From: ald@clipper.ingr.com (Al Date)
Newsgroups: misc.invest,sci.econ,talk.politics.theory
Subject: Re:      Re: Effects of U.S. national debt
Date: 6 Oct 92 01:00:08 GMT
Followup-To: talk.politics.theory
Organization: Intergraph Advanced Processor Division - Palo Alto, CA

Let's take followups out of misc.invest, unless the crowd cries out for more.

In article <1992Oct1.190824.3118@cs.sfu.ca> mcdonald@cs.sfu.ca (Ken Mcdonald) writes:
>
>From a previous article:
>
>>>>
>Considering the total short position is less than the total long position,
>a crash would DESTROY wealth.  If that what you think redistribution means,
>you should buy a dictionary.
> 

Correct.


>Maybe you should check to see if that "business" school was accredited,
>because you got ripped off.
><<<
>
>Actually, no, the previous poster was holding an entirely defensible point
>of view.
>
>Differentiate between wealth, which is capital (eg. factories), knowledge,
>infrastructure, and so forth, and money, which is a medium of exchange,
>such as stock certificates, dollar bills, etc.

Differentiate between tangible capital goods and the money which is used to
measure their value, you mean...


>
>A crash does no destroy a single iota of wealth, since all that has happened
>is that the (often largely imaginary) value people attach to money in
>its various forms has "disappeared."  All of the factories, knowledge,
>etc. are still there.

But wealth needs to be measurable, so we can tell who wins when they
die with the most toys.   (8-)  
I would say that a market crash results in a reappraisal of our wealth
at a much lower level, and if the books are kept honestly, this is the
same as destruction of wealth by bombing or by hurricane.   Any accountants
present? 

Now, one could argue that the previous valuation of wealth was unrealistic,
and that the new (post-crash) valuation is more realistic, but in either
case, the valuation has transitted from X to X-Y, and comparatively
there is Y less wealth, which is measurable.

>
>The confusion following a collapse can often destory real wealth.  For
>instance, if a software company goes bankrupt, then the organizatin
>(infrastructure) it has built up will dissolve, which, ultimately, will
>result in lower future production.  Capital (the organization of the
>company) has disappeared.

Not likely, unless the assets were worthless.  Most companies which go into
bankruptcy sell off their assets, or re-emerge with their assets
intact.  The knowledge workers are still in the market, and the
software is still owned by someone.  The organization which was the
old company simply has been re-organized.


>Nonetheless, a crash can be "good", in the long term, if it redistributes
>money in such a manner that people's L
>LEGAL holdings (the amount of money they are said to be worth) are
>more in line with their real (economic) worth, i.e. tha amount they
>can produce.

I would say that a crash might be good in the longterm if it led to
a more efficient re-organization of the economy.  Maybe we are
saying the same thing.

>
>If you go too far in the other direction (where a very few people have
>legal ownership of the vast majority of wealth), you arrive at serfdom or,
>at the extreme, slavery. 

I am not so sure if the root of serfdom/slavery is a wealth inequality, or
if it is a LEGAL inequality which prevents the lower classes from 
accumulating things.  There were plenty of poor people in the USA in
the 18th and 19th Centuries, but they rose up.  Wealth inequality was
enormous, but everyone got richer. 

> These economies are not very productive, because
>people have little incentive to produce.  (Everything the produce goes
>to the aristocracy, so, once they have produced enough to feed themselves
>and pay the minimum taxes demanded, why bother?)  More importantly, the
>economies are not very pleasant to live in.

I have taken this side of the argument myself, but I am not so sure that
the lash or the fear of the lash cannot be a good incentive-provider.  
Slavery is a complex matter, which diminishes the humanity of both the
slave and the master, but I am not convinced that it is economically 
inferior in all cases.  Certainly slavery cannot compete in an
industrial setting where skilled laborers need to be
kept and motivated to apply their brains. 

>
>The US has been heading in such a direction, as evinced by the growing
>number of people who feel that the best they can hope to do, economically,
>is stay in the same place.

But one has to ask why this is happening.  Could it be because the
middle class has been raped and pillaged by new taxes for the last 25
years, and it has recently lost even the recompense of Cold War
spending which gave them jobs?  The total tax bite is now
30-50% of national income (depending on what state you live in).  
This is far greater than any duke ever demanded from his fiefs.

Instead of letting people get ahead, as they used to, the govt is keeping 
them in place, on their treadmill, and feeding the special interests.  
Of course, the biggest special interest is the bureaucracy itself, who
have through no coincidence been enjoying a bull market in job benefits
and security and who look forward to royal pensions or disability 
checks.

>  It would be nice if the administration would
>do something about this, but since it probably won't, a major, unpleasant
>crash may be the only way to address the issue.

Considering that the govt is at the root of the problem in the first
place, I dont want the administration to "do something about it."
I want them to STOP doing it to me in the first place, which means
to gradually privatize Social Security, slash military and
entitlement spending, layoff the bureaucracy,
stop waging war on people's private habits,
and run in fiscal balance.  
 

--Al Date

So I too will be voting Libertarian!   (8-)