Is a Consumption Economy a False Economy?

http://finance.yahoo.com/tech-ticker/ar ... IA,TLT,UDN

A controversial figure in finance, Peter Schiff, believes we have a false or fake economy as a result of too much consumption as the driver and the resulting RE bubble. I too believe this. I also believe that the stock market is false or fake in that it is a bubble in the works since two decades ago.

I believe that the fear of the social security system being an unsustainable ponzi scheme and the boomers coming into their peak earning years in the early eighties caused a desire to invest that was real, however, the advent of government regulation that allowed the avoidance of taxes in investments (401k) induced a bit of a bubble that grew as the investing fever took over after the crash of 1987.

If you examine the volume of the stock market, the rise is astronomical. Both a rise in domestic savings in the early years and a rise in foreign investment in the late eighties and early nineties gave birth to speculative fever during the techie years. This too is artificial as the collective value of the Dow has exceeded its regression path when adjusted for inflation. In other words it's way overvalued even at these beaten up levels. Personally I think it can fall another 25% and may have to do that in order to achieve balance and its proper valuation.

Peter Schiff believes the economy is false in that we have borrowed to in order to spend. This is a theme we have discussed on this board recently. I think he's right and our creditors are facing a shift in strategy because our spending in their economies has created wealth for them while depleting ours. No longer will they need the US to the degree they have relied on us in the past. This is not to say the US is doomed but there is a definite paradigm shift in process. This process will be painful but more painful if the stimulus bill is passed. It will only add borrowing and spending to the causes of our problem: borrowing and spending.

Mike, You are definately informed. I also agree. Ever hear of Max Keiser? Google him or go to maxkeiser.com I think youll like what he has to say.

I also think on top of all this add. To shore up ever increasing demands to preform on Wall street. Big buisness squeeses out the middle class in the form of. Fewer jobs poorer or no job benefits, outsourcing labor and customer assistance and in turn keeping the gained profit. There by making the consumer economy a ticking time bomb that will end up elliminating the middle class and gaurnteeing a lower standard of living for the average American.
More poor families and increased crime more drugs more alcohol and of course More Billionaires served by a smaller and smaller group of people trying to do better.

wnyjim wrote:Mike, You are definately informed. I also agree. Ever hear of Max Keiser? Google him or go to maxkeiser.com I think youll like what he has to say.

I also think on top of all this add. To shore up ever increasing demands to preform on Wall street. Big buisness squeeses out the middle class in the form of. Fewer jobs poorer or no job benefits, outsourcing labor and customer assistance and in turn keeping the gained profit. There by making the consumer economy a ticking time bomb that will end up elliminating the middle class and gaurnteeing a lower standard of living for the average American.
More poor families and increased crime more drugs more alcohol and of course More Billionaires served by a smaller and smaller group of people trying to do better.

The middle class will definitely shrink though I don't believe it will disappear. It will have to come to equilibrium with the ROTW and that will take time and be a blow to the American ego. I think goverment saw this coming a long time ago and each administration has been taking actions to soften the blow to "ensure domestic tranquility" as they are charged to do.

Drugs are a pox on humanity, no doubt. I dont' have the answers on that. Devil, being with DEA/FBI may shed some light on that age old problem.

I will check out Max Keiser, thanks.

In my simple mind, the answer is simple as to a consumption economy. We don't make anything here any more. Castings for industry are made offshore, and maybe machined here. Machine tools are all made everseas, The feds have shut down heavy manufacturing with regulations that they can't comply with and be competitive, land regulations make development expensive and a long process. You can think of many examples of how our capability to produce goods have been stiffled by regulation. There's no common sense in them.

Does anyone think we could wage a global war like in WWII with our capability to make things in today's world?

Maybe too simple a way of looking at it, but that's how I see it.

wnyjim wrote:Mike, You are definately informed. I also agree. Ever hear of Max Keiser? Google him or go to maxkeiser.com I think youll like what he has to say.

Here's a link to a "Crash Course" on the current economic crisis and how we got there. Should be a must watch for everyone.

http://www.youtube.com/ChrisMartensondotcom

Interesting series by Chris Martinson. I got through the first five chapters and realized that one of this three beliefs from chapter one cannot follow from his discussion of the exponential changes at hand.

If all of the factors he discusses as being exponential are past the "turning point" as he puts it, or a slope greater than 45deg, then the amount of change will be very, very rapid. That satifies his first belief.

He second belief followed from the first belief: We will be affected greatly by this change. The factors of population growth and resource depletion will converge and place the human race in peril.

His third belief is that we can do something about it. This is to say that all of these problems which are so real, and so huge are somehow surmountable. This doesn't logically follow his otherwise excellent logic and, he is wrong about this.

The fact is, what he is describing is clearly foretold in the Bible. Whether it happens in the next 20 years or in the next 4 years in 2013 or in the next 100 or 1000 years is not clear in the Bible or to us now. But clearly, the intelligent people of ancient times were no less intelligent than today's thinkers. They could see that they lived in a harsh environment with limited resources and they could do the math for population growth. The also new the nature of man and his wasteful and hateful and greedy ways. In the beginning they new that they needed greater numbers to survive but I am sure they did portend the opposite problem without much trouble.

