From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Wed Jun 09 2004 - 09:08:28 EDT
--- Phil Dunn <pscumnud@DIRCON.CO.UK> wrote: > >--- Phil Dunn <pscumnud@DIRCON.CO.UK> wrote: > > > > > > >> Hi Ajit > > > > >> Not good enough. You fail to distinguish > between a > >> general rise in > >> prices and a rise confined to just x and y. > >> If the rise is confined to x and y then the rate > of > >> profit is indeed > >> 20%. Whether the business person decides to > >> continue operations > >> depends, inter alia, on whether she can make a > >> profit when x and y > >> are $40 instead of $25. > >> That depends on the dollar price of z in the > second > >> period and > >> inflation). The money capital required can be > >> borrowed. > >_____________________ > >I don't mean general inflation. I mean changes in > >prices of x and y. Let's suppose I go to you to > borrow > >money for my next round of production. I tell you, > >look I just made 20% profit in this business, so > >please lend me some money to reinvest in it. Given > >that you follow TSS logic, you gladly lent me the > >money. But again the same thing happened. The > prices > >of x and y rose to $80 each and my z is now priced > at > >$96. So I again go to you asking to borrow more > money > >to carry on my business. Tell me for how long you > will > >keep faith in TSS and keep lending me money? > Economics > >needs to know which sector is viable and which is > not. > >The viability of a sector depends upon whether it > can > >keep producing at the same level. So you will see > that > >what I wrote was good enough once you start to > think > >of yourself as the person who may have to lend > money > >to a TSS business fellow. Cheers, ajit sinha > > Hi Ajit > > Of course, rising costs are a concern to a business > and its bankers > -- but only if the costs cannot be passed on to the > customers. Here > we have a case where we assume costs can always be > recovered and > where there is a historical cost profit and a > replacement cost loss. > In every year loans can be repaid with interest with > a bit left over > for the proprietor. This is a rock solid business > proposition. > Everybody is in the money (except the workers who > are assumed to live > on air). There is no inflation and so the value of > money is > unchanged. > > Thanks, Ajit, you have provided a refutation of > replacement cost accounting. > > Phil ___________________ Not so fast Phil! You forget that after every round of production I have to come to you for a larger amount of money. So, no matter how rich you are, sooner or later you will run out of money and I will have to close my factory. And if you have power to print money, you will create hyper inflation just to keep me and TSS in business. Cheers, ajit sinha __________________________________ Do you Yahoo!? Friends. Fun. Try the all-new Yahoo! Messenger. http://messenger.yahoo.com/
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