Full text: Effective Demand in the Short Run and in the Long Run

either a depressing influence on effective demand or else the 
necessity of further spending and borrowing "extra”. 
Thus the problem of budgetary deficit spending turns out to be 
only one case of several ways of compensating for the lack of 
investment opportunities in the productive sector. In all cases 
there will be an increase in the share of the interest receivers * 
income and consumption in the total. Since interest is regarded as 
a parasitic income this may create social tensions. (It will be 
. . O' 
said that interest nowadays to a large extent Accrues to old age 
pensioners. This is due to institutions which are not a logical 
necessity and which served very well to enlarge the base of 
support for monetaristic policy of high interest rates ). 
Resentment against paying interest may develop in much the same 
way as the resentment against paying taxes which'heralded the 
neoclassical revolution and which was nourished by the experience 
of a long term trend of increasing burden of taxation. Of even 
greater importance is the instability of this credit system: Part 
of the debt is based on the expectation of a rise in asset prices 
.fr cf C<2y}-i£4 
which as we have seen recently in the US in case of land values 
may easily rebound. In fact the increase in asset prices will be 
called in question or actually stop and reverse when the real 
growth of the economy subsides. In consequence the financial 
system becomes more vulnerable as the relative volume of debt 

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