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<DIV dir=ltr><FONT size=2 face=Arial>----- Forwarded Message -----<BR><B><SPAN style="FONT-WEIGHT: bold">From:</SPAN></B> Gunnar Tomasson <gunnar.tomasson@verizon.net><BR><B><SPAN style="FONT-WEIGHT: bold">To:</SPAN></B> gang8@yahoogroups.com <BR><B><SPAN style="FONT-WEIGHT: bold">Sent:</SPAN></B> Wednesday, 10 October 2012, 13:53<BR><B><SPAN style="FONT-WEIGHT: bold">Subject:</SPAN></B> [gang8] Pension economics 101<BR></FONT></DIV><BR>
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<div class=yiv501584635MsoNormal>Dear Gang.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>“Iceland’s pension fund swims in the ocean around the country.”</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>Or so I put it in a conversation with two leading Icelanders thirty years ago.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>One, Gu<SPAN lang=IS>ðmundur (Gvendur) jaki (the strong) was the leader of Dagsbrún (Dawn), the union of Reykjavík</SPAN>’s day laborers.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>The other, <SPAN lang=IS>Ögmundur Jónasson, was the head of the Union of State and Municipal Government Workers.</SPAN></div>
<div class=yiv501584635MsoNormal><SPAN lang=IS> </SPAN></div>
<div class=yiv501584635MsoNormal><SPAN lang=IS>Currently Iceland</SPAN>’s Minister of Justice and the Interior.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>My point was this:</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>The Icelandic people live on what they produce – directly and indirectly through trade with the rest of the world.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>And how does “money” and “savings” etc. come into the picture?</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>In any number of ways, BUT it does not change the central fact of the matter:</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>A “pension” is a claim on current output without matching contribution to its production.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>In the old days, family took care of its elders and community took care (or not) of unfortunates.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>Now, monetary arrangements have been put in place to supplement such old-style “pensions”.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>And, not surprisingly, mainstream monetary thinking has screwed up in this respect as in most others!</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>Ignorant of an essential fact:</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>In entrepreneurial market economies, profit and interest on production credit has one – and only one – ultimate source:</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>FINAL DEMAND INFLATION – New money created to inflate Final Output “Value” above its Factor Supply Cost.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>A means of placing nominal purchasing power in hands other than those of current Factor Income Recipients. </div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>If Factor Income Recipients put some Factor Income aside for future use, NEW money creation in an equal amount must take place.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>Or else Nominal Demand for Final Output will fall short of the Factor Cost of Final Output by the amount of such “savings”.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>If at some future time, such “savings” are activated to purchase Final Output, the effects are identical to those of NEW money creation.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>There are myriad aspects to all this, but one thing is crystal clear:</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>A pension is a means of reaping where one has not sown.</div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>It puts a chicken in one’s pot by shorting current chicken producers. </div>
<div class=yiv501584635MsoNormal> </div>
<div class=yiv501584635MsoNormal>Gunnar</div>
<div class=yiv501584635MsoNormal> </div></DIV></DIV><!--~-|**|PrettyHtmlStart|**|-~-->
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