Monday, January 29, 2018

Lower prices and scale matters, plus financial assets, plus excess capacity...



When you are certain that prices may rise, buy more at lower prices if you have capital....



You can do the same at current prices, 'coz we know prices could rise... It would be profitable, to buy low and sell at higher prices...



Buy at current prices and if prices fall more than 10%, buy more ( if you have capital), it 'ud reduce the average cost of investment and increase profits...



A businessman must maintain a capacity to invest more if prices fall beyond expectations.....



More spending through lower borrowing cost or real rates due to higher inflation could increase supply in the future leading to lower prices and higher real interest rate and savings investment employment and growth...



There is a considerable ratio of higher borrowing cost and wage cost, which is sticky (wages) in the short run, but commodity prices, partly due to lower borrowing cost, show no such pattern, but dependent on individual markets demand supply, due to the capital class that work with excess capacity to invest more at lower prices.... which could further increase investment employment and growth and expectations...



Higher inflation is a signal that supply could increase to lower future price and expectations....



Investment is the source for more employment and more tight labour force to increase productivity and production and lower inflation and increase real wages/incomes/profits and demand, consumption and savings and investment and growth........,



Expectations play a role in spending... if peo[ple expect that thier real wages would go up... they would spend more and save less to increase demand/spending and growth and (fu)/tu(r)th(e)r growth.... Real or inflation adjusted income help form rational expectations.... and rational spending,,,,,,,,



There is real wage and productivity gap since 1970s...



Therefore, demand is going down and prices, too, alongwith lower real gdp growth, estimates and expectations...



How the people can trust in future... they are not paid their productivity in the past...?



We can promise to compensate in the short run and expect correction in the future... real wages should equal productivity..... to reduce inequality......






Low compliance is above all the problems...



More formalisation of the economy through the incoming data on incomes and spending through bank account transactions, just like the GST on businesses, could help maximise the revenue function... most of the tax payers donot report their true income...



Even a peon in INDIA earns more than engineers, and on the top of it bribe and corruption has long been a tradition in the public life... unless people are brought under financial surveillance through bank accounts transactions they would find a way to dodge tax collection and revenue... only a few crores out of a 1 billion or 100 crore people economy report income, besides the under reporting cases...




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