What's Going On With The Economy: Part I
The Government has declared that it is out of money. Broke. Nothing left in the bank account. And because of that, people are going to be fired, laid off, put out of work, have their benefits cut, have their hours cut, and have their salaries cut. The Government claims that it is the fault of the retirement system, and the health care system, and that if only these costs could be restructured, that everything would be okay.
The biggest lie is hidden within a field of truth; and that is the case right now.
What is this lie?
The lie is this, and it is everywhere, on the TV, in the papers, on the Internet, everywhere: this global economic system is better than any other economic system, so what we have now is the best we could possibility have, and things will get better... if we would just let the system free.
A lie.
A big lie.
One of the biggest lies that we have faced in recent memory.
It is the lie of economics.
The economic system is complex, but it is also simple. We can understand it. We do not have to have degrees in economics, or math, or science, or any degree at all. We only need to see and to think about what is happening in our lives, and in the lives of everyone.
Right now, the state budget director economists are telling us that the states are broke. There is a deficit. A huge deficit. And if this deficit is not fixed, that crisis will result. The politicians believe this, and being people just like ourselves, believe the big lie, and so they also believe that there is no solution, other than to cut expenses wherever they find them.
We hear it happening all over. Wisconsin, Ohio, Tennessee, Michigan, California, Illinois, New York, Florida... the new proposed budgets are being debated, and yelled about, and protested about. Taxes rates are being changed. Programs are being cut. Regulation is being left unenforceable. It is no mistake, things are breaking down.
It is not the fault of the states.
It is not the fault of the politicians.
It is a lie that we've all grown up with, and while we can sit around and point fingers here, and there, and everywhere, this will not help us uncover the lie, which is the first step to achieving a solution.
The revenue of state and local governments is indeed declining, by billions, perhaps over a trillion dollars, when adding all of the states together. This is real money. This is tons of money. And this money had been used to employ people, because, in the end, the only one interested in money are people. The trees don't use it. The animal's don't use it. The rock don't use it. The money spent by the state is used to employ people.
And the people use the money too.
The people use the money to employ other people.
We spend money.
We spend lots of money.
We buy things.
We pay bills.
We pay taxes.
We spend money, and once in a while, a few of us have enough that we even are willing to loan the money out to others, via institutions called banks.
The economists in the state capitals tell us that there is not enough money coming in to the state governments to continue paying out as much, and this is perfectly reasonable, because, as you know, the big lie is hidden in a field of truth.
What will happen when the states pay out less money?
The result is predicable, because we know exactly what we would do if we were a city or township faced with being unable to continue to pay all our firefighters. The choices are on a continuum.
Do we continue to compensate our fire fighters the same next year as we did this year, with the cost being that many firefighters will be laid off?
Or, do we reduce all the firefighters' compensation in the fairest and most equitable way possible, in order to ensure that all the firefighters are still at work and on the job?
In EITHER case, the result is that this group of people, this group of firefighters, is going to have less compensation, less money, and is going to have not only less ability to spend, but indeed will spend less money. In addition, these firefighters are likely to buy even less, because they might just start to view the future with less optimism, and start paying off things like credit cards, mortgages, or loans. Instead of taking out a loan, so they can spend more; they will be paying banks, resulting in them spending less.
This situation, where the people are unable to spend as much; and also unwilling to spend is much; is exactly what has been going on with us for the past few years.
What is the result of this?
We don't need a PhD, or an MBA, or even a BS degree. The result of the public employees spending less money, is that there will be less sales. Less business. And less money coming into the retail segment of the economy. Those who are trying to sell stuff find that one large chunk of the people who were doing the buying, this "market segment" has suddenly started spending less, buying less, and shifting their spending in perhaps very unfortunate ways. Some essential businesses may indeed continue to sell their products, and while people can spend less on food, and less on energy, the spending that declines the most is everything else that can go.
It is an unstable system, and in from some perspectives, an unfortunate system.
People are taught, lured, and encouraged to "go into business for themselves". What this really means is that they are asked to take huge risks that they might be able to provide what the people want AND that the people will be ABLE to buy it. Being an entrepreneur, a business owner, a stock holder -- it is a gamble, and it is gambling. It is depending upon others, many others, hundreds or thousands of others, to do something that; and if the people don't, or can't, follow through, then these gamblers find themselves in the worst position of all.
This is not a surprise, is it? We all know this to be true. We know that going into business is a gamble, a big gamble. And we know that working for private businesses are also gambles, and quite big gambles. But, we still teach the children, at least our culture does, that "getting a job" in the private sector, or "being a business owner" is exactly what they should be.
Right now, though, we can see the weakness of this system. Tens of millions, in the USA alone, have lost their jobs in the private sector.
The states have less money to spend.
The private employers have less money to spend.
