At 21:17 15/08/2012, Arthur wrote:
4. That effective demand has to be maintained if we are to avoid an
economic meltdown.
Effective demand can't be maintained if there are no uniquely new
consumer goods in sight -- as obtained all through the industrial
revolution until about the 1980/90s. Since then we have had nothing
really new, only amalgamations of existing products (e.g.
smartphones), fashion changes and marginal improvements. It was only
then that a whole new tranche of credit money (derivatives) had to be
launched in order to keep the economic machine going. Until the
1980/90s, derivatives were straightforward insurance schemes whose
notional cover matched that of world GDP on a 1:1 basis. Since then,
complex derivatives rose to 10 times world GDP, such was the
desperate need of the investment banks for consumers (and
governments) to keep on spending.
So what is the future. It can only be a great simmering down of
Western economies into long-term depression or, if the US Fed and the
ECB persist in money-printing, hyperinflation.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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