Saturday, October 13, 2012

‘The Rich Get Richer Explained,’ Featuring Warren Buff-ay and ‘The Bernank’

This is very well done, with the one caveat that at the end there is an implication that those just holding capital are sitting there doing nothing. Without capital there would be no buildings, machines or motion pictures. It is very important to distinguish between crony capitalists, who make their money by being in cahoots with government officials and real capitalists who put money into projects that make life easier and more comfortable for all of us.

(ht Mark Perry)


  1. favorite line:

    GIRL: "you'd have to be an idiot to repeat those mistakes"
    GUY: "an idiot or an economist"

  2. Even when money is saved ("hoarded") to fund deferred consumption (i.e. retirement savings) and not as capital for investments, it is still economically productive - it decreases availability of money and thus causes price deflation which increases value of capital saved by others (another way to see it is to observe that the saver produced more than consumed thus making more real goods available to the society, which makes the goods cheaper, so those who do invest can buy more capital goods for their money).

    In other words, hoarding money amounts to investment in the economy as a whole. (In case of hard money at least some of the benefits of such investment will be made available to the original saver in form of higher productivity of the economy as a whole, i.e. dropping prices and increasing purchasing ability of his savings).