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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (65070)	7/22/1999 3:51:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Mike, Speaking of productivity..... There's another big problem with the productivity statistics that few folks talk about. Most workers at most times are not producing up to their full potential. (Just look at me). They only keep as busy as their business happens to be at the time. For example, a salesman may sell 'x' widgets per day when credit is tight and the economy is weak. He can spend his spare time reading Ask Mike Burke. Loosen credit and enable everyone to go on a buying binge and all of sudden he is selling more per hour, per day etc... He is instantly a more productive worker. These sorts of things show up in the "short term" as higher productivity, but they are really bubble-vision. It's similar to the outsized profits and return on capital that is produced by a credit boom. When credit is made available and it isn't from savings, it is simulative. Flood the system with easy credit and you get an orgasm of short-term stimulation to profits and productivity. Wayne

To: Knighty Tin who wrote (65070)	7/22/1999 4:35:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Mike, AG tried to make a case that historic stock prices might be reflecting higher levels of productivity. IMO there are leveling effects between 'real' borrowing costs and 'real' returns on business capital. Even if the business capital stock becomes more productive in the short term, it would probably be matched by a greater demand for capital to invest in order to take advantage of the higher returns. Depending on the amount of savings available to invest, that would eventually cause either a decline in the return on capital or a rise in the level of 'real' borrowing costs and thus drive the values back down to the level of the capital stock. IMHO the "average" business is worth approximately the replacement cost of its assets. (Here I include some assets that are not captured by accounting standards. I do not think they are not large in aggregate though.) Only those businesses that can generate sustainable (key word sustainable) returns on capital that are above market rates of return are worth more than the capital they have invested (goodwill). Those that generate lower returns would be best off liquidating. WE ARE VERY OVERVALUED IN AGGREGATE! AG is the bubblemaster! Wayne