Savings in a Fast-Growth Economy

Ron Kean (
Wed, 21 Apr 1999 06:33:06 -0400

On Tue, 20 Apr 1999 13:00:41 -0500 "Billy Brown" <> writes:

>The real question, then, is what will the supply of investment
>look like relative to the supply of investment capital.

The supply of investment capital would always tend to balance the demand for investment capital, at a given risk level, because the rate of return is the 'price' which varies to keep them in balance.

The premise was that 90% of the population is retired, with indefinitely long life spans, having accumulated much wealth from many years of compounded returns. If we assume that the only thing which would cause them to un-retire would be if the return on their investments fell below their minimum income standard for retirement, and that they have a current income which exceeds that standard, then, they each are able to continue to compound wealth. As their wealth increases, over time they need a lower and lower _rate_ of return to meet their minimum income standard as well as continue to accumulate more wealth. So it would appear that at least the possibility of ever declining rates of return exists, from the investment capital supply side. For a wealthy investor with a practically infinite time horizon, a return on investment of .01% per year might look pretty good.

As for the demand for capital, that might be determined by population growth, infrastructure per capita, and the physical rate of infrastructure depreciation.

I believe
>Hanson has looked into these issues a bit. Are there any comments
>from our
>resident economist?
>Billy Brown, MCSE+I

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