Here we are again, talking about why lack of aggregate demand is not the cause of a recession.
Lack of aggregate demand means people are not buying what is being offered for sale. The old time economists described it as so much stuff being made there just isn’t enough money to buy it all. Keynes described it as so much money being hoarded under the mattress there isn’t enough in circulation to buy everything. Roubini, following Marx, describes it as so much was ripped off from the worker by the capitalist that the worker cannot afford to buy everything.
Luckily, we are dealing with Roubini’s version now. I say lucky because it’s late at night, I’m tired, and want to polish this off quickly. And Roubini’s idiocy can be polished off in a few words.
The problem is that the capitalist is making such a huge profit, right? But what is he profiting from? Sales, right? He got the workers to work for pennies on the dollar, and thus is going to sell his stuff at a huge profit, since his costs are so low. But he can’t sell anything, because the workers he ripped off have so little money in their wallets. That’s why we have a recession now, says Roubini.
Anybody see why this isn’t a problem? Obviously, what going to happen is that the capitalist will have to lower his prices till his workers can afford stuff. End of story.