On Dec 17, 2007, at 6:06 PM, Carrol Cox wrote:
> 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."
This relies on an oddly rigid, and moralistic even, distinction between speculation and investment. The dot.coms made lots of real investment in high-tech equipment - it was real investment that was a byproduct of speculation, you could say. But it also generated lots of jobs and contributed to the productivity acceleration of the late 90s and early 00s. It supported the only sustained real wage increases since 1973 (1995-2000 or so). The bubble was in part responsible for a real change in the way we live - Amazon, the web, MP3s, etc. What part of this was speculative and what part real?
And how do the funds flow in your model? What institutions or networks shift funds out of disappointing prospects for real investment and into "speculation"? Who speculates exactly and where do they get their funds? How does "real" investment get financed? WHat are the links, if any, between the circuits?
Doug