Monday, September 14, 2015


Many who support the flood of refugees into Germany hold or parrot this false belief:

Germany has a labor shortage.

Thus, they call for more bodies who can become more workers in Germany. They believe having more workers is key to growing an economy. Such a belief is one of the most pernicious fallacies that causes more mischief than perhaps anything else.

Now here is reality:

Germans are suffering a capital shortage.

German enterprisers need to acquire more property put to production, aka capital, to leverage extant working age population. So the answer all should seek is the one that tells anyone why Germans have a capital shortage.

Capital shortages arise because returns to capital are not present. Only in the presence of positive returns does capital formation happen.

Most successful businessmen suffer from improvident nearsightedness. They focus on their own P&L statement and not the entire realm of commerce.

Many foolish enterprisers who don't understand capitalism believe they want more workers so they can pay workers less and thus incur less costs per unit of output. Yet, when all enterprisers do that, prices must fall as wages are the source of prices.

In short, the mass of idiot businessmen who call for more immigrants so as to depress wages end up killing the goose that laid the golden egg.

All working people should want to control immigration to keep capital growth rate far higher than the working age population growth rate.

Labor shortages are great for laborers and people in general. All shortages give rise to more capital among enterprising people.

Wages arise from capital. Higher wages arise from more capital producing ever more efficiently. As capital gives rise to wages, more capital gives rise to higher wages. Among no people in the history of mankind do you find wages absent capital.

In countries with big populations and no capital, you get bare subsistence (e.g., countries of Africa). In countries with big population and much capital, you get low wages (e.g., China, India).

Massively increasing the prime working age population, roughly 18-54, both depresses wages and leads to a capital death spiral. When the prime working age labor growth rate exceeds the capital spending rate, wages fall. Falling wages necessitates a fall in prices. A fall in prices causes a fall on the return to capital.

All prices get set by winning bidders in purchases and sales in the face of what is on offer. Wage rates are prices.

Would-be employers bid against themselves in an English auction. Would-be workers bid against themselves in a Dutch auction.

Massively increasing the worker head count means both would-be employers and would-be workers bid less.

As income (wages, earnings) is the source of prices, falling income means falling prices. Falling prices on extant capital investment means falling return to investment.

Capital spending then must fall and unemployment must rise so that enterprisers can then adjust to re-gain the same return rate to capital. Future capital gets lessened. Life gets worse.

Heed my dictum: Labor makes property. Capital makes property efficiently.

Property means right of ownership and not what is owned. Capital is merely another name for property put to production in hopes of a gain (see: CAPITALISM. BECAUSE WITHOUT IT, YOU WOULD BE LIVING AS A BARE SUBSISTENCE SAVAGE and WHY IS THE ECONOMY SO HORRIBLE? BECAUSE ACADEMIA ECONOMICS IS FAKE).

Capital alone is the source of improvement in the lives of all.

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