Full text: Capital Gains in Economic Theory and National Accounting

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
	        

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