[CrashList] physical capital and energy price hikes (was: response to Julien)
julp at freesurf.ch
Wed Sep 27 09:12:12 MDT 2000
>Well, I can see his logic. He's talking like a banker would about
>devalorisation which happens especially with primary energy price
>hikes, which depress profit rates across the board and also impoverish
You forgot: IF the policies don't adapt or adapt badly. Sure, unless the
regulators are willing to hide the effects of the hikes with net subventions, there
is going to be pressures and maybe dislocation in some sectors, but profit
rates across the board can be preserved. You are nevertheless right that
profits and/or the masses will have to suffer a bit unless a redistributive
strategy is launched. The question is whether this bit is more or less important
than the bit caused by other factors than the price hikes.
As to your banker analogy, the banker is concerned because he sees the
loan he made as fixed and a devalorisation of the capital buyed with his loan
would make a bankruptcy a much uglier process from his perspective. But
where is the loan in the assets/GNP ratio? It seems obvious to me your
analogy is not relevant to that ratio but to another one like loans/assets.
Anyway, an economy is more than an aggregate of lenders and borrowers. In
other words your banker is concerned because the guy he lent money to
doesn't have a personal central banker to back him in case of trouble. A
whole economy can get out of banking troubles with good policies.
>Incidentally, what is the ratio of assets/GNP today? I
>heard it's been going down in the US, as aconsequence of the New
>Economy? What is it in Japan, any idea?
I repeat: What can this statistic even mean? I understand devalorisation but I
don't understand how it will be different is the ratio of assets/GNP is high or
low. And I don't even know how he/you price the assets in fact. Depending on
how you price them, the "New Economy" could have increased or decreased
the ratio. And if the "New Economy" affected the ratio, so what?
>But HUGE amounts of fixed plant and machinery were retired in the
>1970s. Detroit and Birmingham were ghost towns. That was when the word
>'deindustrialisation' came in vogue.
Sure, but are "huge amounts" the same thing as the "much of" the guy you
quoted talks about? Maybe I'm again misunderstanding English subtelties.
Anyway, that huge amounts were retired doesn't say why. The price of oil isn't
the only factor in the profitability equation. Interest rates f.ex. play a very
important role, both directly and indirectly.
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