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Thread: What Creates Wealth?

  1. #121
    Sorry for the short replies- I have only had a few minutes a day to spend here. I focused on one issue to avoid making things more complicated.

    Greater savings (i.e., more unconsumed production - i.e., more deferred demand) will ceteris paribus promote longer-term lines of production for "higher order" goods (those further from final consumption goods) - thereby promoting higher employment in the longer-term sectors of production and lower employment in the shorter-term sectors of production.

    On the other hand, greater spending (i.e., less unconsumed production - i.e., more present demand) will ceteris paribus promote shorter-term lines of production for "lower order" goods (those closer to final consumption goods) - thereby promoting higher employment in the shorter-term sectors of production and lower employment in the longer-term sectors of production.
    Which is basically what I said. Without including "long term sectors".



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  3. #122
    Quote Originally Posted by Zippyjuan View Post
    So if everybody stops buying things now and waits for some point in the future to buy them, it will create more jobs?

    It will mean possibly more jobs in the future but fewer jobs now (because companies will be selling less and thus need to produce fewer goods which will require fewer workers).
    Yes, because it will allow a build up of savings which will allow businesses to borrow money to invest in things like factories. Short term pain in return for long term gain.

    If you're personally in debt aren't you better off in the long run if you take some short term pain and spend less for a couple years until you get out of debt?

  4. #123
    Quote Originally Posted by Zippyjuan View Post
    Which is basically what I said. Without including "long term sectors".
    But that's just the problem!

    You don't get to exclude the longer-term sectors from consideration and then say that "less spending & more savings = fewer jobs."
    Last edited by Occam's Banana; 12-16-2014 at 07:22 PM.
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  5. #124
    Which is why I said:
    It will mean possibly more jobs in the future but fewer jobs now (because companies will be selling less and thus need to produce fewer goods which will require fewer workers).
    If you mean changing workers from current production to R&D, that switch doesn't happen. If a company has excess production "near term sectors", they lay off workers- not move them to the R&D department "long term sectors". R&D may take a hit too if people are delaying consumption and saving because companies will have less money (profits) to spend on it.

    Why would there be more jobs in the future? Because people would be taking their savings (delayed consumption) and spending it- higher overall spending.
    Last edited by Zippyjuan; 12-16-2014 at 08:29 PM.

  6. #125
    Quote Originally Posted by Zippyjuan View Post
    Which is why I said:
    It will mean possibly more jobs in the future but fewer jobs now (because companies will be selling less and thus need to produce fewer goods which will require fewer workers).
    And my whole point is that your "but fewer jobs now" qualification does not necessarily follow, for all the reasons I've already stated and am about to re-state again ...

    Quote Originally Posted by Zippyjuan View Post
    If you mean changing workers from current production to R&D, that switch doesn't happen. If a company has excess production "near term sectors", they lay off workers- not move them to the R&D department "long term sectors".
    What makes you think that I was referring to employment within a single firm? I'm talking about employment in general across the entire economy - not about Acme Corp. employees being transferred from one department or division of Acme Corp. to another.

    And of course workers will be laid off or let go in shorter-term sectors under conditions of decreased present demand. And if the decreased present demand occurs as a consequence of increased deferred demand (i.e., greater savings), then employment will ceteris paribus increase in longer-term sectors of production elsewhere in the economy. IOW: Some people will have to change jobs & employers - and more waiters, stockers, sales personnel and the like will have to find new jobs such as ones on assembly lines that produce higher-order goods, for example.

    Likewise, workers will be laid off or let go in longer-term sectors under conditions of increased present demand. And if the increased present demand occurs as a consequence of decreased deferred demand (i.e., greater spending), then employment will ceteris paribus increase in shorter-term sectors of production elsewhere in the economy. IOW: Some people will have to change jobs & employers - and more workers on assembly lines for higher-order goods, for example, will have to find new jobs as waiters, stockers, sales personnel and the like.

    Quote Originally Posted by Zippyjuan View Post
    R&D may take a hit too if people are delaying consumption and saving because companies will have less money (profits) to spend on it.
    Have you read anything I've written? I've addressed this very thing at some length in several of my previous posts on this particular subject.

