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by chii 1483 days ago
which then encourages investment (it is, after all, what financial products end up being used to finance).

This investment would, if done smartly, will produce more goods and services to justify the higher prices of those financial instruments.

Thus, the economy grows. The financial growth leads the goods/services growth. Unless, of course, the financial growth is spent poorly (which is of course, totally possible), and thus you get nothing out of the spent resources.
1 comments
alaricus 1482 days ago
Not necessarily. How did the economy benefit from retail investors driving up the price of memestocks? Financial activity can be extractive.
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chii 1482 days ago
> How did the economy benefit from retail investors driving up the price of memestocks?

GME did a secondary offering during the memestock rise in price. https://www.shacknews.com/article/125255/gamestop-gme-comple...

it created funding, which they could've used to pivot their business. Whether they use this money wisely to generate more profit is a different question, but you'd expect a business to generally try.

Just because some activities are extractive, doesn't mean all activity of that type is extractive.

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Sevii 1482 days ago
The concern is that with enough printing (aka 2020-21) there aren't enough wise investments to put the money into. If capital is already cheap, even cheaper capital doesn't help anyone.
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chii 1482 days ago
> there aren't enough wise investments to put the money into

yes, that is a concern, but only for those who are investing. Not for society in general imho. The investment would lose money if it wasn't wise, and the investor who did it suffers the loss. unless, of course, this loss is subsidized by taxpayers (e.g., a bailout).

Cheaper capital allows for investments that otherwise would not have happened to happen. An example is the massive amounts of dark fiber left over from the dot-com boom. the losses from building out those fiber is suffered by the investors, but the benefit is now being reaped by whoever that purchased it on discount after the bust.

I wish the same could've been said for fracking shale oil - unfortunately, that didn't happen (and thus led to high prices of oil today). So it's not always the case that unwise investments turn out to be useful in the future, but you can't really know ahead of time.

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imtringued 1482 days ago
That is true but honestly, it's only a problem with real estate and land.
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