Full text: Capital Gains in Economic Theory and National Accounting

10 
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
	        

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