December 12, 2018

What produces more bread? An economy with all consumers being equal, or one with some being filthy rich?

Sir, David Redshaw quotes John Kenneth Galbraith from his 1929 book The Great Crashwith: “The rich cannot buy great quantities of bread.” “Excess wealth can lead to speculative froth” December 13.

True, but when the rich transfer their purchasing power by buying assets that would often otherwise not be demanded, might that not be causing others to have job opportunities that would allow them to buy greater quantities of bread, than would have been the case without the rich?

And Redshaw goes on to say “The economy is motored by the regular and reliable spending of a confident workforce rather than by the mega rich, whose erratic and luxury-end spending always seems to end in boom and bust.”

Really? When has an erratic and luxury-end spending by the mega rich ended in a boom and bust? Last time I looked it was poor buyers of homes in the subprime sector in the US, empowered by being packaged into AAA rated securities, these securities in its turn empowered by regulators who allowed European banks and US investment banks to leverage more than 60 times their capital with these only because they had an AAA to AA rating, which ended in boom and bust.

Sir, never forget that a paper is also measured by what it allows to be published.