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No, the problem is more general than that.

Even if you can aggregate capital smoothly and without problems, it would still be wrong to say that there is lots and lots of capital sloshing around looking for gainful employment. The correct formulation is that there is lots of financial assets sloshing around, looking for capital to gainfully employ.

This formulation - quite independent of how you measure the volume and value of real capital - illustrates that the problem is a shortage rather than an excess of capital (including raw materials).

At the moment, we also happen to have a shortage of financial assets, due to the inability or unwillingness of policymakers to distinguish between physical capital (which must be paid for in sweat and raw materials) and financial assets (which can be created ex nihilo and consigned to oblivion essentially for free and in whatever volume required for the optimal functioning of the productive economy.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Dec 20th, 2011 at 05:28:55 AM EST
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