To be sure, the Bible is spot-on accurate in the assessment of men, both good and evil. It clearly states that you could be one or the other or both at the same time. It clearly states that man is imperfect and will do himself in when given the chance. It clearly states that the world as we know it will come to an end. It clearly states that in order for man to be free of evil, he must cast aside all worldly possessions and place himself at the mercy of the Lord.

Most people find that totally absurd. They scoff at the wisdom of the Bible because of its age as if men have changed since then. They scoff at such admonitions as archaic myths. But, tell me, where does their race for money, possessions, fame, power, and lust take them? Does it take them to heaven on earth? Does it take them to heaven in spirit?

You know where it takes them.

And what will we do tomorrow?

We will chase those things again and again.

So, what should we do?

Some will understand this message clearly, and some will scoff at it:

Remember that Jesus said he came here to divide us and also, to separate the wheat from the chaff.

Be right with God. His judgement will come when we least expect it.

Well, I wasn't going to chime in on this thread, but i just can't help myself. Mike you are absolutely spot on!!!
As to how we as a people are to handle our finances, I read somewhere in the old testament a long time ago where the lord spelled out how man is to conduct his finacial business, the one thing that stood out was that in any business the highest paid man should not receive any more than seven times the lowest paid mans wages. If all business were to follow that guide line we would not be in the mess that we find ourselves in now. If by chance you know where that chapter and verse is to be found in the bible let me know as i would like to read it again for myself.

I believe the acceleration point down this slippery road was in Richard Nixon's administration when he took this country off of the gold standard and put our financial future in the hands of a private corporation, namely the federal reserve board.

This is just my two cents, i'm for sure no expert, but as of today have reached the age of sixty five and been around long enough to watch the slow and now the accelerated decline in our economy and i think, what a shame but, also know that it was inevitable.

On a side note, if your interested, pick up a book entitled " In the Begining" by Walt Brown, Ph.D. It is so facinating i guarranty you won't be able to put it down. It is compeeling evidence of creation and the flood, which BTW is the reason we are all burning coal today.

mikeandgerry wrote:Be right with God.

Excellent advice Mike. Hallelujah!

Can not argue with your thoughts on this .

JB Sparks wrote:As to how we as a people are to handle our finances, I read somewhere in the old testament a long time ago where the lord spelled out how man is to conduct his finacial business, the one thing that stood out was that in any business the highest paid man should not receive any more than seven times the lowest paid mans wages. If all business were to follow that guide line we would not be in the mess that we find ourselves in now. If by chance you know where that chapter and verse is to be found in the bible let me know as i would like to read it again for myself.

http://www.christianitytoday.com/ct/200 ... -32.0.html

Within that article is the only reference, Christian, not biblical, that I could find about a ratio of "executive" pay to worker pay.

20:1 in the article.

I found no biblical references to a ratio.

Mike, Thanks for thar article, I believe it is run away greed that is bring down our wonderful country and ceo's are leading the way. I really thought that i read in the O.T. about a 7 to 1 ratio but, since the article didn't mention a chapter and verse on the subject and nobody else can find it either, i think i must have read that somewhere else, just too long ago to remember.

I don't think "consumption" is the problem, it's using debt to finance that consumption where the problem stops. We all know that the Federal Reserve printing money out of thin air is bad, but most of us have our own little printing press in our pockets called a credit card.

Some people can manage their debt and don't have any problems, but as a country, we can't.

The REAL false economy is the one our leaders are trying to build. It's called a "service" or "knowledge based" economy. Be suspect of anyone pushing these ideas.

Making money off of moving money around just drives the downward spiral. As we are seeing now.

Think about when was the last time anyone saw a manufacturing/heavy industry plant being built. I only see malls being built aaround here.

I suggest you all invest a few minutes and watch this simplistic yet accurate depiction of what is wrong.... http://www.hulu.com/watch/1389/saturday ... -buy-stuff
Invest your time before you invest your money.....Test your strategy before you risk your money....

I didn't realize that the good book had a principal theory on low, middle, and upper class income. Wow my conception was always that we were all equal in gods eye and I just thought that meant including a pay scale. My reality of life and the good book seems to be nothing but fiction. I wonder now at this point since they say that Jesus was a carpenter, was he a lead carpenter, layout, or a grub. Maybe he owned the corporation that built housing and commercial structures in the area. Was he in a union?
My madness in this continues with the notion that people that break there backs at a job day in and day out get paid less and will be fired if they do not meet a quota, and that a man that can pick up a paper all day and talk with others at a water cooler and be paid billions and loose billions and keeps his job and perks has nothing to loose.
I'll be glad when I finally get a clear answerer on this and other question I have when my time on this earth is done.
Let me asure all here that no malice is intended, I'm just lost and confused and bluting out my thoughts, trying to understand the events that have happend and continue to happen is just blowing my mind, and I'm honest about it.