Forwarded message: >From uniag.sk!brun Tue Oct 31 14:13:22 1995 Date: Tue, 31 Oct 1995 14:36:36 +0100 (MET) From: Michael BRUN <[EMAIL PROTECTED]> To: Marianne Bruen <[EMAIL PROTECTED]> Subject: Re: PS In-Reply-To: <[EMAIL PROTECTED]> Message-Id: <[EMAIL PROTECTED]> Mime-Version: 1.0 Content-Type: TEXT/PLAIN; charset=US-ASCII Manni, You can pass on to the PEN-L net the following. (If you like you can erase this preliminary note first.) In response to Robert Peter Burns, I think it is true that if all interest rates (not just some, e.g. just short term rates, when savers can simply switch savings) go down, there may be a significant increase in private investment. But what kind of investment? Unless there is believed to be demand for products, investors will shy away from productive enterprise, with the exception of innovations that render other products obsolete. Since government expenditure is to be cut, it cannot be the engine of demand. However, if the returns to saving fall, money previously saved may be switched to expenditure, and if enough of it flows out as consumption expenditure, then there will be no need for a demand engine. If Ross Perot and all his billionaire and millionaire colleagues decide on one big political campaign, for example, then the "service" sector will thrive and invite investors. Employment will rise, and prosperity will be there as it would have been with increased military spending. Of course, money in insurance and pension funds will not be able to move so easily, so unless the wealthy can do enough alone, the stimulus won't be of sufficient size. If not much increase in consumption expenditure takes place, though, then I'm afraid most "investment" will be purchases of real estate and fake paintings, more of a speculative than productive nature. Money will simply move around among the wealthy. There will be almost no stimulus. Those are my (not very stimulating) two cents, Michael Brun, University of Agriculture at Nitra, Slovak Republic e-mail: [EMAIL PROTECTED]
