Why does the economy have to continue expanding?

[FormerOwner]

bsrsharma,

I agree with what you stated in your last post. My explanation really only applies since the early 70’s. I totally agree that the Vietnam War was a turning point for our country and we’ve been headed for a cliff ever since. I just don’t know exactly how far away the edge is and what will push us over.

Another thing I didn’t mention is that our expanding economy at it’s core is extremely natural resource dependent and this is even more scary than the fractional reserve banking system as operated by the Federal Reserve. If the world can’t keep producing/shipping mass quantities of stuff, no one would have a reason to borrow, and we would again be faced with a depression. As you said, the US is in a much more precarious position than many other developed countries due to the fact that we consume more than we produce.

[bsrsharma]

I think this bubble implosion may be just the right lesson the country needed before things become irreversible. 2+ million people losing their homes involuntarily is going to change social, political and economic culture of the country. This is going to be much larger than Savings & Loan Crisis. After the dust settles, there will be a lot of fear about debt and everyone will be more careful.

[bsrsharma]

I think this bubble implosion may be just the right lesson the country needed before things become irreversible. 2+ million people losing their homes involuntarily is going to change social, political and economic culture of the country. This is going to be much larger than Savings & Loan Crisis. After the dust settles, there will be a lot of fear about debt and everyone will be more careful.

[bsrsharma]

I think this bubble implosion may be just the right lesson the country needed before things become irreversible. 2+ million people losing their homes involuntarily is going to change social, political and economic culture of the country. This is going to be much larger than Savings & Loan Crisis. After the dust settles, there will be a lot of fear about debt and everyone will be more careful.

[citydweller]

Now I remember why I dropped Econ 101. Trying to understand all this makes my head hurt.

I can’t help feeling though, that another depression is inevitable. I know, be careful what you wish for, but I can’t help thinking that America would be a better place if the current out of control consumer mentality came to a screeching halt. I enjoy living a fairly simple lifestyle, but sometimes feel out of place around my friends/acquaintances who are all caught up in their expensive cars, clothes, shoes, watches, sunglasses, TV’s, etc. etc… I’d prefer to be around people who are content just to have their needs met, and are able to truly appreciate the occasional splurge.

My focus right now is on paying down my mortgage and getting at least a years worth of living expenses stashed in the bank. If the economy does crash, I want to be as prepared as possible. Does anyone believe that another Depression is inevitable, or can an economy continue to expand indefinately?

[citydweller]

Now I remember why I dropped Econ 101. Trying to understand all this makes my head hurt.

I can’t help feeling though, that another depression is inevitable. I know, be careful what you wish for, but I can’t help thinking that America would be a better place if the current out of control consumer mentality came to a screeching halt. I enjoy living a fairly simple lifestyle, but sometimes feel out of place around my friends/acquaintances who are all caught up in their expensive cars, clothes, shoes, watches, sunglasses, TV’s, etc. etc… I’d prefer to be around people who are content just to have their needs met, and are able to truly appreciate the occasional splurge.

My focus right now is on paying down my mortgage and getting at least a years worth of living expenses stashed in the bank. If the economy does crash, I want to be as prepared as possible. Does anyone believe that another Depression is inevitable, or can an economy continue to expand indefinately?

[citydweller]

Now I remember why I dropped Econ 101. Trying to understand all this makes my head hurt.

I can’t help feeling though, that another depression is inevitable. I know, be careful what you wish for, but I can’t help thinking that America would be a better place if the current out of control consumer mentality came to a screeching halt. I enjoy living a fairly simple lifestyle, but sometimes feel out of place around my friends/acquaintances who are all caught up in their expensive cars, clothes, shoes, watches, sunglasses, TV’s, etc. etc… I’d prefer to be around people who are content just to have their needs met, and are able to truly appreciate the occasional splurge.

My focus right now is on paying down my mortgage and getting at least a years worth of living expenses stashed in the bank. If the economy does crash, I want to be as prepared as possible. Does anyone believe that another Depression is inevitable, or can an economy continue to expand indefinately?

[FormerOwner]

Another depression is inevitable – it’s just a severe form of what happens in the down phase of the business cycle. We just don’t know WHEN.

I’m a big believer in cycles. Everything in nature operates within repeating cycles and there are short cycles within longer cycles. The economy is created by people so we cause the cycles to occur by our nature. A really long economic cycle would be the rise and fall of an entire civilization. Within that, there are shorter cycles that represent major shifts in methods of production/use of energy/etc. Within those, there are business cycles where the economy first overshoots then undershoots asset values, employment, etc. This again is an oversimplification. These cycles have been “manipulated” by the Federal Reserve for the last few decades in an effort to prevent a meltdown. The meldown has not been prevented though, just postponed and the potential for problems multiplied.

[FormerOwner]

Another depression is inevitable – it’s just a severe form of what happens in the down phase of the business cycle. We just don’t know WHEN.

I’m a big believer in cycles. Everything in nature operates within repeating cycles and there are short cycles within longer cycles. The economy is created by people so we cause the cycles to occur by our nature. A really long economic cycle would be the rise and fall of an entire civilization. Within that, there are shorter cycles that represent major shifts in methods of production/use of energy/etc. Within those, there are business cycles where the economy first overshoots then undershoots asset values, employment, etc. This again is an oversimplification. These cycles have been “manipulated” by the Federal Reserve for the last few decades in an effort to prevent a meltdown. The meldown has not been prevented though, just postponed and the potential for problems multiplied.

[FormerOwner]

Another depression is inevitable – it’s just a severe form of what happens in the down phase of the business cycle. We just don’t know WHEN.

I’m a big believer in cycles. Everything in nature operates within repeating cycles and there are short cycles within longer cycles. The economy is created by people so we cause the cycles to occur by our nature. A really long economic cycle would be the rise and fall of an entire civilization. Within that, there are shorter cycles that represent major shifts in methods of production/use of energy/etc. Within those, there are business cycles where the economy first overshoots then undershoots asset values, employment, etc. This again is an oversimplification. These cycles have been “manipulated” by the Federal Reserve for the last few decades in an effort to prevent a meltdown. The meldown has not been prevented though, just postponed and the potential for problems multiplied.

[bsrsharma]

Another depression is inevitable

My guess is this is going to be an extended stagflation (stagnation + inflation). i.e. a period of low to no growth combined with inflation. The best analogy is the late Nixon years through early Reagan years (including Ford & Carter years) 1974-1982. Almost 8 years of low growth, high unemployment and high inflation.

 

[bsrsharma]

Another depression is inevitable

My guess is this is going to be an extended stagflation (stagnation + inflation). i.e. a period of low to no growth combined with inflation. The best analogy is the late Nixon years through early Reagan years (including Ford & Carter years) 1974-1982. Almost 8 years of low growth, high unemployment and high inflation.

 

[bsrsharma]

Another depression is inevitable

My guess is this is going to be an extended stagflation (stagnation + inflation). i.e. a period of low to no growth combined with inflation. The best analogy is the late Nixon years through early Reagan years (including Ford & Carter years) 1974-1982. Almost 8 years of low growth, high unemployment and high inflation.

 

[FormerOwner]

Stagflation does seem (to me) like the most likely outcome this time around but some people make some arguments for deflation or even a severe depression as well. I guess that’s why it’s smart to hedge your bets and try and diversify into things that will work in either scenario (to the extent that’s possible!).

[FormerOwner]

Stagflation does seem (to me) like the most likely outcome this time around but some people make some arguments for deflation or even a severe depression as well. I guess that’s why it’s smart to hedge your bets and try and diversify into things that will work in either scenario (to the extent that’s possible!).

[Author]

Posts