How Economies Shrink
I try to avoid complaining about personal troubles, but as I was battling our ongoing problems with a tub drain, I was thinking about some stuff I read in The Forgotten Man, a book about the Great Depression.
We often have the impression that the Crash was a sudden and catastrophic event: the stock market collapsed and everything fell apart. But as Amity Shlaes shows, it was not an event, but a process, a devolutionary spiral as the bursting of the stock bubble put strain on other parts of the economy. Think the unraveling of a piece of cloth.
As people have less money or fear they soon will have less money, they cut back on their spending. As a result, the sellers from whom they would've bought have less money coming in, so they have to cut back on their spending. If they have employees, they may have to cut hours or lay people off altogether. Now those people have less money to spend, and have to cut back.
In my own situation, if money were good, we would've just called the plumber to get it fixed properly. But because sales have been lousy for us, we don't have the money for the plumber, and have to hobble the tub along as best we can. As a result, the plumber doesn't have the money we would've spent, and doesn't buy the supplies that would've been used to fix the problem properly. And the wholesale plumbing supply store doesn't have the money that would've been spent on the parts, and out the ripples spread into the economy.
And why are sales lousy for us? The reasons are complex, and some of them get into issues of properly balancing a vendor hall for the size of a convention and the proliferation of conventions in certain areas. However, to judge by how many people keep admiring our merchandise but don't spend, I'm thinking that a lot of the lost sales are just a factor of people having less money to spend, or fearing that they may soon have less money and limiting their spending in anticipation of trouble. If they're spending their own money, they may be experiencing stagnant wages or the threat of layoffs (when your fellow workers are getting called in and told they're being let go, you can't help but fear you could be next). Even at anime conventions, which have a younger and more free-spending crowd, parents are handing their children less money. Even older teens and twenty-somethings who have their own incomes are facing reduced hours at work -- because people are cutting their spending at the sorts of places where young people tend to work.
And it looks like we're not done with the contractions yet. There's another disturbing bubble developing in the housing market, not to mention the student debt bubble, which is going to have to burst when a shrinking economy means all those graduates can't find employment that enables them to keep current on their monthly payments.
We often have the impression that the Crash was a sudden and catastrophic event: the stock market collapsed and everything fell apart. But as Amity Shlaes shows, it was not an event, but a process, a devolutionary spiral as the bursting of the stock bubble put strain on other parts of the economy. Think the unraveling of a piece of cloth.
As people have less money or fear they soon will have less money, they cut back on their spending. As a result, the sellers from whom they would've bought have less money coming in, so they have to cut back on their spending. If they have employees, they may have to cut hours or lay people off altogether. Now those people have less money to spend, and have to cut back.
In my own situation, if money were good, we would've just called the plumber to get it fixed properly. But because sales have been lousy for us, we don't have the money for the plumber, and have to hobble the tub along as best we can. As a result, the plumber doesn't have the money we would've spent, and doesn't buy the supplies that would've been used to fix the problem properly. And the wholesale plumbing supply store doesn't have the money that would've been spent on the parts, and out the ripples spread into the economy.
And why are sales lousy for us? The reasons are complex, and some of them get into issues of properly balancing a vendor hall for the size of a convention and the proliferation of conventions in certain areas. However, to judge by how many people keep admiring our merchandise but don't spend, I'm thinking that a lot of the lost sales are just a factor of people having less money to spend, or fearing that they may soon have less money and limiting their spending in anticipation of trouble. If they're spending their own money, they may be experiencing stagnant wages or the threat of layoffs (when your fellow workers are getting called in and told they're being let go, you can't help but fear you could be next). Even at anime conventions, which have a younger and more free-spending crowd, parents are handing their children less money. Even older teens and twenty-somethings who have their own incomes are facing reduced hours at work -- because people are cutting their spending at the sorts of places where young people tend to work.
And it looks like we're not done with the contractions yet. There's another disturbing bubble developing in the housing market, not to mention the student debt bubble, which is going to have to burst when a shrinking economy means all those graduates can't find employment that enables them to keep current on their monthly payments.