Posted: Feb 12, 2017 8:46 am
by VazScep
Thommo wrote:Are companies mandated to increase their share price, or just maximise it? For this discussion, the distinction seems important.
Increase? Shareholders are investors.

What I'm suggesting about there being a limited demand for capital is that it's only worth paying to borrow money if you have a more profitable way of investing that money available. This is dependent on the size of the total market outside of finance - if that market is completely (and probably near optimally) filled then there are no investment opportunities to exploit. In this hypothetical situation where all wealth is being subsumed by lenders, that's exactly what's happened, isn't it?
I don't know.

What I've been told (and I'm grossly ignorant on economics and expect to be for the rest of my life) is that things like fractional reserve banking already mitigate against the sort of scenario in the OP, though I'm also told that money created by banks in this way is a small fraction of the actual money supply, which is mostly in the form of derivatives. Nevertheless, as I understand, all this money supply still has some sort of interest or premium due on it, which gives it an incentive to grow, and thus the economy with it. The argument from some people (such as UE on this forum) is that having an economy which has an incentive to grow built into it isn't sustainable. Then again, we get to have financial crashes from time to time.