporations, but sole proprietors and partnerships. They are the real drivers of new ways of doing business and real creators of jobs (including those for the owners themselves), along with small and new corporations
Depends on your definition of small business. If you use the SBA definition of less than 500 employees then yes, if you use the traditional defintiton of less than 50 jobs then no, companies with less than 50 employees are less than 1/3 of jobs.
I'd recommend you re-read my post. I'm not the one confusing Capital vs. assets. Cash is asset in the accounting sense, but not capital. Capital is a way of doing business that can be additive to capital accumulation.
For example, horse and carriage as taxi service in the days before reliable automobile was capital. However, as soon as automobiles became reliable enough, horses and carriages as taxi were destroyed as capital: maintaining the horse would cost more than taxi fare would bring in. They were reborn as capital in the form of tourist attraction when air travel brought in enough tourists to New York City 60+ years later.
Government spending enough money to keep the horse cabbies in business during all those decades until some of them became profitable again as tourist attractions would keep the cronies in business while destroying capital overall via the taxation that would be required to make those subsidy payments.
1. Most sole proprietors and partnerships are not "companies."
2. Many, if not most, people are not in growth industries. That does not change the fact that their employers are net job eliminators. Those employees are just taking over from some other employee before the job is eliminated.
Capital is a way of doing business that can be additive to capital accumulation.
Can you please share some references that discuss this usage of the word capital?
For example, horse and carriage as taxi service in the days before reliable automobile was capital. However, as soon as automobiles became reliable enough, horses and carriages as taxi were destroyed as capital: maintaining the horse would cost more than taxi fare would bring in. They were reborn as capital in the form of tourist attraction when air travel brought in enough tourists to New York City 60+ years later.
The horse and carriage were productive assets before the automobile. And yes, as such, they would be considered capital as well.
Government printing enough money to keep the horse cabbies in business during all those decades until some of them became profitable again as tourist attractions would keep the cronies in business while destroying capital overall via the taxation that would be required to make those subsidy payments.
Again--this is completely orthogonal to the original discussion and another effort by you to change the subject, besides being incorrect.
Capital is by definition that which can accumulate onto itself. Otherwise, it would not last long as "capital."
You are the one confusing Capital with money. Money having low interest rate is prima face evidence that the economic environment is having a shortage of real capital accumulating opportunity.
Capital is by definition that which can accumulate onto itself. Otherwise, it would not last long as "capital."
You are the one confusing Capital with money. Money having low interest rate is prima face evidence that the economic environment is having a shortage of real capital accumulating opportunity.
Nope--as I posted earlier, capital includes cash, but it also includes assets.
I asked for you to provide a reference-not restate your incorrect definition.
Low interest rate is prima face evidence that the economy is having a shortage of investment opportunities.
Corporate profitability is actually a very poor indicator of economic vitality: corporate profitability is heavily influenced by the financial industry, whose profitability is far more volatile than other industries and at the peak accounted to nearly half of all corporate profitability therefore the vast majority of the ups and downs.
Corporate profitability is actually a very poor indicator of economic vitality: corporate profitability is heavily influenced by the financial industry, whose profitability is far more volatile than other industries and at the peak accounted to nearly half of all corporate profitability therefore the vast majority of the ups and downs.
This whole discussion is dumb because I didn't provide that chart to show as an indication of economic vitality.
So you agree with me then on low interest rate is indicative of lack of (profitable investment opportunity == Real Capital).
Capital is by definition profitable enterprise opportunity (therefore can afford to employ new people in order to expand). A horse carriage set is capital if it is profitable in the free market; it ceases to be Real Capital ( via capital destruction when the new Real Capital the automobile emerged) when it was no longer profitable. Now you see the relevance of my earlier point.
You brought us a chart that showed essentially the financial industry is highly profitable under the FED system, to be paid by either run - away inflation or another crash to be bailed out by the government later.
You wanted to cite that as a reason why tax on the rest of the economy should be raised to pay for the financial bailouts of the past, present and future.
So you agree with me then on low interest rate is indicative of lack of (profitable investment opportunity == Real Capital).
Capital is by definition profitable enterprise opportunity. A horse carriage set is capital if it is profitable in the free market; it ceases to be Real Capital ( via capital destruction when the new Real Capital the automobile emerged) when it was no longer profitable. Now you see the relevance of my earlier point.
Again--please show me a reference that defines capital as "profitable enterprise opportunity".