    If more people are delaying consumption by saving, then ceteris paribus more companies will be able to borrow more money to fund & support longer-term lines of production (such as R&D), thereby alleviating to that degree the need for more sales revenues in the present in order to fund & support those longer lines. For the umpteenth time, you cannot simply say that "companies will have less money to spend" merely because fewer people are spending in the present. If fewer people are spending in the present, then more people are saving in the present - and as a consequence of this, there will be more money available for companies to borrow more cheaply, thereby encouraging them to do so.

    Why would there be more jobs in the future? Because people would be taking their savings (delayed consumption) and spending it- higher overall spending.
    "Higher spending" in the future is not necessary in order for there to be "more jobs" in the future - for the same reason that "higher spending" in the present is not necessary in order for there to be "more jobs" in the present. Ceteris paribus, "higher spending" by consumers of final goods at time X will result in higher employment in shorter-term sectors of production at time X and lower employment in longer-term sectors of production at time X - while "lower spending" by consumers of final goods at time X will result in lower employment in shorter-term sectors of production at time X and higher employment in longer-term sectors of production at time X.

    IOW: Jobs will shift from shorter-term sectors to longer-term sectors or vice versa, depending on the relative balance between spending and savings. In either case - and for a variety of reasons dependent upon the contingent particulars of any given situation - there may be a net loss or net gain in overall employment. But any net loss of jobs, if it were to occur, could not simply be attributed a priori to decreased spending. (Nor could any net gain of jobs be attributed a priori to increased spending.) You would have to know the contingent particulars of the situation before being able to arrive at any such conclusion - and even then, that conclusion would apply only to that situation. The general case - with which I have been exclusively concerned - operates under conditions of ceteris paribus, which obviates consideration of such contingent factors.
    Last edited by Occam's Banana; 12-16-2014 at 10:43 PM.

  7. #126
    What makes you think that I was referring to employment within a single firm? I'm talking about employment in general across the entire economy - not about Acme Corp. employees being transferred from one department or division of Acme Corp. to another.
    The market is the sum of all companies. If people in general are spending less (postponing consumption), employers across the economy have less revenue. In net, they will all need fewer workers (some will see increases in business and need more but overall, there will be less need for workers). Lower revenues means less money not just for production but R&D as well. If they are seeing lower sales they are not as likely to be pouring MORE money into R&D- unless they expect future sales increases to merit the investment. Companies are not investing in expanding their production today because sales figures still don't justify the expenses. Neither is a lack of capital (money to borrow for investing in future production) a limiting factor. Companies have trillions themselves in cash and banks have trillions in unlent money available.

    Likewise, workers will be laid off or let go in longer-term sectors under conditions of increased present demand. And if the increased present demand occurs as a consequence of decreased deferred demand (i.e., greater spending), then employment will ceteris paribus increase in shorter-term sectors of production elsewhere in the economy. IOW: Some people will have to change jobs & employers - and more workers on assembly lines for higher-order goods, for example, will have to find new jobs as waiters, stockers, sales personnel and the like.
    This makes it sound like there should be no unemployment- that people not needed in one area will simply get a job in another one.
    Last edited by Zippyjuan; 12-17-2014 at 01:14 PM.

  8. #127
    Quote Originally Posted by Zippyjuan View Post
    Which is why I said:


    If you mean changing workers from current production to R&D, that switch doesn't happen. If a company has excess production "near term sectors", they lay off workers- not move them to the R&D department "long term sectors". R&D may take a hit too if people are delaying consumption and saving because companies will have less money (profits) to spend on it.

    Why would there be more jobs in the future? Because people would be taking their savings (delayed consumption) and spending it- higher overall spending.
    This entire post is entirely false.

    In the market, the customer is the boss.

    Customers are saving more and spending less? You'll have more machinists, more skyscraper construction projects, more visionary businesses with very long-term profitability plans getting started and capitalized, in short more things going on that won't (or at least aren't expected to) pay off until a long time in the future.

    Customers are spending more and saving less? You'll have more sandwich shops and laundromats and clothing retailers. In short, more focus on people's immediate desires, on end products which can already be produced using technology and equipment available today. In short, things that will pay off immediately and give end-users an immediately higher standard of living.

