Tuesday, February 12, 2013

Investment Opportunities

A spat between Paul Krugman and Tyler Cowen over why corporations and wealthy individuals are sitting on mountains of cash. Krugman says insufficient final demand. Cowen says "Great Stagnation" produced lack of investment opportunities.

I'm not sure that there is any difference worth mentioning between these two points of view. If there is not enough final demand because those with money aren't hungry and those who are hungry don't have money, redistribute, or at least create incentives for those with the cash to spend it.

Wealth taxes are one way to do that, but a bit of inflation might be better. If your money is decreasing in value, maybe you should buy something now instead of later. That's especially true for government expenditures. This notion was understood, even if imperfectly, in ancient Mesopotamia, though of course those with money still find it difficult to comprehend. Their method was debt "jubilees" which wiped out consumer debts, but inflation is more systematic.