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Junior Member
quote: Originally posted by Cooper
quote: Originally posted by PGL
You've got to ask where this leads for us as a society.
Well, under the basic scenario you've been describing, under which the demand for capital increases, and the supply of labour similarly increases... All else held constant that results in the relative returns for capital goods growing, and those who hold capital becoming wealthier. Meanwhile the relative returns on Labour have decreased due to increased supply, so those who contribute labour receive less return for their input, in a relative sense. So under that scenario, you work more for relatively less, and those who are already wealthy grow wealthier as the proportion of return for capital input increases and labour costs decrease.
Not an analysis of the current situation, just an extension of the example discussed here.
Well, I guess I already knew that in my heart of hearts.
I was hoping for a more optimistic outlook - revolution perhaps?
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Member
Maybe, but if that very simple scenario is applicable then there is a point at which the demand for capital goods will reduce, because the market for those goods is predominantly those who provide labour, so the decrease in relative wealth for those whose main input is labour will also lead to a decrease in the demand for capital goods. In this instance it would be in the best interests of all concerned (particularly those providing the capital) to ensure that the discrepancies aren't large enough to warrant revolution. Time and the "invisible hand" would bring it back into equilibrium, in other words.
Undisputed 2006 World Cup Premierleague Champion
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Junior Member
It's late but I guess we are talking 'supply and demand' here
What troubles me is that we are moving (by stealth) to a different point on the supply demand curve than we were at say 20 years ago - vis-a-vis what the average joe/joess got for the number of hours that he/she worked.
So at what point does it come to equilibrium, and more importantly, why has the equilibrium shifted - the invisible hand perhaps?
Disc - no idea whether or not you put a question mark on a rhetorical question. Sad really, I can ask them but I can't punctuate them!
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Member
quote: Originally posted by PGL
It's late but I guess we are talking 'supply and demand' here
What troubles me is that we are moving (by stealth) to a different point on the supply demand curve than we were at say 20 years ago - vis-a-vis what the average joe/joess got for the number of hours that he/she worked.
So at what point does it come to equilibrium, and more importantly, why has the equilibrium shifted - the invisible hand perhaps?
Disc - no idea whether or not you put a question mark on a rhetorical question.
Yeah... it's too late in the day for me to say much of any intelligence. Why has the equilibrium shifted? Social factors maybe? Living beyond your means; cheap credit and/or expensive credit not being properly preceived as such, coinciding with a more materialistic way of valuing one's worth? Leading to increased indebtedness and the purchase of consumption goods that don't generate an economic return (the lack of ability to differentiate a true need from a perceived need which is actually a want), but which serves to increase a society's productivity, so as to give the perception that average "wealth" is growing. All leading to the individual needing to make the decision to increase their labour supply (working more) whilst also increasing the return on capital (by demanding more capital goods) which subsequently decreases the relative return on labour, leading to a bit of a downward spiral. I'm just making it up as I go but it makes sense at half past 12 on a tuesday morning.
The argument for why the equilibrium has/has not shifted would probably depend on what the individual would be proposing as a cure (if any!). An economic liberal would just claim it's the symptom of a productive society and the individual's decision to work more to increase their utility, a marxist would claim it's an example of the capitalist class using their might to gain extra leverage over the proletariat. Both would make the diagnosis on the basis of justifying the cure they have in mind to fix it.
Undisputed 2006 World Cup Premierleague Champion
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Member
Just a note from the field.
Took a half hour ride on a Auckland ferry to a far flung suburb.
A 1980's Fibrolite on 1/4 acre with no view going for $510,000.
Sections in adjacent new development selling for $280,000.
Assured by ferry boat driver prices still have a long way to go and will double.
Reminds me of that story about the shoe shine boy who gave a tip to that great share market investor who then immediately sold out of the market that day.
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Member
In answer to your first question, yes very good returns are obtainable by investing in property.
So if good returns = rocks, then yes property can ‘rock’.
I disagree with your comment that gearing is gambling. It all depends on what you do with the borrowed money.
To your example… a share price increase of 3.91x is certainly a very healthy return for a 12 month period. Congratulations!
If you could have done so, knowing what you knew about that stock a year ago, would you have borrowed $80k for every $20k of your own money and used the funds to buy more of that particular stock? Based on the fact that the share price went up by 3.91x in 12 months the company in question probably had/still has a pretty small market cap, and I’m guessing there’s no way a bank would lend to an 80% LVR on such a stock. A personal loan is always an option though.
Your example is partly hypothetical because you didn’t actually borrow the money, you just looked back at one particular share you hold that has appreciated a lot in the last year, and concluded that shares must be better than borrowing for real estate.
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Member
Hi aspex.
Yes you're right, I made a few incorrect assumptions.
So now I'm eating humble pie. [:I]
That's a great return! Good on you.
Perhaps I ought to educate myself on how CFD's work and then if it makes sense and I feel comfortable with it, give it a go, starting small of course.
What did you do to get educated & started?
Thanks for posting.
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