    What about jobs? You'll have full employment under both scenarios, and anything in-between. As long as wage rates are liquid, free and unhampered by state aggression, the market will clear. As long as industries are non-cartelized, professions are non-licensed -- in other words as long as everyone is free to do whatever they want, unhampered by state aggression and forcible barriers to entry, the market will adjust. In the Depression of 1920-1921, the depression that fixed itself, the labor market reacted very quickly and erased unemployment in very short order. Let me be clear: it proved me right. It proved you wrong.

  9. #128
    Quote Originally Posted by helmuth_hubener View Post
    Customers are saving more and spending less? You'll have more machinists, more skyscraper construction projects, more visionary businesses with very long-term profitability plans getting started and capitalized, in short more things going on that won't (or at least aren't expected to) pay off until a long time in the future.

    Customers are spending more and saving less? You'll have more sandwich shops and laundromats and clothing retailers. In short, more focus on people's immediate desires, on end products which can already be produced using technology and equipment available today. In short, things that will pay off immediately and give end-users an immediately higher standard of living.
    I agree. I heard that the average age of our factory equipment is at a 50 year high or something like that.

    Zippy holds the false Keynesian view that spending leads to productivity. The flaw is that the govt can't boost spending without stealing from the producers in one way or another. There is no shortcut. You have to have savings to create the loans to increase production.



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  11. #129
    Customers are saving more and spending less? You'll have more machinists, more skyscraper construction projects, more visionary businesses with very long-term profitability plans getting started and capitalized, in short more things going on that won't (or at least aren't expected to) pay off until a long time in the future.

    Customers are spending more and saving less? You'll have more sandwich shops and laundromats and clothing retailers. In short, more focus on people's immediate desires, on end products which can already be produced using technology and equipment available today. In short, things that will pay off immediately and give end-users an immediately higher standard of living.
    Why will you have more skyscrapers? Our biggest construction boom of the the last 50 years occured during the housing bubble- when the personal savings rate was hitting a low. The unemployment rate also hit a low during that time.

    US Savings Rate:



    US Unemployment Rate:



    Both were near peaks about 1980. According to your theory, they should be in opposite directions. We had double digit savings rate. We had doubled digit inflation rate. We had double digit price inflation.
    Last edited by Zippyjuan; 12-17-2014 at 01:38 PM.

  12. #130
    Quote Originally Posted by Madison320 View Post
    I agree. I heard that the average age of our factory equipment is at a 50 year high or something like that.

    Zippy holds the false Keynesian view that spending leads to productivity. The flaw is that the govt can't boost spending without stealing from the producers in one way or another. There is no shortcut. You have to have savings to create the loans to increase production.
    Savings again meaning more money to invest in productivity- creating jobs? Again- we have vast amounts of money available for that. It is not the problem we face today. Yes, if demand already exists, investing in productivity will create more jobs and sales- but the demand has to be there. And yes, they cannot borrow if there are not savings to borrow from. Both are needed- it isn't one or the other. But the issue today is on the demand side. Companies won't increase investment in productivity unless they think they will be able to sell the excess production.

  13. #131

  14. #132
    Quote Originally Posted by Zippyjuan View Post
    Savings again meaning more money to invest in productivity- creating jobs? Again- we have vast amounts of money available for that. It is not the problem we face today. Yes, if demand already exists, investing in productivity will create more jobs and sales- but the demand has to be there. And yes, they cannot borrow if there are not savings to borrow from. Both are needed- it isn't one or the other. But the issue today is on the demand side. Companies won't increase investment in productivity unless they think they will be able to sell the excess production.
    Do you ever read the posts? I explained this to you already and so did another guy a couple of times. The "savings" you are talking about is from printed money. It's not real savings. It comes from stealing from existing savings by devaluing those existing dollars. When you try to fake savings by printing money you end up damaging the economy. The logical conclusion to your argument is that we can all have printing presses and just print money when we need it since there's no downside.

  15. #133
    Personal savings rate is twice what it was in 2005. How much have companies increased their investments in productivity in that time? Personal savings- not "printed money".

  16. #134
    Quote Originally Posted by Zippyjuan View Post
    Why will you have more skyscrapers?
    Because they are expensive, capital-intensive projects with very, very long amortizations.

