Is There Too Much Venture Capital?

Doug Henwood dhenwood at panix.com
Mon Dec 13 09:34:32 PST 1999


James Baird wrote:


>Working out here in the belly of the Sillycon Valley beast, I've been
>wondering recently if part of the continued strength of the economy could be
>due to a sort of "IPO Keynesianism". Most of the Internet companies I see
>out here not only have no chance of ever making any money, but no remotely
>rational person could ever believe they will. And yet they're taking all
>this extra capital sloshing around the markets and spending it on my
>ridiculously overpriced labor, on TV ads, on construction, etc. Wasn't
>Keynes's perscription large amounts of investment with no productive outcome
>("hiring one set of men to dig holes, and another to fill them in")? I'm
>not entirely sure I'm joking about this...

Yeah, this IPO mania is actually a way of getting money out of what Keynes called the financial circulation and into the industrial circulation. It's not unlike the government borrowing money to buy military hardware. Good thing Jordan's convinced us it could go on for years - otherwise, the collapse of the IPO madness could have major real-world effects!

Doug



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