Julien Pierrehumbert
Wed, 27 Sep 2000 09:35:43 -0700
>Well, I can see his logic. He's talking like a banker would about >devalorisation which happens especially with primary energy price >hikes, which depress profit rates across the board and also impoverish >the masses. You forgot: IF the policies don't adapt or adapt badly. Sure, unless the regulators are willing to hide the effects of the hikes with net subventions, there is going to be pressures and maybe dislocation in some sectors, but profit rates across the board can be preserved. You are nevertheless right that profits and/or the masses will have to suffer a bit unless a redistributive strategy is launched. The question is whether this bit is more or less important than the bit caused by other factors than the price hikes. As to your banker analogy, the banker is concerned because he sees the loan he made as fixed and a devalorisation of the capital buyed with his loan would make a bankruptcy a much uglier process from his perspective. But where is the loan in the assets/GNP ratio? It seems obvious to me your analogy is not relevant to that ratio but to another one like loans/assets. Anyway, an economy is more than an aggregate of lenders and borrowers. In other words your banker is concerned because the guy he lent money to doesn't have a personal central banker to back him in case of trouble. A whole economy can get out of banking troubles with good policies. >Incidentally, what is the ratio of assets/GNP today? I >heard it's been going down in the US, as aconsequence of the New >Economy? What is it in Japan, any idea? I repeat: What can this statistic even mean? I understand devalorisation but I don't understand how it will be different is the ratio of assets/GNP is high or low. And I don't even know how he/you price the assets in fact. Depending on how you price them, the "New Economy" could have increased or decreased the ratio. And if the "New Economy" affected the ratio, so what? >But HUGE amounts of fixed plant and machinery were retired in the >1970s. Detroit and Birmingham were ghost towns. That was when the word >'deindustrialisation' came in vogue. Sure, but are "huge amounts" the same thing as the "much of" the guy you quoted talks about? Maybe I'm again misunderstanding English subtelties. Anyway, that huge amounts were retired doesn't say why. The price of oil isn't the only factor in the profitability equation. Interest rates f.ex. play a very important role, both directly and indirectly. _______________________________________________ Crashlist resources: http://website.lineone.net/~resource_base To change your options or unsubscribe go to: http://lists.wwpublish.com/mailman/listinfo/crashlist