This weekend’s unnerving events on Wall Street does nothing to allay my feeling that, for a long time now, we have been mining our economy rather than growing it. Generally speaking, to grow an economy, I’d think that you have to concentrate on inventing new things, improving old things, or producing old things more cost effectively than before. On the other side, you need a sufficient number of people who are inventing, improving, or producing other things. In a sense, each inventor, improver, or producer swaps some of his stuff for some of the other guy’s stuff.
But, since it’s cumbersome to engineer a person-to-person swap; we have currency which stores value in much the same way as a battery stores energy. However, whereas batteries store energy pursuant to scientifically observable physical laws; currency is a whole lot less reliable. Currency works on trust and reputation. People accept currency in return for their stuff or labor because they believe that the value of that currency will be there when it is time for them, in turn, to go and acquire stuff or labor of their own.
Seems like, instead of inventing, improving, or producing; our economy has been focused more on doing funny things with currency, e.g., elaborate schemes with mortgages founded on unreliable notions about the ability of the mortgagor to make payments as agreed. We’ve been draining that currency battery and, after awhile, the jumper cables aren’t going to work anymore.
That’s a pretty strong analogy.. I like it.
The math is simple that proves Doug’s point:
Every retailer has been growing in sales, on average, for the past few years.
The average American debt have been growing for the past few years.
Those two added together says that we have been making money just by borrowing it. This means that at some point, sales will have to go down while people pay off debt.
Otherwise, we’ll have a bunch of people not paying their debts, and then the banks will be in trouble….oohhh…never-mind…