By John Ballard
Snip here from Nouriel Roubini's latest.
...free markets don't generate enough final demand. In the United States, for example, slashing labor costs has sharply reduced the share of labor income in GDP. With credit exhausted, the effects on aggregate demand of decades of redistribution of income and wealth�from labor to capital, from wages to profits, from poor to rich, and from households to corporate firms�have become severe, owing to the lower marginal propensity of firms/capital owners/rich households to spend.
The problem is not new. Karl Marx oversold socialism, but he was right in claiming that globalization, unfettered financial capitalism, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct. As he argued, unregulated capitalism can lead to regular bouts of over-capacity, under-consumption, and the recurrence of destructive financial crises, fueled by credit bubbles and asset-price booms and busts.
In other words, if you ain't got cash or credit you can't buy anything. What's not to understand?
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