Janet Yellen: Savers will have to be Punished 'For Quite Some Time'

[oyarde]

Which actually kinda supports what she said- low rates will encourage more investment in job creation activities. Your buying more trees and fuel helps the grower and the energy seller. They have more money to spend on things and might also hire more workers to help the increase in business. Putting it in the bank doesn't directly create any jobs. Spending it does.

Lol . Yeah , they got me Zip , except I will never hire any workers or report more income , when I keel over dead this particular place will be the only one I owe anything on and the land itself will be be worth that , so the Grandkids , Great grand Daughter can decide what choice they want to do with it then . I will finally be @ peace , too tired to pay for others and no after life coupon for doing so . LOL . I honestly had no great aspirations as a young man , I have exceeded that despite myself . It is a strange world .

 

[2young2vote]

Giving employees money would not increase profit in the long run. It could certainly increase sales, but every penny of cash reserves taken out of a company for the sole purpose of being given to employees in the hope that it increases sales is a penny that has become less efficient due to taxes and inflation. By the time they get it back it will probably be worth less than 3/4 of what it was when they had it originally. Their savings will not last forever and they will eventually spend - when they believe it will earn them the greatest return. It is the same argument as minimum wage - it provides temporary spending power increases to individuals who were lucky enough to keep their job, but it never lasts. Do corporate cash reserves have to keep getting larger and larger in order to "eventually" make more money? We all know that isn't the way it works.

 

[Madison320]

Putting it in the bank doesn't directly create any jobs. Spending it does.

No! Putting it in the bank allows the money to become available for capital investment to build factories, to make our labor more productive. Spending it just gives a temporary boost to retailers.

 

[oyarde]

Retail does not look that great .

 

[devil21]

+rep for translation

edit: how is it that these folks see the fix to the problems of too much debt and too much bad debt as... encouraging more debt?

The entire system functions on the messed up principle that debt=wealth. Gotta keep pumping up debt to put new devalued money into the system. Without it, deflation kicks in and the system collapses onto itself. It's a giant ponzi scheme and shell game. All ponzi ends eventually.

 

[Zippyjuan]

No! Putting it in the bank allows the money to become available for capital investment to build factories, to make our labor more productive. Spending it just gives a temporary boost to retailers.

They must be building hundreds or thousands of factories with that $2 trillion. Where are they? If money in the bank is all it takes, they should be popping up all over the place.

True the banks must have money in them for companies to be able to borrow if they want to invest in more factories or whatever- but they won't do it until they see enough demand for their goods to make building a new factory worthwhile. The banks have tons of money (even companies have about $2 trillion sitting around- but not enough demand to expand). How do they see that demand? When consumers spend more money on their goods. Without the customers buying more, they won't build more. There is not a shortage of capital available for expansion. The shortage is in consumer purchases. If you owned a business what would encourage you to expand and build another factory? Knowing the banks had money or your sales projections?

 

[NoOneButPaul]

http://mises.org/books/economics_in_one_lesson_hazlitt.pdf

You should really read this book Zippy... I'm really not sure how you ended up here to begin with lol... I feel like a lot of the supportive arguments you make are very well debunked by Hazlitt. I would argue with you but I just don't see the point...

 

[Lucille]

So according to ZippyJeffry, it's the corporations' fault that savers will have to punished for quite some time? LOL But of course.

Dumbass ineducable progs (BIRM) should go to PuffHo or Koz Kidz playpen where they belong, and stop embarrassing themselves here.

 

[Zippyjuan]

http://mises.org/books/economics_in_one_lesson_hazlitt.pdf

You should really read this book Zippy... I'm really not sure how you ended up here to begin with lol... I feel like a lot of the supportive arguments you make are very well debunked by Hazlitt. I would argue with you but I just don't see the point...

Can you point me to a particular page which disputes what I said? Under what conditions does it say a business will decide to expand their production? Can you increase demand by increasing production? Could Chrysler have ended their problems during the economic collapse by simply making more cars (they had cars piling up at dealer's lots) - or did there have to be demand for those cars before it made sense to create more of them? Thanks.

It does say this:

After the machine has produced economies sufficient to offset its
cost, the clothing manufacturer has more profits than before. (We
shall assume that he merely sells his coats for the same price as his
competitors, and makes no effort to undersell them.) At this point, it
may seem, labor has suffered a net loss of employment, while it is only
the manufacturer, the capitalist, who has gained. But it is precisely out
of these extra profits that the subsequent social gains must come. The
manufacturer must use these extra profits in at least one of three ways,
and possibly he will use part of them in all three: (1) he will use the
extra profits to expand his operations by buying more machines to
make more coats; or (2) he will invest the extra profits in some other
industry; or (3) he will spend the extra profits on increasing his own
consumption. Whichever of these three courses he takes, he will
increase employment.