    According to your theory
    Let me just say first that your reply is completely and utterly clueless and unrelated to any theory or claim I may have put forward. You say "According to your theory they should be in opposite directions". What is "they"? Unemployment and savings rate. Where in the world did I say these two things should be negatively correlated, as you accuse me? Nowhere. You have completely and utterly misunderstood (or pretended to misunderstand) my post, despite it having only 221 words.

    But to make it fun, let's pretend you made a coherent and legitimate point. I'll generously make it for you:
    Quote Originally Posted by Pretend Zippyjuan with Intelligence View Post
    You said we have always had more skyscraper projects when savings increased. Yet, I do not see any such correlation. Could you clarify? Your theory seems to not be confirmed by reality.
    Nope, I said: in the market.

    When the monopoly state is busy distorting the credit market, sending false credit signals, phenomena are different entirely.

    In the free market, interest rates are determined by supply and demand. So, in the free market only two main things can affect the interest rate, supply and demand, which boils down to just one thing: increased (or decreased) savings available for investment. More savings = less demand for goods, and thus less demand for loans and investment from firms, and it also = more supply of loanable or investible funds available. Thus, the price of the funds (the interest rate) goes down.

    In today's world, interest rates are greatly distorted by (though certainly not determined by!) fractional reserve banking. When interest rates are distorted downwards, which is what fractional reserve banking does, businessmen get a false signal. The low interest rates tell them: "Savings must have increased, there's lots of free resources floating around waiting for someone to use them." However, this is false. In fact, the opposite has occurred. Because there's only so many real, actual resources in existence, eventually that reality asserts itself. Many of the long-term projects that were started are untenable. The whole economy runs out of steam and has to undergo a retrenchment.

    There's the way the business cycle works, in 189 words.

  17. #135
    Quote Originally Posted by Occam's Banana View Post
    And my whole point is that your "but fewer jobs now" qualification does not necessarily follow, for all the reasons I've already stated and am about to re-state again ...
    Only this time, I am not going to re-state them ...

    Quote Originally Posted by Zippyjuan View Post
    The market is the sum of all companies.
    No, it isn't. (LOL - suddenly, you are being insufficiently aggregative, for a change, rather than excessively and unfastidiously aggregative ...)

    The market is the sum of all producers (including but not limited to "companies"), consumers (who may also be producers, and vice versa) and their intermediaries - as well as any third-party "interventionists" (such as the government or the Federal Reserve system). A "free" market is the same, sans "interventionists."

    Quote Originally Posted by Zippyjuan View Post
    If people in general are spending less (postponing consumption), employers across the economy have less revenue. In net, they will all need fewer workers (some will see increases in business and need more but overall, there will be less need for workers). Lower revenues means less money [...]
    And THAT is the very non sequitur against which I have been arguing at some length.
    Just stating a non sequitur over and over does not constitute a refutation of any kind.

    Lower spending does not ceteris paribus mean less available money.
    Lower spending does not ceteris paribus mean lower employment.

    Since you have ignored all previous explanations of why this is the case, I will not waste time repeating any of them.

    Quote Originally Posted by Zippyjuan View Post
    Likewise, workers will be laid off or let go in longer-term sectors under conditions of increased present demand. And if the increased present demand occurs as a consequence of decreased deferred demand (i.e., greater spending), then employment will ceteris paribus increase in shorter-term sectors of production elsewhere in the economy. IOW: Some people will have to change jobs & employers - and more workers on assembly lines for higher-order goods, for example, will have to find new jobs as waiters, stockers, sales personnel and the like.
    This makes it sound like there should be no unemployment- that people not needed in one area will simply get a job in another one.
    And here we go again. Rather than try to understand the whole of another's argument from its parts, you just pull one of those parts out of the larger context, ignore all the rest, and then argue with what the bit you cherry-picked "makes it sound like" (as if nothing else had been said) ...

    I don't think you are stupid - so I can only assume that you do this kind of thing on purpose. (Is this why you don't properly quote your interlocutors in your replies to them? I've noticed that either you don't quote the people you respond to at all, or if you do, you eliminate the "Originally Posted by so-and-so" bit so that it is inconvenient for people to go back and find the whole of the post to which you are responding.)

