No matter how complicated economists try to make economics, it really is a simple study. If you can understand core concepts like why you can't print off more money, what is "wealth," etc, you are about 90% there, heck, you're probably better than most economists who've been brainwashed to look at "production surplus charts" and are addicted to Black Swan econometric models. And so while economists on cable TV are citing macro and global economic figures and concepts, I want to introduce a simple, micro-concept.
If people don't produce, they will die.
Yes, we can make it more complicated. We can take overly productive people and have them support unproductive ones. We can borrow money from productive people overseas to support unproductive people here today. We can even borrow from productive people of the future who don't exist yet to support unproductive people today.
But in the end, if there are too many parasites and not enough producers, the system will fail.
What's funny though is if you look at the resources we spend on the unproductive people it has all the markings of a financial bubble.
We currently spend nearly 70% of our governmental budgets of wealth redistribution, supporting the unproductive people.
We are borrowing from other productive people in foreign countries to support our unproductive ones.
And we are borrowing from the future to support our current unproductive classes.
If you add it all up, the trillions of dollars we spend every year (whether we have it or not) on unproductive people dwarfs the Dotcom Bubble, the Housing Bubble, the Education Bubble, and the Retirement Bubble.
And like all bubbles, this one will pop as well.
The problem is this bubble is not a financial one, it's a human one. And when I say "pop" I mean impoverishment and death.
I do not wish to sound Malthusian about this, but there have been other "human bubbles" that have popped. Most notably when countries went full blown communism. China's great leap forward and Stalin's brilliant starvation schemes put the Nazi's to shame in their ability to kill. And it was all done in a very simple way - starvation. In short, the economic environment changed to the point the production or earnings (in the form of food) tanked and was not adequate enough to support the price (in the form of human lives).
Of course, these were a bit more rapid conversions from one economy to another, but the same thing is happening here in the US, albeit much more slowly. The government is growing and crowding out the private sector to the point it accounts for 40% of our economy. More and more people are dependent upon government for their survival to the point 1 in 2 people in the US now collect a government check. Our economic growth rate has slowed to about half of what it used to be. And the unproductive people tend to have more children than the productive ones, ensuring the ratio of parasites to producers will continue to increase.
The question is when will the bubble burst.
It's impossible to say, but like all bubbles it will come when lenders no longer extend credit. China will have had enough. The Arabs will have had enough. Even US bond holders will have had enough. They will realize the US does not have the economic productive capacity (desire, actually) to produce the wealth necessary to pay back its debts. At that point in time they will cut us off and the US will take on the mantle of a charity case, desperate of "foreign aid" much like Haiti or sub-Saharan African countries. There may be some debt forgiveness, but all the debt forgiveness in the world will not solve the problem of a lack of production. We will become a welfare state and get to enjoy the death rates, poverty rates, starvation rates, and infant mortality rates of our third world sister countries.
And we will all blame Bush and Big Oil.
Oh, I know, I know, this is harsh and how dare I talk about death, but ignoring it won't stop it from happening. Besides, this is how I enjoy the decline.
Enjoy the decline!