Comments on: Economics http://www.sharms.org/blog/2009/02/economics/ Life, Linux and Technology Thu, 26 Jan 2012 02:40:20 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Ryan Thiessen http://www.sharms.org/blog/2009/02/economics/comment-page-1/#comment-1025 Ryan Thiessen Thu, 05 Feb 2009 07:17:52 +0000 http://www.sharms.org/blog/?p=306#comment-1025 Short answer is no -- those problems affect only production in those specific industries. And even then, people will replace cars and TVs with improved version if they can afford to. The simplest and easiest way to understand the problems facing the world economy today is that the economy was extended via credit, and when the mortgage bubble burst the lines of credit have been severely retracted. So people can only spend money close to what they actually have, which curtails overall expenditures at an economy-wide level. The question is, were we overextended on credit before and this is normalization? Or was that normal and we need to come back out of our shells? This will determine how long it takes to come out of the current downturn. Short answer is no — those problems affect only production in those specific industries. And even then, people will replace cars and TVs with improved version if they can afford to.

The simplest and easiest way to understand the problems facing the world economy today is that the economy was extended via credit, and when the mortgage bubble burst the lines of credit have been severely retracted. So people can only spend money close to what they actually have, which curtails overall expenditures at an economy-wide level.

The question is, were we overextended on credit before and this is normalization? Or was that normal and we need to come back out of our shells? This will determine how long it takes to come out of the current downturn.

]]> By: Andrea Ratto http://www.sharms.org/blog/2009/02/economics/comment-page-1/#comment-1024 Andrea Ratto Thu, 05 Feb 2009 07:12:00 +0000 http://www.sharms.org/blog/?p=306#comment-1024 I agree, there is simply not much need for certain things in today's world. Cars in particular. If you consider that a car works for years and there have been no major technology improvement in cars for 10 or more years. In Italy we have terrible traffic problems and pollution too, but the government has just deliberated "eco-incentives" again, which create premature trash and put more cars on the roads, at high expenses that would have been invested much better on other things. Car manufacturers manage to stay in the market by drugging it, not by creating what people want: small and inexpensive cars or clean engines. About reallocating resources where there is still demand, we are starting to see a problem on that... scarcity is being removed from some sectors and what should be a good thing in this twisted system turns out to be a bad one. I recommend to see Zeitgeist: addendum, a shocking documentary, freely downloadable, very appropriate to this crisis. I agree, there is simply not much need for certain things in today’s world. Cars in particular. If you consider that a car works for years and there have been no major technology improvement in cars for 10 or more years.
In Italy we have terrible traffic problems and pollution too, but the government has just deliberated “eco-incentives” again, which create premature trash and put more cars on the roads, at high expenses that would have been invested much better on other things.
Car manufacturers manage to stay in the market by drugging it, not by creating what people want: small and inexpensive cars or clean engines.

About reallocating resources where there is still demand, we are starting to see a problem on that… scarcity is being removed from some sectors and what should be a good thing in this twisted system turns out to be a bad one.
I recommend to see Zeitgeist: addendum, a shocking documentary, freely downloadable, very appropriate to this crisis.

]]> By: Justin Barrett http://www.sharms.org/blog/2009/02/economics/comment-page-1/#comment-1023 Justin Barrett Thu, 05 Feb 2009 06:52:53 +0000 http://www.sharms.org/blog/?p=306#comment-1023 The problem isn't so much an issue of supply and demand of durable goods. It's really easy to make that statement but it isn't entirely true. The more disposable income a person has the more they will increase demand for newer products. We all do this to some level when we try to justify a purchase of some good, "Should I eat out or not? Should I get a new laptop or not. etc..." The issue is that more people are loosing more of that disposable income at a faster pace than markets can adjust for. (More people are not eating out at a faster rate then people's hours can be scaled back. etc...) I can trim my company when sells are low and vice versa. But here, companies are having to slash jobs to react faster than the quick pace at which people are loosing their income (which you can see the cycle in all of that.) The overall question is what is causing the amount of moving money (money switching hands) to decrease at such a fast pace? Of course the answer is not very simple. So we could say it is a supply and demand issue but it has more to deal with the supply and demand for money. There is a huge supply of money for low risk but there is very little demand for it. There is a huge demand for money in high risk but absolutely no bank is even going to conceive about supplying high risk with money and that's just one aspect of it. This wouldn't be an incredibly huge problem had we not made pretty much everything, except oxygen, high risk. But I don't want it to come off that I'm trying to simplify the issue, it's an incredibly complex mess we've gotten ourself into and I don't want to diminish what you've purposed here, we all need a serious priority check. Resources are allocated where the money is, and the money is where large groups of people with a lot of cash gather. (aka: we should be taking our 40% of the blame for what's going on here.) The problem isn’t so much an issue of supply and demand of durable goods. It’s really easy to make that statement but it isn’t entirely true. The more disposable income a person has the more they will increase demand for newer products. We all do this to some level when we try to justify a purchase of some good, “Should I eat out or not? Should I get a new laptop or not. etc…”

The issue is that more people are loosing more of that disposable income at a faster pace than markets can adjust for. (More people are not eating out at a faster rate then people’s hours can be scaled back. etc…) I can trim my company when sells are low and vice versa. But here, companies are having to slash jobs to react faster than the quick pace at which people are loosing their income (which you can see the cycle in all of that.)

The overall question is what is causing the amount of moving money (money switching hands) to decrease at such a fast pace? Of course the answer is not very simple. So we could say it is a supply and demand issue but it has more to deal with the supply and demand for money. There is a huge supply of money for low risk but there is very little demand for it. There is a huge demand for money in high risk but absolutely no bank is even going to conceive about supplying high risk with money and that’s just one aspect of it.

This wouldn’t be an incredibly huge problem had we not made pretty much everything, except oxygen, high risk. But I don’t want it to come off that I’m trying to simplify the issue, it’s an incredibly complex mess we’ve gotten ourself into and I don’t want to diminish what you’ve purposed here, we all need a serious priority check. Resources are allocated where the money is, and the money is where large groups of people with a lot of cash gather. (aka: we should be taking our 40% of the blame for what’s going on here.)

]]> By: Dylan McCall http://www.sharms.org/blog/2009/02/economics/comment-page-1/#comment-1022 Dylan McCall Thu, 05 Feb 2009 05:16:26 +0000 http://www.sharms.org/blog/?p=306#comment-1022 From everyone already owning a TV to multiple computer displays. The contrast is beautiful :P (Disclaimer: I have a dual screen setup with my laptop). Neat idea! I agree. The problem is that the businesses haven't really observed the meaning of this and instead try to create need where there shouldn't be any. Case in point: Forced upgrade paths via dropped software support. I wonder how they can be pointed in the right direction? From everyone already owning a TV to multiple computer displays.
The contrast is beautiful :P

(Disclaimer: I have a dual screen setup with my laptop).

Neat idea!
I agree. The problem is that the businesses haven’t really observed the meaning of this and instead try to create need where there shouldn’t be any. Case in point: Forced upgrade paths via dropped software support.
I wonder how they can be pointed in the right direction?

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