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V- MACROECONOMIC IMPLICATIONS OF CREATING CAPITAL GAINS.
There is a certain terminological difficulty: Saving and
investment stands in the same relation as capital gains and what?
We might call it capital gains creating credit, although it is not
always and entirely credit but may be paid out of the buyers own
pocket. It is strictly the asset buyer's spending in so far as it
finances the increase in the asset price. We might for the time
being call it inflationary spending on assets.Now this spending
creates capital gains of the same amount which may be spent again
on consumption or investment or may be kept in financial assets.At
the same time, however, it burdens the buyer of the asset just as
much with interest payments ( debt service ) as if the credit had
been used only for productive investment. Now we must refer to a
rather old fashioned distinction between production and
consumption credit: If the credit serves to initiate additional
production (especially increased productivity) then the interest
and in good time also the capital can be paid out of the
additional profits created by means of the credit. In the case of
the credits which are used only to create capital gains, in the
contrary, the interest has to be paid from existing incomes: That
means the distribution of the society's income will be
affected,there will be a shift of incomes in favor of the rentier.
This will be true whether the assets are land or shares or even
raw material stocks. The most important case is probably that of
urban land because there is here a long run tendency to an
increase in values which means that the shift in income is
continuing, just as it had been predicted by Ricardo, only for
different reasons. The same burdening of the society's income by