Harry, Thank you for your long rebuttal of my argument.
I'm afraid, however, that you haven't convinced me. I still maintain that a prolonged slump in share prices has harmful effects. Among these are: (a) permanent reduction in spending power of millions of pensioners (and ultimately of increased numbers of unemployed) (b) severe difficulties to businesses wishing to borrow for investment in innovation. You say: "So it happens that a lot of people lose -- even as a lot of other people gain." It ain't so, I'm afraid. This is a case of what fashionable economists call "a lack of symmetry". In other words, some people may gain but far larger number of people lose. And they not only lose money, but they lose confidence in the financial services sector. Even when governments bring about reforms it then takes many years before ordinary folk save again instead of spending. Of course, in a period of significant economic growth, both saving and spending fuels further investment in new products. But, as now, when there are no genuinely innovative products (that is, in change-of-lifestyle terms) then, when savings declines, spending goes round and round in a vortex of buying the usual things with smaller and smaller price tags which then slowly loses speed -- as in Japan right now. All the extra money being pumped into the economy (by means of lower and lower interest rates) accumulates as asset inflation on the one hand and huge debts on the other. Economic growth for most of human history has only been of the order of, let us say, 0.1% per year, not of the 2-10% of the last 150 years stimulated by fossil fuel production. Now that oil fields are emptying (see my other post), then the present slump in share prices may lead on to a recession which will last for a long time until a new energy technology comes along. KSH ---------------------------------------------------------------------------- ------------ Keith Hudson, General Editor, Handlo Music, http://www.handlo.com 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________ _______________________________________________ Futurework mailing list [EMAIL PROTECTED] http://scribe.uwaterloo.ca/mailman/listinfo/futurework
