USA: 2012 Republican Primaries - Romney carries New Hampshire 10 replies

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Nemmerle Forum Mod

Voice of joy and sunshine

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26th May 2003

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#11 7 years ago

Demonseed;5600917Remember, a lot of these people are business owners. We're also talking about corporations who own assets like factories, property, etc. You can't just liquefy that stuff overnight to improve your financial position.

What you can do is curb investment, curtail expansion, and hunker down. In many cases a President presiding over a down economy is out the door after 4 years and replaced with one from the other party. If you know that the chance exists for that President to be more business-friendly, or at least not openly hostile to business, you just dig in to wait it out.

After all, any cash you save is still going to be there in a few years, and you've made the interest on it at no risk. Once the investment climate improves, you go back to doing things the way you used to.

These companies (and people) tend to take the long view of things. 4 years is not a long period of time in terms of major corporation.

If you hang onto your money and the government does something silly that devalues the dollar, you won’t be able to buy anything with that money. Your bills will be a hundred gazillion dollars and the money you’ve kept in your pocket will be a few million dollars. Assets increase or decrease in the number of dollars you can get for them to keep pace - more or less - with the value of the dollar, (provided the number of and demand for assets remains more or less constant,) currency doesn’t; with currency it’s always a 1-1 relationship unless you use an intermediary trade to another form of wealth and then back to the original currency.

Nor will the interest you earn on your money be worth much. Interest is a bounty you’re paid for allowing people to do risky things with your money, and generally vastly underpays you for the risk. Just leaving your money in the bank isn’t a good option - the bank invests your money and maintains a suitable reserve to deal with a couple of weeks or so’s operating expenses. But they don’t have everyone’s money, they’ve spent it. If the bank invests poorly and goes under you can’t get the money back.

Which, theoretically, is why you have a central bank; to underwrite the lesser bank’s risks so that people can have confidence when they invest in the banking system. Which is good for growth when things are going well. The downside of which is that it lets the banks take extremely risky gambles in the knowledge that if they lose the cost will be spread across society in some suitably abstract manner by the government. In which case their competitors will share the cost as much as they do; and the only winning move becomes to gamble with the highest win-loss ratio you can legally get away with, in the knowledge that the short-term gains will allow you to dominate the market, rather than the highest averaged wins, (since everyone pays the costs for everyone else’s gambling strategies, regardless of how careful you were.)

There’s no such thing as risk-free interest.

If you have a 1,000 dollar debt and a loaf of bread costs 10,000 dollars you want to be the man who spent 1,000 dollars on a bakery, not the man with ten thousand dollars in his back pocket. The man with the bakery's going to walk away filthy rich, or at the very least with the capability to trade bread for the things he wants without inflation buggering him over.

Of course you don't want to be in a variable rate loan, either. Which is why so many people lose their homes when the inflation dramatically outstrips their earnings....

If you need to pay your bills in an economic downturn you invest the money before the downturn, or as high up on the downwards slope as you can manage, and use that investment to buy dollars when they're cheaper, with which you then pay your bills. Or you just directly pay your bills with assets, provided you've invested in something suitably fungible.

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