Reply #69: Hiring & Profits [View All]

[unlawflcombatnt]

Exactly.

Hiring workers when there is no current or anticipated demand is a complete waste of money. No companies do that. Claiming that companies hire without some response to demand, simply because they have investment capital, is ridiculous.

If a company hires workers for production and never sells a product, it means they've misjudged the demand for production. They incorrectly anticipated demand for a product. The fact that no demand exists doesn't mean jobs were created without demand. It means jobs were created by a mistaken anticipation of future demand.

I'd like to give the following example. Let's pretend I'm a doctor who sees 5 patients per day. I have one nurse. That's because I only need one nurse to see those 5 patients. Let's say my new half-wit friend, George Bush, gives me $1 million. Now I have plenty of money to invest and hire more nurses. Do I hire any more nurses? Of course not. I don't need any more nurses to see those 5 patients. I don't need any more equipment. So I save the money (or buy gold with it.)

Let's change the example. Let's say my lunatic ex-friend George Bush takes that $1 million back. He then gives spreads it out and gives it to 5,000 potential patients of mine, who previously could not afford my services. Suddenly I have a lot more patients. Suddenly I need more nurses to take care of those patients. Do I hire more nurses. Absolutely. I need more nurses to see the increased number of patients. But I don't have that $1 million to pay the nurses. It doesn't matter. I hire them anyway, because I can borrow money to pay them, or I can pay them when the patients pay me.

Why did I hire more nurses? Because my demand for their services increased. Why did demand for my services increase? Because more patients could afford my services. What initiated this additional demand? The increased income of my potential patients.

So what created the extra jobs for nurses? Increased demand. The increased consumer (patient) income increased demand for my services. Did availability of investment capital have anything to do with creating those jobs? No. Nothing whatsoever.

Jobs were created exclusively as a result of increased demand for services those jobs provided.

Investment does NOT create jobs. Demand does.