Full text: Capital Gains, Pension Funds and the Low Savings Ratio in the United States

But could there not be very strong effects on the flows? The value 
of urban land has tremendously increased in the course of time, 
and much of that gain has been realised when the land has changed 
hands. No doubt the capital gains have had their effect on 
distribution, on consumption and on investment and these effects 
as such are seen in the national accounts but the way in which 
they have come about is shrouded in obscurity. Is that a 
satisfactory state of affairs? 
The idea that the transactions in land etc can simply be left out 
of account meets with objections. The seller has experienced an 
increase in wealth unless he consumes the gain from the sale. That 
clearly brings him interest or profit and thus affects the 
distribution of income. A saving has been produced to the extent 
of the capital gain and the quasi-investment which has created it 
is the corresponding spending of the buyer. We may call it a 
quasi-investment in the same way as the budget deficit because 
each creates automatically the corresponding saving to finance 
itself. They ressemble investment from the point of view of 
creation of effective demand even though they do not represent 
material wealth but only claims which command renumeration in the 
form of interest This increase in nominal wealth is brought about 
by spending of the buyer (of land etc ), in most cases financed by 
bank credits. 
Unlike the buyer who pays just one lump sum the seller can 
distinguish how much of what he receives is maintenance of his 
/ \ A 
wealth and how much is income. 
But what happens if the capital gains are spent on consumption? 
This is an even more spectacular case of the effects of capital 
gains. Since this consumption has not been created in the normal 
circuit of income-cost-income,it is an active variable as it were

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