I disagree that that is a definition that is in wide use.
Low interest rate is an indication of a lot of available capital that has very few investment opportunities. This happens when inequality reaches current levels as qualified demand is low and cash is hoarded at the top.
You brought us a chart that showed essentially the financial industry is highly profitable under the FED system, to be paid by either run - away inflation or another crash to be bailed out by the government later.
You wanted to cite that as a reason why tax on the rest of the economy should be raised to pay for the financial bailouts of the past, present and future.
lol--Both of those statements are absolutely false. How about you stick to explaining your idiotic definitions and let me post what I'm saying.
Low interest rate is indicative of too much money chasing too few profitable enterprise opportunities.
Defining profitable enterprise opportunity as capital is by far the more straight-forward way of defining Real Captial: as the profitability enables hiring of new additional labor . . . Thereby completing the Capital - Labor conceptual dual. Real Capital is that which can employ Labor in a sustainable way; in other words, profitable enterprise opportunity.
Defining money as capital doesn't work in a fiat money system. The most obvious example is the flood of monopoly money not being able to raise employment. Money by itself, not merely as a payment device in a sustainable profitable enterprise, does not complete the Capital -Labor conceptual dual.
What? Low interest = glut of capital, dearth of opportunities.
If there was abundant demand for investment/capital and a dearth of capital, you'd see high interest rates.
Low interest rate means glut of money, dearth of opportunity.
Don't confuse money with Real Capital in a fiat money system. The FED printing up $8 trillion didn't suddenly increase the US Real Capital stock by $8 trillion. They wish. LOL
Defining profitable enterprise opportunity as capital is by far the more straight-forward way of defining Real Captial: as the profitability enables hiring of new additional labor . . . Thereby completing the Capital - Labor conceptual dual. Real Capital is that which can employ Labor in a sustainable way; in other words, profitable enterprise opportunity.
Hey-you can make up your own definitions whenever you want, just don't expect anyone to know wtf you're talking about.
"Hoarding of cash" is supposed to be irrelevant / cured in a fiat money system.
Looks the like the real problem is glut of money keeping unsustainable businesses in business reducing industry profitability (too much competition from marginal players driving down product/service prices while driving up input factor costs) while letting the financial industry collect a tax on other industries' revenue stream via debt service payment from the marginal players.
Don't confuse money with Real Capital in a fiat money system
Nobody is confusing anything except you.
The separating of fiat money from other forms of capital (Real Capital) is an important first step towards understanding what's really going on.
Counting money as part of capital worked during the era of market money, but not during out current fiat money era, especially when talking in the macro sense for the economy as a whole.
"Hoarding of cash" is supposed to be irrelevant / cured in a fiat money system.
Fiat money system discourages hoarding, but when inequality gets to current levels, there's not much that can be done.
Looks the like the real problem is glut of money keeping unsustainable businesses in business reducing industry profitability (too much competition from marginal players driving down product/service prices while driving up input factor costs) while letting the financial industry collect a tax on other industries' revenue stream via debt service payment from the marginal players.
Nope. As I already showed you, industry profitability is high. The problem is lack of demand because of inequality.
You were counting money as capital then telling people not to confuse capital vs. assets. Talk about confusion!
The separating of fiat money from other forms of capital (Real Capital) is an important first step towards understanding what's really going on.
Counting money as part of capital worked during the era of market money, but not during out current fiat money era, especially when talking in the macro sense for the economy as a whole.
What's really going on now is quite simple to understand and requires that money be counted as capital. That way it is easy to see that there is obviously NOT a lack of capital.
Your terminology only serves to confuse--which is undoubtedly why you use it.
You were counting money as capital then telling people not to confuse capital vs. assets. Talk about confusion!
huh? What are you talking about now? Next time why don't you include my post when you answer it? That way you can't misquote or mischaracterize what I said.
Nonsense. If hoarding of cash were the problem, Ben ' s helicopter would have solved the problem. But it did not. The real problem is the fiat money system can only create money, but can not create Real Capital. The more money it prints, the more Real Capital is destroyed due to the distortions the new money creates.
No, you did not show industry profitability. You showed corporate profitability rise, which not only skew towards large mature players (only counting corporations, not sole proprietors or partnerships) but also heavily skewed towards financial industry because that particular industry is far more volatile than other industries due to leverage.
Comment 22 from you "don't confuse capital with asset."
I'm using a phone, it doesn't do quotation on this site.