    NOTHING in what I said implies that there would be no unemployment, or that employment would remain constant. In fact, I very explicitly acknowledged that such might not be the case. The ONLY way you can hope to get away with pretending that what I said implied any such thing is to ignore what I actually said elsewhere in the very same post (which, as per usual, is exactly what you did). Namely, this (emphasis added):
    Quote Originally Posted by Occam's Banana View Post
    Jobs will shift from shorter-term sectors to longer-term sectors or vice versa, depending on the relative balance between spending and savings. In either case - and for a variety of reasons dependent upon the contingent [empirical] particulars of any given situation - there may be a net loss or net gain in overall employment. But any net loss of jobs, if it were to occur, could not simply be attributed a priori to decreased spending. (Nor could any net gain of jobs be attributed a priori to increased spending.) You would have to know the contingent [empirical] particulars of the situation before being able to arrive at any such conclusion - and even then, that conclusion would apply only to that situation. The general case - with which I have been exclusively concerned - operates under conditions of ceteris paribus, which obviates consideration of such contingent [empirical] factors.
    Last edited by Occam's Banana; 12-18-2014 at 04:14 AM.

  18. #136
    Quote Originally Posted by Zippyjuan View Post
    Personal savings rate is twice what it was in 2005. How much have companies increased their investments in productivity in that time? Personal savings- not "printed money".
    Couple points:

    1. You are the master at twisting statistics. I knew as soon as I read your post that 2005 must've been a record low in personal savings. Sure enough it was, 2.5%. Now we are at 5%. But the long term average is more like 10%.

    2. The savings rate is a bogus statistic anyway. What matters is the total pool of real savings (not all the money that has been printed). I don't know what that pool of savings is, but it can't possibly be that much money because interest rates have been at 0% for 8 years!!!! Nobody just puts all their money in the bank like they used to.



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  20. #137
    What matters is the total pool of real savings (not all the money that has been printed). I don't know what that pool of savings is, but it can't possibly be that much money because interest rates have been at 0% for 8 years!!!! Nobody just puts all their money in the bank like they used to.
    Total savings have also grown exponentially. http://research.stlouisfed.org/fred2/series/WSAVNS

    (flash chart- see link). They are over $7.7 trillion today. Twice what it was in 2005 and that is twice what it was in 2000 (which means it is four times that level today). That does not include other forms of savings like stocks, bonds, or mutual funds. So if that is all need we should be seeing lots of long term investments. Are we?
    Last edited by Zippyjuan; 12-19-2014 at 05:07 PM.

  21. #138
    Quote Originally Posted by Zippyjuan View Post
    So if that is all need we should be seeing lots of long term investments. Are we?
    It's complicated, Zippy. As I said before. Can you not deal with complexity? Are you only happy with believing things that can fit onto bumper stickers? You will hold a belief only if it's simplistic and childish? That's certainly how it seems.

  22. #139
    So savings is not all we need to have a growing economy. Thanks. What I was trying to say.

    "If only we had more savings, we would have more borrowing by companies and more investing which would be creating more jobs."

    You are right- it is more complicated than that. We have the savings. But we don't have the borrowing and investing. Why? We don't have a strong enough demand on the other side of the equation. You need both supply and demand.

  23. #140
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    Madison 320 writes:

    "..The "savings" you are talking about is from printed money. It's not real savings...."


    (..so is the '$pending'...so is that not real 'spending' too?..btw, 'printed money' is part of Republicrat mythology/ignorance...i too used it for years..good folks need to use honest realism when writing/talking ...not false, twisted, Republicrat radio/teevee jargon..)


    "..When you try to fake savings by printing money you end up damaging the economy..."

    (granted, most folks are damaged...but the 'vampire bankster crowd' whom pull the lever$, create deposit$, etc., LOVES IT..The banksters' per$onal 'economy' is VASTLY ENHANCED...)

    "...The logical conclusion to your argument is that we can all have printing presses and just print money when we need it since there's no downside..."

    ('money' 'value' is relative to scarcity..your purported 'betters' will maintain the 'proper quantity' in veritable secrecy and you are/will be left with trivial issues about which to quibble..)

    The savings rate is a bogus statistic anyway. What matters is the total pool of real savings (not all the money that has been printed). I don't know what that pool of savings is,

    (..do you trust any of their 'statistics?'..why?..bogus savings number$..bogus spending number$..hmmm..you'd think someone would blow the whi$tle...but hardly a $tinking peep...even from 'the good ones'..)(hint: there isn't even one 'good one')
    Last edited by H. E. Panqui; 12-23-2014 at 01:37 PM.

