So the question is : Does consumer spending have a positive ratio with the long term health of an economy ?
Not really. Japan is regularly cited as a society with low consumer spending (everybody saves), but whilst their economy has problems they seem no worse than others in their region. Meanwhile the US & UK have had consumer-led booms based on loose credit control that have led to bubbles that threaten, not just the national economies, but the western capitalist model itself.
So this has become, not just "Case not proven", but a classic case of a vested interest trying to argue that the sky is polka-dot pink in order to boost their short-term interests. And these people are taken seriously ???? keep to the Fen Causeway
Just my two euro cents.
<disclaimer>I am not an economist and I don't play one on TV, but I have a sindicated column on a blog.</disclaimer> A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
But what you say suggests that consumers must spend more. And to do that you must put more money into their pockets and give them a feeling of confidence that there is more on the way. Overcome their prudence.
This is done either by paying them more (unpopular under shareholder capitalism) or by lending them more (very popular with banks and credit organisations).
The former leads to wage inflation, the latter leads to credit spirals and the sort of bubbles we see elsewhere. So, despite the pressure for the latter as the instrument of choice, neither represents the perfect solution. I know it's unpopular with free-market nincompoops but government must artificially balance the two for the well-being of the overall economy.
Course it is possible to have both go out of control at the same time, but that really needs IMF-level advice to achieve with any certainty. keep to the Fen Causeway
Also, class stratification takes the form of investors/consumers/outcasts. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
what you say suggests that consumers must spend more
But then again, I'm a dangerous pinko commie, or something. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
After all it is the believe in the coin you are using...but the dollar/euro you are useing is only backed by confidence.. the same confidence that can make you buy or save. Worst, what you save now is basically in the bank.. so it really does not exist...You are supposed to be able to recover .. but if every body tries to get at the same time .. well it is like injecting a lot of currency in the economy....inflation?
Basically the economy is a full system of believes as big as religion. It seems like you ahve to balance different believes so that everybosy is roughly happy
When you spend and you are on debt..are you sure you will ever pay.. but then if everybody stops paying nobody pays.. and there is a recession? not really.. you can create a bubble...and even create more money... is inflation going up printing more money...well are you sure? you can put the money you generate in debt.. for future use.
It is all very confusing for a physicist...so Migeru.. is economy hopeless or is there any way to make sense without the impression that we live in a symbolic illusion?
A pleasure I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude
There is a "money fallacy" whereby people think they are progressing if they make more money in nominal terms, not in real terms. If the cost of living dropped by 10% peoplle should be happy to take a 5% pay cut, but they probably prefer to have a 5% raise even though the cost of living goes by 10%. This is because the cost of living is an intangible while the numerical amount of your income is tangible.
One way of getting rid of the money fallacy is to educate everyone about the difference between nominal and real value and how to do financial planning on that basis, taking into account the undertainty of future inflation. The other way to get rid of the money fallacy is to keep inflation constant, since that way the way people actually reason about money will more closely approximate reality, and there will be reduced inflation risk for everyone.
Just a thought. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
Japan's problem was not high savings rate, it was increasing rates. Similarly, US and UK (and to some extent as well France) have consumption boosted by unsustainable levels of debt despite stagnant revenues. Germany has both stagnant revenues and no increase in debt.
When the debt bubble bursts, those with the less unbalance on the debt side should do a lot better. In the long run, we're all dead. John Maynard Keynes
