Effective demand can come from needed new infrastructure and repairs to existing infrastructure. Demand can also come from spending for defense. Recall the boost that took place as western countries geared up to prepare for and fight WW2. In this latter case bonds were issued and citizens were urged to buy bonds to "back the allies". This was a way of sterilizing the new money. Print money. Buy bonds. Don't spend on other items.
Doesn't always have to come from consumers, although consumers have been driving demand in recent years. From: [email protected] [mailto:[email protected]] On Behalf Of Keith Hudson Sent: Thursday, August 16, 2012 8:10 PM To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION Subject: [Futurework] Arthur's 4th belief 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 <http://allisstatus.wordpress.com/>
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