In other words, the manufacturer, as a result of his economies, has
profits that he did not have before. Every dollar of the amount he has
saved in direct wages to former coat makers, he now has to pay out in
indirect wages to the makers of the new machine, or to the workers
in another capital industry, or to the makers of a new house or motor
car for himself, or of jewelry and furs for his wife. In any case (unless
he is a pointless hoarder) he gives indirectly as many jobs as he ceased
to give directly.

That the owner of capital will have more profits. The question is what action with those profits creates the most jobs. If the owner gives the new excess profits to his employees, they are likely to spend most of that on buying goods and services. It claims that if the owner keeps the profits, he will also spend the money on goods and services. But it ignores that he will spend less. A business owner (particularly of a large business) is usually a wealthy individual. He doesn't need to consume much more than what he already does. How many more cars does he need? How much bigger of a house or more clothes will he buy? No- his money will go into savings or some form of investment. The lower income consumers (his employees) do have unmet needs and wants. They are likely to spend a significantly higher portion of their income on goods and services. Buying goods and services increases demand for them. That creates the need for more workers to produce those goods and services. More new jobs are created if the extra income goes to the workers rather than the business owner and share holders. But the owners of the capital only care about their own profits like any rational economic actor so they aren't looking at the impact of their actions on the overall economy.

Henry Ford recognized this. He felt that he could sell more cars if his own employees could afford to buy them so he paid his workers significantly higher wages than his competitors. And it helped him sell a ton of more cars (which also meant hiring more workers to make those cars and more profits to Ford from selling those additional cars) than his competitors and even he did before.

All the actions in the article do increase employment, but at different rates. The impacts are no the same (though it suggests that they are). The scale of the impact is different. They will all produce more jobs- true. But not the same number of jobs.

(and it still doesn't address the issue of WHY a company would decide to increase production)

(I will add that I do have a degree in economics).

 

[Zippyjuan]

So according to ZippyJeffry, it's the corporations' fault that savers will have to punished for quite some time? LOL But of course.

Dumbass ineducable progs (BIRM) should go to PuffHo or Koz Kidz playpen where they belong, and stop embarrassing themselves here.

Not what I said at all. I am not saying that business in any way caused low interest rates. I am saying that low interest rates and lots of money in the banks are no enough by themselves to cause a business to create more jobs by increasing their production. They need people to buy what they will create. They won't invest unless they know they will be able to sell what they make.

 

[Bohner]

Not what I said at all. I am not saying that business in any way caused low interest rates. I am saying that low interest rates and lots of money in the banks are no enough by themselves to cause a business to create more jobs by increasing their production. They need people to buy what they will create. They won't invest unless they know they will be able to sell what they make.

Do you know what else increases demand?

Lower prices.

 

[Lucille]

wrong thread

 

[Zippyjuan]

Do you know what else increases demand?

Lower prices.

That can help also. The main problem is our stock- market driven economy. Companies set quarterly goals rather than long term goals. They want to increase profits for shareholders in this quarter so they raise prices or cut wages (costs) (or hours for workers) to try to increase it. Next quarter, more increasing profits are again expected- money flowing more to the top rather than being shared with other factors of production (higher wages or lower prices). Eventually you go beyond cuts which improve your bottom line and hurt your ability to conduct your business well so sales drop and more cuts are called for. A company focused on long term growth of the company will make different decisions on what to do than one focused on short term results. They will invest more in attracting quality labor and improving their operations over time rather than shooting for some arbitrary target this quarter.

 

[Bohner]

That can help also. The main problem is our stock- market driven economy. Companies set quarterly goals rather than long term goals. They want to increase profits for shareholders in this quarter so they raise prices or cut wages (costs) (or hours for workers) to try to increase it. Next quarter, more increasing profits are again expected- money flowing more to the top rather than being shared with other factors of production (higher wages or lower prices). Eventually you go beyond cuts which improve your bottom line and hurt your ability to conduct your business well so sales drop and more cuts are called for. A company focused on long term growth of the company will make different decisions on what to do than one focused on short term results. They will invest more in attracting quality labor and improving their operations over time rather than shooting for some arbitrary target this quarter.

I was speaking more from a monetary standpoint than from a fiscal standpoint. Interest rates are low, but pulling back on stimulus would at least allow prices to drop which in itself would help spur demand in the long run. From a fiscal standpoint, you can help lower costs and decrease barriers to entry by easing up on regulations.