The people have less money to spend; which means that they send less and less to the government, which in turn has less and less to pay the people employed on behalf of the public.
It is a vicious cycle, and this bit of understanding is just the beginning of the story of what is going on.
The biggest lie is hidden within a field of truth; and that is the case right now.
What is this lie?
The lie is this, and it is everywhere, on the TV, in the papers, on the Internet, everywhere: this global economic system is better than any other economic system, so what we have now is the best we could possibility have, and things will get better... if we would just let the system free.
A lie.
A big lie.
One of the biggest lies that we have faced in recent memory.
It is the lie of economics.
The economic system is complex, but it is also simple. We can understand it. We do not have to have degrees in economics, or math, or science, or any degree at all. We only need to see and to think about what is happening in our lives, and in the lives of everyone.
Right now, the state budget director economists are telling us that the states are broke. There is a deficit. A huge deficit. And if this deficit is not fixed, that crisis will result. The politicians believe this, and being people just like ourselves, believe the big lie, and so they also believe that there is no solution, other than to cut expenses wherever they find them.
We hear it happening all over. Wisconsin, Ohio, Tennessee, Michigan, California, Illinois, New York, Florida... the new proposed budgets are being debated, and yelled about, and protested about. Taxes rates are being changed. Programs are being cut. Regulation is being left unenforceable. It is no mistake, things are breaking down.
It is not the fault of the states.
It is not the fault of the politicians.
It is a lie that we've all grown up with, and while we can sit around and point fingers here, and there, and everywhere, this will not help us uncover the lie, which is the first step to achieving a solution.
The revenue of state and local governments is indeed declining, by billions, perhaps over a trillion dollars, when adding all of the states together. This is real money. This is tons of money. And this money had been used to employ people, because, in the end, the only one interested in money are people. The trees don't use it. The animal's don't use it. The rock don't use it. The money spent by the state is used to employ people.
And the people use the money too.
The people use the money to employ other people.
We spend money.
We spend lots of money.
We buy things.
We pay bills.
We pay taxes.
We spend money, and once in a while, a few of us have enough that we even are willing to loan the money out to others, via institutions called banks.
The economists in the state capitals tell us that there is not enough money coming in to the state governments to continue paying out as much, and this is perfectly reasonable, because, as you know, the big lie is hidden in a field of truth.
What will happen when the states pay out less money?
The result is predicable, because we know exactly what we would do if we were a city or township faced with being unable to continue to pay all our firefighters. The choices are on a continuum.
Do we continue to compensate our fire fighters the same next year as we did this year, with the cost being that many firefighters will be laid off?
Or, do we reduce all the firefighters' compensation in the fairest and most equitable way possible, in order to ensure that all the firefighters are still at work and on the job?
In EITHER case, the result is that this group of people, this group of firefighters, is going to have less compensation, less money, and is going to have not only less ability to spend, but indeed will spend less money. In addition, these firefighters are likely to buy even less, because they might just start to view the future with less optimism, and start paying off things like credit cards, mortgages, or loans. Instead of taking out a loan, so they can spend more; they will be paying banks, resulting in them spending less.
This situation, where the people are unable to spend as much; and also unwilling to spend is much; is exactly what has been going on with us for the past few years.
What is the result of this?
We don't need a PhD, or an MBA, or even a BS degree. The result of the public employees spending less money, is that there will be less sales. Less business. And less money coming into the retail segment of the economy. Those who are trying to sell stuff find that one large chunk of the people who were doing the buying, this "market segment" has suddenly started spending less, buying less, and shifting their spending in perhaps very unfortunate ways. Some essential businesses may indeed continue to sell their products, and while people can spend less on food, and less on energy, the spending that declines the most is everything else that can go.
It is an unstable system, and in from some perspectives, an unfortunate system.
People are taught, lured, and encouraged to "go into business for themselves". What this really means is that they are asked to take huge risks that they might be able to provide what the people want AND that the people will be ABLE to buy it. Being an entrepreneur, a business owner, a stock holder -- it is a gamble, and it is gambling. It is depending upon others, many others, hundreds or thousands of others, to do something that; and if the people don't, or can't, follow through, then these gamblers find themselves in the worst position of all.
This is not a surprise, is it? We all know this to be true. We know that going into business is a gamble, a big gamble. And we know that working for private businesses are also gambles, and quite big gambles. But, we still teach the children, at least our culture does, that "getting a job" in the private sector, or "being a business owner" is exactly what they should be.
Right now, though, we can see the weakness of this system. Tens of millions, in the USA alone, have lost their jobs in the private sector.
The states have less money to spend.
The private employers have less money to spend.
The people have less money to spend; which means that they send less and less to the government, which in turn has less and less to pay the people employed on behalf of the public.
It is a vicious cycle, and this bit of understanding is just the beginning of the story of what is going on.