Posted tagged ‘Seed Corn’

Capital Consumption, aka, Eating Our Seed Corn.

January 30, 2013
Corn Seeds

Corn Seeds (Photo credit: Stevie Rocco)

This article on ZeroHedge.com, R.I.P. Retirement: 28% Of Americans Are Raiding Their 401k Plans, talks about how people are withdrawing a portion of their retirement savings and spending it on present consumption. A large part of these savings will be used  to produce capital goods (tools, buildings, vehicles, machines, etc.), which will be used to produce future goods more efficiently. When we start to use money saved for capital formation and use it for present consumption, we are eating our seed corn. If we start to eat a portion of the corn we’ve set aside for use as seed, we won’t produce as much corn for next years consumption. This has been happening for the last four years. Individuals have been using savings earmarked for the future, in order survive in the present.

CAPITAL FORMATION

The money an individual gets paid for the good or service he produces (more…)