Quote:
Originally Posted by pai mei
The value of the wages in an enterprise is always just a fraction of the cost of the finished product. That is for all factories and hotels and whatever across the planet. What does that mean ? It means people will never be able to buy all that is produced. All the money go to the business owner. But how many finished products do they buy ?
Solution : credit.
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I apologize in advance for not reading any further, but I could not get past the flaw in the "solution". Consumption can come from wages, but we also have profits, capital gains and on a global perspective - exports (the theory being - items produced efficiently in one area get exported to an area where that is not true, but that area has an efficiency advantage in a product they export).
{added} I just finished watching the video, I think they presented a one sided summation of money and debt in an economy. I think they failed to look at the fact that debt is most often used to acquire assets, and in some cases productive assets. For example if $100,000 loan is given to a farmer to purchase a tractor with a useful life of 20 years, or a depreciation rate of $5,000 per year, and let's say the debt service on the loan is $6,000 per year, then we have a total annual cost of the tractor of $11,000 excluding operating expenses. If that tractor enables the farmer to be more productive and is able to feed 100 more people at a rate of $50 per week and generates the farmer 10% of the gross that is ($50 x 52 week x 100 people x 10% to the farmer) $26,000. The farmer has a gross profit of $15,000 per year on the tractor or the debt not including operating costs. This is a net good for the farmer, net good for society (100 more people getting fed), net good for the bank, and a net good for the tractor maker. the system begins to fail if debt is used for non-productive purposes.