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Who: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
Port: Lake Pleasant, AZ
09 April 2018 | Pago Pago, American Samoa
An Informed Atheist Re-Addresses Christianity
10 March 2018 | Pago Pago, American Samoa
A Progressive Reform Program for America
10 March 2018 | Pago Pago, American Samoa
Supply Side and Libertarians Are Wrong and Not Supported by the Data
10 March 2018 | Pago Pago, American Samoa
How Income Inequality Injures People and the Economy
22 August 2017 | Pago Pago, American Samoa
A Democratic Reform Program for America
22 August 2017 | Pago Pago, American Samoa
The Supply Side Libertarians Are Wrong and Not Supported by the Data
22 August 2017 | Pago Pago, American Samoa
The Rise of Economic Ignorance
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part VI)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part V)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part IV)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part III)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part II)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part I)
22 August 2017 | Pago Pago, American Samoa
Racial Hatred Is Confused
22 August 2017 | Pago Pago, American Samoa
What To Do About North Korea
22 August 2017 | Pago Pago, American Samoa
On Neoliberalism
22 August 2017 | Pago Pago, American Samoa
Ban Hate Marches and Assemblies
22 August 2017 | Pago Pago, American Samoa
On Miss Piggy and Mr. Pork
22 August 2017 | Pago Pago, American Samoa
The Demise of the Democratic Party
09 August 2017 | Pago Pago, American Samoa
On Elitism

A Common Economic Misunderstanding

06 October 2016 | Pago Pago, American Samoa
Kimball Corson
The Problem: 'When we say income "hoarding," what are we referring to? The rich don't hoard money by sticking money in their mattresses. They invest their money. They buy stocks, bonds, CD's, real estate, and start ups. These actions do stimulate the economy, directly and indirectly'.
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Most don't understand this issue or Keynes' theory. What Keynes did was explain why Say's law does not apply. Say's law, in its most common formulation, explains that production equals consumption plus investment, that is GDP = national income = Y = C + I, consumption and investment. This is taught as basic classical economics, even today, regrettably.

Keynes actually said in his "General Theory . . ." that Say's law does not apply because some wealthier people don't want to spend all their income on current consumption or real current investment. They have have a higher preference for liquidity. They want cash and liquid assets close at hand so that means they can't be consumed or be truly invested in real investment in illiquid new real assets.

Current real investment does not include money squirreled away as cash or put into liquid secondary financial markets, like the stock and bond markets. It includes only money spent on IPOs which in turn spend that money on real longer term immediate investment, and money invested in real businesses immediately, etc. Money not spent on real current investment or current consumption negates Say's law where GDP = national income or Y = C + I (where S=I). Keynes' implicit formulation is Y = C - H where H = S - I or Y = C - (S - I). Hoarding, H, is introduced to the analysis and satisfies the need for high liquidity preference, but with great income inequality can create a liquidity trap where one can stall the growth of a large economy.

Those with high liquidity preferences hoard. A liquidity trap can occur, Keynes said, at some low interest rate where the demand for liquidity or liquid assets is very high, and highly liquidity assets (mostly cash and secondary financial assets) are sought so the demand for them becomes almost perfectly elastic (very, very great). Current real investment is never liquid. Serious hoarding in large sums can only occur with substantial income inequality, because otherwise people need to spend most of their income on consumption and can save only a little which can be really invested so something approximating Say's law is restored. That is it in a nutshell.

Money hoarded from the flow of income into consumption and real investment impairs that flow and impairs future income which slows the economy. It also slows the velocity of money where MV = GDP so the Fed has to increase the supply of money to counteract the reduced velocity of it from hoarding by the rich in order to maintain GDP. This is a huge drag on growth and why we are in our new "lower low" of slowed growth, relative of course, to what it could be otherwise.

Keynes is very poorly understood by most including many economists and professors of mainstream classical economics, e.g., Greenspan, et al. (Apologies for the very basic algebra, but I thought it might help some.)
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Vessel Name: Altaira
Vessel Make/Model: A Fair Weather Mariner 39 is a fast (PHRF 132), heavily ballasted (43%), high-aspect (6:1), stiff, comfortable, offshore performance cruiser by Bob Perry that goes to wind well (30 deg w/ good headway) and is also good up and down the Beaufort scale.
Hailing Port: Lake Pleasant, AZ
Crew: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
About:
Kimball Corson: I am a 75 year old solo sailor, by choice. However, I did take on a personable, but high maintenance female kitten, now a full grown cat, named KiKiPoo when she is sweet, or KatKatPo after she has just killed something like a bird or bat. [...]
Extra:
Although I was a lawyer and practiced law with good success for thirty years, creating significant new law, I never really believed in the law, the politics of law or in the over reaching self-interest of most lawyers I met. Too much exposure to Nietzsche and other good and seriously thoughtful [...]
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Profile

Who: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
Port: Lake Pleasant, AZ