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

To: Don Lloyd who wrote (70922)	11/23/1999 11:03:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Don, >>Per Austrian theory, it is the profits that are temporary, everything else being equal. For a company to continue to earn profits above risk free rates it must either be protected behind a strong barrier to entry or to continuously innovate and exploit new profitable niches before its existing and potential competitors.<< I agree with you completely. But I believe that's only the case when you are referring to an increase in the return on existing capital. That's not what I am talking about. I'm mostly referring to the increase in profits and productivity that comes from the reinvestment of current profits. (this includes additional funds) Example: I can replace a worn out $1000 machine with a brand new $2000 machine that makes my workers more productive. If all competitors continue to earn the exact ROC, profits will be higher for all and (all else being equal) they should be sustainable. >>The economy will still benefit from the increased productivity, but it will do so mostly by lower prices to consumers that result from competition. But this will not show up directly in improved economic statistics, only indirectly as consumers have more funds available to buy other new and existing products.<< In general the Fed increases the money supply to offset the general decline in aggregate prices that result from productivity gains. This contributes to higher income streams and overall profits. One need only look at a graph of corporate profits/GDP/productivity to see the relationship. Wayne