>
>
>I doubt it. I would assume that all available funds go to "real
>investment" AS LONG AS real investment is available. and the shift of
>funds into "bubbles" is evidence that real investment has reached its
>maximum under the given conditions so that there are surplus funds with
>no place to go except speculative activity. The evidence for this is
>precisely the evidence Seth gives: that the bubble did not detract from
>"real investment."
>
>
>
No, this isn't right.
This....
>the shift of
>funds into "bubbles" is evidence that real investment has reached its
>maximum under the given conditions so that there are surplus funds with
>no place to go except speculative activity
>
...is exactly what I was trying to dispute.
My point was that there is no such thing as a "shift of funds into bubbles." The *same* funds that are used for real investment can be "simultaneously" used for a bubble if one develops. Any reasoning based on the idea of funds "shifting" from real to speculative uses or vice versa is already off-track. The two types of activity are logically independent. Actually, in the real world, bubbles almost always go along with an *increase* in real activity.
Carrol's quote above seems to be based on a common fallacy around here - that when a sum of money is used in a transaction it can't be used again. In reality, the same stock of money can be used once, twice, three times or more in a given year - it's just a question of how fast the velocity of money is. A speculative bubble doesn't require any funds to be shifted out of real activity. It just requires (holding the money supply constant) that each unit of money change hands more times per year.
In practice, bubbles usually involve both an increase in the velocity of money and a growth in the supply of money.
Seth