01-07-2017, 03:13 PM
Quote:And where do the consumers get their money from? I have a feeling we're going to go round and round in circles if we play this out.Well of course. The economic process is circular, surely you most know this. Output is produced, some of which is purchased by present consumers, and some it is purchased by current investors who hope to recover their investment from their share of (larger) future consumer spending. Current output generates income for consumers which finances their current consumption. As long as the share of output that goes to consumers remains strong, future output made possible by current investment will provide the income necessary for the future consumers to purchase the output necessary to ensure the future return that justifies current investment. It's a reflexive process.
What makes the system work is the reliable transmission of output to consumer income, which ensures the arrival of that future consumption on schedule. The key issue behind sluggish growth trends in recent decades is that this reliability is breaking down, making investing more risky. This is why companies are sitting on all that cash.