So, a naive interpretation of this state of affairs is companies are ripping off consumers by over-charging them, and are also partly responsible for the credit crunch?
Higher profits and cash accumulation are an understood macro-economic symptom of credit expansion. Consumers buy stuff with money earned from business production (mostly wages), so consumption is constrained by the amount of production going on. Cut back on wages and production on a macro level and then demand sinks and businesses make less money. But introduce heavy spending on credit and consumption is no longer constrained by aggregate production outlays. People spend money they didn't earn. Businesses can cut back on wages and still find themselves making large paper profits.
The problem with this picture is you're looking at a transfer of wealth, by way of inflation, from currency holders to those positioned to leverage credit on the best terms.
Interesting. So companies would have to raise prices to prevent consumers from over-stretching themselves - but of course they have no reason to do this, they should just take the money and hoard it for use later?
Right, but bear with me - in my 'fantasy economy', one thing companies could do to prevent consumers over-reaching themselves is raise prices? I'm not saying they should, or would do this. I assume all they should do is make money for their owners (and hang the consequences, lol)?
