[lbo-talk] Fitch and Brenner

Ted Winslow egwinslow at rogers.com
Sun Feb 22 06:13:07 PST 2009


Mike Beggs wrote:


> I am talking about 'too much saving' in the sense that it drives up
> the
> price of assets, financial and otherwise, beyond their value in
> terms of
> capitalised future returns. Obviously when the assets are actually
> bought
> the purchaser probably has a different implicit assessment of the
> likely
> future returns. My argument in the conversation with SA is that this
> can be
> partially driven by profit/saving rates (with these two linked with
> the
> familiar idea that savings out of profit tends to be higher than
> savings out
> of wages) exceeding the rate at which new real capital goods can be
> deployed
> at the going profit rate.

This still seems to be using "saving" to mean that part of current income (wages, profits, etc.) that isn't "consumed" (i.e. that part that has its counterpart in the current output of investment goods - newly produced plant, equipment and inventories).

How can "saving" in this sense "drive up the price of assets, financial and otherwise"?

The value of such "saving" must be equal to the value of the current output of investment goods. There isn't an additional amount that can be used to purchase and drive up the price of financial and non- financial assets "beyond their value in terms of capitalised future returns".

Ted



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