Nonsense. If hoarding of cash were the problem, Ben ' s helicopter would have solved the problem.
Unfortunately, that's not the case. It wasn't nearly enough, it didn't get to the right people, and it didn't reduce income inequality. Until the bottom 50% get some cash, the problem won't be solved.
No, you did not show industry profitability. You showed corporate profitability rise, which not only skew towards large mature players (only counting corporations, not sole proprietors or partnerships) but also heavily skewed towards financial industry because that particular industry is far more volatile than other industries due to leverage.
That's correct. And you can feel free to post something that shows industry profitability is low.
It is already statistically shown clearly that the helicopter money landed far more on the top 0.1% than the rest 99.9% combined. Yet, you say that was not enough helicopter money
Talk about an ideological / religious blind spot.
The idea that the a small group of people having a monopoly on something can result in a more equitable distribution of that something than a free market place can do is patently false. You may as well believe in the Divine Right of the FED.
The dearth of profitable opportunity in the economy is shown by the low interest rate. I thought we already agreed on that.
It is already statistically shown clearly that the helicopter money landed far more on the top 0.1% than the rest 99.9% combined. Yet, you say that was not enough helicopter money
Talk about an ideological / religious blind spot.
Wow--did you read this part of the post?
it didn't get to the right people
The idea that the a small group of people having a monopoly on something can result in a more equitable distribution of that something than a free market place can do is patently false. You may as well believe in the Divine Right of the FED.
Well, we know that an unregulated free market will result in wealth moving upwards. That is well established. I'm not sure who you mean in your cryptic start to the quoted passage, but a well regulated market will result in less inequality.
On the contrary. The dearth of sustainable profitable opportunity outside the financial industry is due to:
1. Too many marginal players are kept in the industries by cheap money, resulting in low product / service prices. BTW, that explains the "deflation" in manufactured goods / services while massive inflation in financial assets prices.
2. Tax and regulatory uncertainty.
You can look up the income and net worth rise of the top 0.1% over the past few years vs. The rest 99.9%
Free market allows capital destruction, whereas government regulators tend to help entrenched players at the expense of the upstarts.
It is no co-incidence that almost all the top banks today trace their origin to the late 19th and early 20th century, whereas the earlier giants had been crushed by the earlier episodes of creative destruction. The FED was founded in 1913.
The Great Recession was actually doing a good job leveling the field, massively reducing the wealth of many a top 0.1%, until the government stepped in to save them at the expense of the rest 99.9%
The Great Recession was actually doing a good job leveling the field, massively reducing the wealth of many a top 0.1%, until the government stepped in to save them at the expense of the rest 99.9%
Yep.
19th century saw many large fortunes made and destroyed.
20th century saw dynastic families having made their fortune trying to engage in politics in order to keep their offsprings wealthy and powerful. E.g. the Kennedies, the Bushes, etc..
That is actually the common pattern throughout history for most of the rest of the world: family wealth through commerce is way too easily made and lost in 2-3 genrations. Wealthy families sought political privilege to keep keep wealth and power for their offsprings.
Without the FED and government bailouts, many of the wealthy, including even Warren Buffet, would have lost the bulk of their fortune.
The wealthy are far more leveraged than the poor. The poor who can only rent and not buy house don't have much collateralized debt, whereas the typical wealthy had/have plenty. If the prices kept going down, the process would have significantly leveled asset disparity in this country and enabled people to buy their own homes cheaper.
Did you not notice, those 19th century super wealthy were largely self-made men who seized opportunity and delivered valuable service . . . And after they were gone, their fortune more or less faded away . . . Except for those who wedded their dynastic families to the government and the FED.
LOL, Eisenhower, Nixon and Ford were Democrats, only in your duck world.
I did not change the subject. You were the one who brought the list of superwealthy.
Of course the superwealthy gave plenty. Yet there were plenty left over to the offsprings. However, the free market ensured that competition would whittle away at the inheritance . . . Which also contributed to the patriarchs understanding how pointless it would be to pass the entire fortune to offsprings.
Contrast that with the 20th century and now: seems the post-FDR era has given people a sense that it is the government's responsibility to take care of the poor, while it is the parents' responsibility to leave as much as possible to the dynastic wealthy offsprings.
Just like the Republicans controlled the Congress while Truman was president and Carter was president. That's just the American voters' wisdom to keep them in check and balance, unlike your partisan silliness.
Here is a common saying:
If your vote is in someone's back pocket, you will be sat on :-)
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