Saturday, October 18, 2008

LINK: The Greatest Explanation for the Great Depression, boom & housing bubble?

Professor James Livingston explains simply that if business squeezes too much money out of labor, then, demand drops and business has no healthy place to invest its excess profits (plant and equipment) and heads out in search speculative paper which the only alternative ( start ups with no realistic business model, risky real estate): leading us from bubble to bubble.

Ditto for Bush's tax breaks for the already too rich being invested in, guess what, real estate paper.


Steve Roth said...

100% agree. It's far and away the most cogent and convincing explanation I've seen--a compelling explication of the actual mechanism of causation.

Though I'd like to see a lot more support--profit/wage ratios over time, share of capital stock invested productive stuff, etc.

Denis Drew said...

Steve Roth,
"more support"

Agreed; I think we can be sure the process substantially inflates -- if not creates -- any bubble.