Zero-interest cash with crushed consumer demand goes to asset purchases, not production.
Evidence
With investment first knocked out by the crash of 2008 and finished off soon after by austerity, throwing new money at the financiers was never going to resurrect it. Put yourself in the position of a capitalist at a time when austerity is eliminating your customers’ income. Suppose I give you a billion dollars to play with for free, i.e. at a zero interest rate. Naturally you will take the free billion but as we’ve established you would be mad to invest it in new production lines. So what are you going to do with the free cash? You could buy real estate or art or, better still, shares in your own company. That way, the shares in your company appreciate in value and, if you are the CEO running it, your stature and share-linked bonuses rise too. — Yanis Varoufakis, Technofeudalism, 394
Categorization
- XREF: Exemplifies the wealth-effect/asset-bubble mechanism also discussed in Piketty’s r>g; reinforces the ‘gilded stagnation’ turn that funds cloud capital. — connects to: Savings do not necessarily produce investment and can instead produce hoarding — Mark Blyth, Austerity: The History of a Dangerous…, 342; Banks create money ex nihilo, so credit not savings finances investment — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 139; Nonfinance firms’ financial gains are funded by production-derived cash flows, not new productivity — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 175
- corroborated: 2 independent passages support this claim — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 394
Broader Connections
- Savings do not necessarily produce investment and can instead produce hoarding
#expands(0.72) — Mark Blyth, Austerity, 342 - Nonfinance firms’ financial gains are funded by production-derived cash flows, not new productivity
#corroborates(0.72) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 175 - Banks create money ex nihilo, so credit not savings finances investment
#complicates(0.70) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 139