  24. #141
    Quote Originally Posted by Zippyjuan View Post
    So savings is not all we need to have a growing economy. Thanks. What I was trying to say.
    Yes, I'm sure this is a huge revelation to everyone here. What would we do without you?

    Everyone knows there's many, many elements needed for a good economy.

  25. #142
    Quote Originally Posted by Zippyjuan View Post
    You are right- it is more complicated than that. We have the savings. But we don't have the borrowing and investing. Why? We don't have a strong enough demand on the other side of the equation. You need both supply and demand.
    It has nothing to do with demand... There is a demand for borrowing and investing, but there is not enough incentive for banks to do it. They can get a much better ROI from paper than they can from lending money to someone who might use it to build something. Why risk your money on a low interest return? It's why the velocity has been so slow.

    Although, there seems to be a shift occurring that will save your ass again... Oil prices. Another market manipulation to be sure, but this could boost the strength of the dollar and get the speed of dollars to pick up from the bottom up. There are huge geo-political forces in play here, but they do not justify a managed economy. You will take it as a sign that demand is picking back up, but it is really the velocity. Who knows what will happened to interest rates, now? How will the BRICS respond? There is just too much complication to plan for. At some point, we could be in very serious trouble. Or, the rest of the world may adopt the dollar and we'll be on easy street. I can't make a prediction on which way it will go or the timetable. I guess you have to get while the gettin's good.
    "And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works." - Bastiat

    "It is difficult to free fools from the chains they revere." - Voltaire

  26. #143
    Quote Originally Posted by helmuth_hubener View Post
    Yes, I'm sure this is a huge revelation to everyone here. What would we do without you?

    Everyone knows there's many, many elements needed for a good economy.
    except liberals who think jobs is everything and libertarians who think not having taxes is everything
    pcosmar's lie : There are more votes than registered Voters..

  27. #144
    Quote Originally Posted by PRB View Post
    except liberals who think jobs is everything and libertarians who think not having taxes is everything
    I do not think either of those are true. Not for any actual humans who I know, anyway. Your associates may be different.



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  29. #145
    Quote Originally Posted by CaptUSA View Post
    It has nothing to do with demand... There is a demand for borrowing and investing, but there is not enough incentive for banks to do it. They can get a much better ROI from paper than they can from lending money to someone who might use it to build something. Why risk your money on a low interest return? It's why the velocity has been so slow.

    Although, there seems to be a shift occurring that will save your ass again... Oil prices. Another market manipulation to be sure, but this could boost the strength of the dollar and get the speed of dollars to pick up from the bottom up. There are huge geo-political forces in play here, but they do not justify a managed economy. You will take it as a sign that demand is picking back up, but it is really the velocity. Who knows what will happened to interest rates, now? How will the BRICS respond? There is just too much complication to plan for. At some point, we could be in very serious trouble. Or, the rest of the world may adopt the dollar and we'll be on easy street. I can't make a prediction on which way it will go or the timetable. I guess you have to get while the gettin's good.
    Pretend you own a company. What will you consider if you are thinking about increasing production? Will you think "I think we can sell a lot more" or "I think we can borrow more money because people are saving more money (and not buying more goods)? Demand has everything to do with it.

    Yes, as you point out there is also demand for money- borrowing to invest. Does the demand for borrowing exceed the supply of money available? If so, interest rates (the cost of borrowing money) should be high. Are they? The supply of money to be lent out should be about used up. Is it? At $2 trillion in excess reserves- plus corporations sitting on $1 trillion of cash themselves? The demand for money is very weak.

    They can get a much better ROI from paper than they can from lending money to someone who might use it to build something.
    Why don't the banks loan out that $2 trillion they are sitting on? They are getting interest on it from the Fed. One quarter of one percent. Hardly an incentive to have $2 trillion laying about when a home loan could get five percent or a business loan at seven percent or a car loan at three percent. That is a better ROI to have it sitting there? I don't think so.
    Last edited by Zippyjuan; 12-23-2014 at 05:54 PM.

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