OWNWER OCCUPIED DWELLING HOUSES
1.Houses currently bought
at purchase price
1.Depreciation
(value used up)
to consumption account
2.Investment (= saving )
to investment account
VI.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 interest
payments not fed from additional output due to the credit is also found in
different cases: Consumer's credit and government borrowing to finance armaments
or social expenditure wwhich as a direct effect increase effective demand. The