So the competition of excess investments is capitalism’s solution to the allocation problem and without growth, none of your investments are excess?
So firstly, if growth ever does end, it means that you can’t expect investments to ever be profitable.
This exact thing was beginning to happen in the 70’s and the resulting Capital strike is basically what ushered in neoliberalism. However, we have seen over the past decades that people will buy bonds issued by the American government even when interest rates are low simply because they have so much faith that the American government will not lose the ability to print money. So even if the market crashes, those rates are better than nothing and it’s still a hedge against uncertainty. I hope I’m remembering that analysis properly. I lifted it off of Mark Blythe
If people started doing nothing but buying bonds, capitalism would crumble still, as there wouldn't be anyway to allocate capital.
Bonds have value because they have zero risk, but capital investments will always have a risk, and if there is a no growth, the the average investment will actually lose money. In that case we can never get into a situation where it's similar to the bond market.
So the competition of excess investments is capitalism’s solution to the allocation problem and without growth, none of your investments are excess?
This exact thing was beginning to happen in the 70’s and the resulting Capital strike is basically what ushered in neoliberalism. However, we have seen over the past decades that people will buy bonds issued by the American government even when interest rates are low simply because they have so much faith that the American government will not lose the ability to print money. So even if the market crashes, those rates are better than nothing and it’s still a hedge against uncertainty. I hope I’m remembering that analysis properly. I lifted it off of Mark Blythe
If people started doing nothing but buying bonds, capitalism would crumble still, as there wouldn't be anyway to allocate capital.
Bonds have value because they have zero risk, but capital investments will always have a risk, and if there is a no growth, the the average investment will actually lose money. In that case we can never get into a situation where it's similar to the bond market.