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To: BlueStateDepression
So long as the money spent is not directly consumed but instead used to create more labor and thus more money. Spending is what makes us grow my friend.

Spending for consumption sustains the current level of production but doesn't add new capability. To do that we need investment. I'm not knocking spending, it's a big part of our economy and many industries and services have been built to support the retail industry such as delivery, accounting, and loads of online services and support. But spending can be too big a part of an economy as ours is now. We should be producing more exportable goods as a share of the economy rather than going into debt to support consumption.

Saving and investing on the other hand is deferred consumption. Instead of taking some goods in trade for my services, I take money which I save or invest so I can buy the goods later. Investment (such as buying new production machinery) is also the primary way to improve productivity. That allows more people to be hired and higher wages to be paid. Workers who are motivate to work harder will also produce more as you point out. But the productivity increases produced by investment vastly outpace any gains by working harder. The machinery and automation brought by information technology had produced amazing increases in productivity which has lead to greater wealth overall. I admit sometimes the wealth takes a while to trickle down especially when old manufacturing methods are being phased out and workers need to be retrained. But holding back those improvement to protect jobs will result in lost jobs overall as the wealth and productivity of the economy is reduced.

108 posted on 11/22/2005 7:04:50 PM PST by palmer (Money problems do not come from a lack of money, but from living an excessive, unrealistic lifestyle)
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To: palmer
Spending for consumption sustains the current level of production but doesn't add new capability.

That which is consumed must be replenished when demand is present. This spending on a consumable creates more labor. When the consumable(gasoline) is sold it creates a gross profit. A portion of these gross profits must be spent creating more consumables(gasoline). What portion is spent on raw materials and the labor to create it, not to mention infrastructure, to facilitate its making is determined by the demand. Reinvesting profits in the business, including increasing capability, is facilitated by the spending done on the consumable. Without spending on the consumable, there would be no profits to reinvest.

It seems you are saying that without outside investment, capability could not be added. This is untrue. Lots of companies grow without outside investment. Proper allocation of gross profits make it happen.

Outside investment can make capability grow faster, that much is true. When someone invests they spend. If the company goes under, that money is gone one could even say 'consumed'.

We should be producing more exportable goods as a share of the economy rather than going into debt to support consumption.

We should be exporting more services rather than goods. Services require far less finite resources than the production of goods.

Machinery is a good thing for production until it doesn't work. CNC burning tables increase production in a sheet metal shop BUT when the table is not functioning production stops. There is also a danger that ability to do things by hand is lost when too there is too much reliance on technology.

But the productivity increases produced by investment vastly outpace any gains by working harder.

One does not always have to work harder to be more productive. Wealth that doesn't trickle down because it is taken out of the cycle to fast (ie subverting labor's portion or over taxation) is part of the problem I point out. To many advancements leading to jobs being phased out derails the whole cycle as there is less people with less money to buy the product or even service being produced. Holding back the advancements , sometimes, is the only way to insure a company can even survive.
109 posted on 11/25/2005 1:05:28 PM PST by BlueStateDepression
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