great find (as usual) i have recently gone through some of the exact same reasoning on a personal level. for a long time i hated the idea of capitalism, but i was incorrect in my analysis of what capitalism really is. i learned that america is not a capitalist economy (like everyone claims) it is actually a corporatist economy. some of my friends have even accused me of doing an about face when it comes to my personal ideology. i told them not to worry i still hate my government and most of american society just like always.....only now i am hating them for the right reasons
Good article I don't quite understand, but at the same time I think I do. Production is the main way to stimulate the Economy, Consumption is not. That we need to create an environment to proliferate that growth is the best idea if I'm not mistaken. How exactly does this tie in with how we got out of the last Depression if it does at all? Not trying to spark an argument I'm just wondering out loud. If we've had an environment of low taxes that would allow Business growth why would the Economy Crash? Is it because we're Keynesian, Corporatist? I know we're not truly Capitalist that's for sure, the HS Economy teacher explained that fully. I've always thought we as a culture consumed to much, why else are we the fattest lol, but this seems like the ebb and flow of great super powers throughout history that's how they always end right? Also I've heard a more then a few people on the right talk about stimulating the Economy through 'Consumerism/Consumption' only through tax breaks too so that last part of the article is a bit puzzling but whatever. I'll just go ask my Gramps what's up since he's so wise in the ways of the world (I just want to mention that I hold no affiliations, so please don't jump to conclusions and label me something that I'm not Thank You)
The Great Depression lasted from 1929-1945. We didn't see growth until the government slashed spending by 2/3rds at the end of the war and gave the people their money back. The only reason the economy crashes is because of malinvestment, which creates a bubble. Malinvestment is caused by Federal Reserve policy, namely artificially low interest rates and fractional reserve banking. Keynesians tell us that malinvestment is caused by "animal spirits", but this is a blatant cop out. Yup. See this: The Course of Empire - Wikipedia, the free encyclopedia We are in between consummation and destruction. Both the "left" and "right" of American politics, and most of the world, are keynesians. This is why Obama's economic policy is identical to Bush's, and Clinton's, Bush Sr., etc... The only thing they disagree on is a paltry 3% in the top tax rate, which is a total distraction issue.
Wouldn't increased consumption stimulate increased production? Increased consumption is like an increase in demand, an increase in demand should be met with an increase in production. Without an increase in demand, an increase in production is nothing but an unintended inventory investment. So really, when people talk about stimulus and increasing consumption they should be talking about increasing demand, not just trying to get firms to produce things. It's necessary that there be a proper level of demand, so all of their products get sold, unless they want to have leftover that they don't sell. The consumer nation or whatever, is that what your main idea here is? I think we just got labeled that because we import way more than we export. That's not really good for us as a people either, it's bad for our economy. I tried to explain that a bit I hope it makes sense.
I'm just going by what the article said man, which was consumption BAD Production GOOD. I think they were going with their needs to be more opportunities for production to flourish, really I have no idea I didn't do well in mentioned Econ class. Again I'm just going by what the article is saying. But you have to admit we are a nation of buyers. Its all we do, in fact its our favorite past time, while China loans us the money... Point being all major empires go through this phase of spending The Romans did it, the English did and etcetera History repeats itself and we should all know this by now. No explanation so no no makes no sense
Consumption = demand Production = supply if we try to get firms to produce a bunch of shit without paying attention to demand, the firms are going to end up with unintended inventory investment. The firm will produce a bunch of goods regardless of how they are demanded, and the result will be an increase in inventories, not an increase in how many they have sold. To sell more of their inventory, demand needs to rise. The total demand in our economy is equal with the total level of consumption in our economy. So, stimulating consumption will increase demand to the point where firms will actually be able to sell more goods, which will lead to them producing more goods to sell. My point is, you can't just tell a firm, "Produce more goods cuz dats how welth iz made." The goods will just sit there, unless there is an increase in demand. Well I explained it in the first paragraph of the last post.
The article is only talking about artificial consumption through taxation, deficit spending and inflation. It is saying that these do not have a positive effect on economic growth because of the parable of the broken window. People who consume by going into debt are accomplishing the same thing. They are not saying to stimulate production either though.
I was going to reply to you earlier about why production precedes consumption, but I got sort of side-tracked. I'm glad someone had gotten to you in the last 3 hours...