Good buddy of mine. Realtor carpenter. Busted his ass off when he was young. Fell in love in his early 20's. Lent a girl with big tits a lot of money, never got it back. Didn't matter as through determination and raw effort he inevitably made killer coin during the housing bubble. However, while he was successful he was foolish enough to buy a cabin and a luxury SUV (among other purchases) thinking it would continue forever. Crash hit, he suffered mightily for 6 years. Now, he crawled back, not losing a thing, and is once again approaching $100,000 for an annual salary.
His next major purchase?
A new fishing pole.
Another good buddy of mine. Smart, young entrepreneur. Made a KILLING during the housing bubble as he was a master carpenter and also invested in real estate. Was flying to Vegas on a semi-weekly basis with his wife. Drove a Mercedes and also thought the good times would last. Housing bubble hit. Some of his investment partners proved not to be as solvent or honest as they claimed. His flagship operation went bust. Now, he's rebuilt himself a nice piece of property he bought at the bottom of the bust, built up a stash of cash to pay off creditors if necessary.
His next major purchase?
A cigar with me.
Never had anywhere near the success of the aforementioned two. Finally found a company to refinance my house. Make enough money on book sales and various internet ventures to put food on the table and travel on the cheap sleeping in crappy motels, if not the rental car. One time, with full time dance classes and full time banking work, almost made $100,000 had I not told my employer to go fornicate himself. Housing bubble hit, reverted to solely dance classes, and once again lived in an illegally furnished basement apartment to make ends meet.
Next major purchase?
Gas for my next road trip.
So what, young lieutenants, do all the aforementioned boys above have in common?
Well, let me tell you.
1. They in their naive youth were more than willing to bust out of the gates, take on life, and become great entrepreneurs or captains of industry.
2. They foolishly assumed what finite and fleeting fortune they did have was going to last forever and either purchased things they shouldn't have or made investments in what is now in retrospect foolish things.
3. After suffering the great recession, having to get by on limited income wherein finances were so crippling and threatening, all of them have (and pay attention to this) ZERO INTEREST IN EVER BUYING ANYTHING OF SIGNIFICANT WORTH EVER AGAIN.
And thus the point of my post.
While we three men of occident aren't conclusive empirical proof, we are anecdotes of what I believe to be a torpedoing trend for the Keynesian Obamanauts - people, with the harshness of the Great Recession fresh in their minds, just plain don't want to invest or spend money.
I wanted to see if there was a "Marginal Propensity to Consume" figure on the FRED database to confirm this, but I could not find one. Still, using several proxies you see at least a reluctance or stubbornness as the population becomes penny pinchers a la those who went through the Great Depression.
Gross private investment, though recovering, still isn't back to its historical average:
The Personal Savings Rate (which I believe is actually a good thing) is not playing Keynesian ball
And the velocity of money puts another nail on Obama's record-breaking stimulus spending:
Whatever specific events caused this - crushing finances for 7 years, big titted girls running off with money, foreclosure, ne'er an ounce of job security - the larger point is that what is ultimately driving this fear to spend and invest is psychology. And sadly, for Obama and his Keynesians, they largely ignore psychology, insisting to treat economics as an actual, mathematical science arrogantly thinking they can predict the economy like Newtonian physics.
Since they ignore psychology the economic policies they enact are rendered impotent. For example we do have relatively low taxes historically speaking. But spending is so out of control it undermines the entire future of the economy, driving away any long term investment. Obama can talk all he wants about jobs, but with Obama and the left blatantly spouting off their hatred, envy and desire to steal from the successful, it not only makes it just talk, but further deters any would-be entrepreneurs from trying their best. And ironically, since none of these Keynesian tactics have actually worked, the left has screwed over their most reliable demographic - young people. Additionally burden this demographic with student loans used largely to finance the "Leftist Vampire Professor Industry" and it doesn't matter how much "hope and faith" they have in Obama, they just plain don't have the money to buy houses, cars, and boost the economy.
The end result is what we have now - an economy that could not be more diametrically opposed to textbook economics. Historical (and I do mean historical) stimulus spending, yet a stagnant economy.
For Austrian economists or people who just have their heads out of their asses, this makes sense. For charlatans posing as Keynesians, but who know better (Krugman, etc.), this also makes sense, but they need to come up with increasingly fabricated poppycock to keep the spending gravy train going. For the rest of the economists out there this simply does not compute. But then again, most economists spent way too much time obsessing over math, let alone they actually believed the leftist claptrap they were fed in school. Alas, the price one pays for a lack of intellectually honest and independent thought is confusion and forced cognitive dissonance.
Enjoy the decline!