>-----Original Message-----
>From: Doug Henwood [mailto:dhenwood at panix.com]
>Sent: 21 December 2001 19:53
>To: lbo-talk at lists.panix.com
>Subject: Re: Fwd: Re: Finance and Economics after the Dotcom Crash
>
>
>Jesus, for people who like to call other people idiots, they should
>be careful what they say.
>
>>At 1:46 PM -0500 12/21/01, kwalker2 at gte.net quoted:
>>>
>>>From: "Russell Turpin" <deafbox at hotmail.com>
>>>To: fork at xent.com
>>><...>
>>>I enjoyed reading that. Thanks for posting it. I cannot
>>>resist making one comment on the substance.
>>>
>>>Doug Henwood says:
>>>>I'd also like to make the point that there's something
>>>>illusory and fetishistic about the very notion of retirement
>>>>funds. Individuals or families can save for a while, then draw
>>>>down their savings, but societies
>>>>as a whole cannot. Today's retirees can't be sustained using
>>>>yesterday's savings - the money has to come from
>>>>today. Effectively, today's stock buyers are what fund today's stock
>>>>sellers. Just like a public pension
>>>>system, a private one depends on the cross-generational
>>>>transfer of funds from workers to retirees.
>>>
>>>That is one of the most wrong-headed economic claims I
>>>have ever read! It completely ignores what constitutes
>>>economic progress: that the current generation is NOT
>>>beginning from scratch, but is working on a foundation
>>>of accumulated capital, which interpreted broadly, is
>>>the entire economic infrastructure, including the
>>>knowledge distributed in the economic system, and the
>>>knowledge held in the new generation's heads. This base
>>>is provided by the previous generations' savings and
>>>investment. Societies can and do save, in much the same
>>>way an individul or family does. That is such a
>>>critically important aspect of economic history that it
>>>completely flabbergasts me that someone writing on
>>>finance would miss it.
>
>I was talking about savings in monetary form. Of course societies
>progress and prosper on the basis of physical capital and knowledge
>accumulated by previous generations.
>
>I'd attribute this misreading to flawed reading comprehension, but I
>think it's symptomatic of the fact that fellows like this can't tell
>the difference between money and ideas, or money and machines.
I think also due to their inability to distinguish between saving, hoarding and investment -- and also the delusion that future consumption can be sustained by present hoarding.
They know about saving (= abstention from consuming some part of revenue) and take for granted that their (monetary) savings get recycled (by someone else) into investment (= building new (physical) means of production, broadly defined -- i.e. including know-how as well as its instantiation in machines, etc.).
Since individually they can always withdraw their savings from the bank (unless they live in Argentina...) to finance consumption, they believe that personal hoarding is possible for indefinite periods. Since they get interest on their savings accounts, they confuse (the appearance of) extended hoarding with investment.
Symmetrically, they muddle up dis-saving, drawing down stocks, and production. Since they subconsciously believe in an imaginary hoard of stuff which can be drawn on to sustain consumption, they overlook the fact that all the investment in the world is useless unless the resulting means of production are put to use.
Because they get interest on their saving account, they imagine that means of production can produce revenue without labour.
Julian Wells