First, it must balance employers’ demand for waged labor with the available labor supply.
Second, it must equalize savings and investment.
If the prevailing real interest rate fails to balance the labor market, we end up with unemployment, precariousness, wasted human potential, and poverty. If it fails to bring investment up to the level of savings, deflation sets in and feeds back into even lower investment.
It takes a heroic disposition to assume that this magic number exists or that, even if it does, our collective endeavors will result in an actual real interest rate close to it.
How do free marketeers convince themselves that there exists a single real interest rate (say, 2%) that would inspire investors to funnel all existing savings into productive investments and spur employers to hire everyone who wishes to work at the prevailing wage?
Yanis Varoufakis Project Syndicate 19 March 2019
Grundbultsfrågan: Hur blir S = I ??? Savings and investment, being different activities carried on by different people
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