As Predicted, Austerity Policies Send US Economy Downward

[Karee 4,191]

That's a big assumption that for one, Federal income tax revenue is guaranteed (by whom?) and for how much? If 40 million people are jobless, the fed collects nothing from them.

Take a business like an independent restaurant, for example. If the location is in a good spot (high traffic) and the food is good, they'll have a steady supply of patrons. However, it's not simply about revenue, but bringing in enough revenue to keep the business afloat, and if that restaurant doesn't spend money on keeping the place clean and presentable, or doesn't bother to hire a decent cook, chances are, they're not going to see their sales go up.

Business fundamentals 101.

I don't see the federal govt. going out of business.

[one...two...tree 2,762]

I don't see the federal govt. going out of business.

Same concepts apply. A business must bring in enough revenue to cover the cost of running the business and you can't bring in revenue without spending some money, regularly for things like advertising, inventory, labor, upkeep, etc. When you start to pinch on these necessary expenditures, chances are, your sales will drop.

[dalegg 143]

So now the threat of Austerity is being called Austerity?

[Dan and Judy 614]

I would like to take a stab at the difference between a single household and a National economy.

I will start by stating my qualifications:

I passed high school economics some time in the 70's

I read a book about money and banks about 10 years ago

that's about it

Starting at the beginning

Everybody had to do everything for themselves

pick their own berries and build their own chairs, catch their own fish

clean their own toilets.......everything

It soon became evident that some guys were better fishermen

and some were better farmers

women were better at cleaning toilets and doing laundry

hence specialization was born

fishermen fished all day long and farmers farmed from sun up to sun set it was more efficient.

but the farmer wanted to eat some tuna and the fisher had a hankering for corn

before there was money, if you wanted something that someone else had you would offer

to trade them something you had (a product) or a service. if you didn't have anything they wanted

you could just kill them and take all their stuff

somebody invented armies to make it easier to take other peoples stuff

then somebody else invented an army to keep other armies from taking all their stuff

Too many people were dying like that so John Currency invented money, being rather egotistical

he named it after himself.

Money makes trading easier

without money a farmer who didn't like the taste of fish would not trade with a fisherman because

the fisherman didn't have what the farmer wanted

The brickmaker liked fish but he didn't have any corn which is what the fisherman wanted.

Once money was invented if you had or did something of value you could sell it for money

and then take your money and go buy whatever you wanted

So Money makes trading easier. To an economy Money is like oil for a car, it reduces friction between the buyer

and the seller and keeps things flowing smoothly

I believe salt (sal) was a currency used by the romans to pay their soldiers, hence the word salary.

On some islands seashells were used.

The hard part was getting people to agree on what was acceptable to be used as money.

So we invented governments

Governments decided gold and silver made the best money

Then some English liberal bozo named John Locke came along

He was related to John Currency through a long line of Johns

Anyway He thought there should be a law of supply and demand

He got parliment to pass it and we've been stuck with it ever since

Ok so I have not said a word about the difference between a single household and a national economy.

I'm afraid that won't come until the next chapter which I will probably call "Supply and Demand"

Ok I'm back, had to go get my nose shaved.

This is chapter II " The law of supply and demand"

So like 400 years ago Locke rams this law through parliment.

You ask how many slaves will John buy if they cost $1000, let's say 6

so you get some graph paper and write the different possible costs on the left side

then put the number of slaves across the bottom

find where the 6 slaves intersects with the $1000 and put a dot there

then ask how many slaves will he buy if they cost $500, let's say 15

put a dot at the intersection of $500 and 15 slaves

do that with a few more prices and then draw a line connecting the dots

You have just graphed the demand for slaves

Now ask how many slaves is Paul willing to sell at the price of $1000

thats a lot of guineas so Paul is willing to part with 200 slaves at that price

find where $1000 intersects with 200 slaves and put your dot.

same thing with a few more prices and

you have just graphed the supply of slaves

Now the point where those two lines intersect tells you how many slaves

are going to be sold

That's "The law of Supply and Demand"

It works for tatoos, coffee, rubberbands, BJ's, and even money

Ok we are laying the foundation for a deep understanding

of economics

But I still have not gotten into the difference between between that single household

and the national economy

I guess that will come in chapter 3

Edited February 6, 2013 by Dan and Judy

[Mr. Big Dog 10,747]

But I still have not gotten into the difference between between that single household

and the national economy

I guess that will come in chapter 3

I can't wait...

[OnMyWayID 1,489]

That's a big assumption that for one, Federal income tax revenue is guaranteed (by whom?) and for how much? If 40 million people are jobless, the fed collects nothing from them.

Take a business like an independent restaurant, for example. If the location is in a good spot (high traffic) and the food is good, they'll have a steady supply of patrons. However, it's not simply about revenue, but bringing in enough revenue to keep the business afloat, and if that restaurant doesn't spend money on keeping the place clean and presentable, or doesn't bother to hire a decent cook, chances are, they're not going to see their sales go up.

Business fundamentals 101.

SuperValu had 40 billion a year in income (now closer to 35 billion as they keep shrinking), they went from $60 a share at one point to under $2.00 a share last year.. Why? Because they leveraged their size through debt and now are unable to lower prices. The competition, who does not have the heavy debt-load, is killing them. The debt load for this company is 6 billion with over 100,000 employees (220,000 at one point - so far the debt has cost 120,000 jobs for this ONE company)... They are unable to expand or build new stores or lower prices because of their debt.

What killed Mervyns? What caused Kmart to implode to almost nothing and become a non-player? Why is sears unable to modernize to complete when other similar companies can? Why did Winn Dixie declare bankruptcy? Debt.. They all have limited options because of their debt load.

Debt is useful tool, but only to a certain point. Supervalu took on the debt making certain assumptions about the future. When those assumptions turned out wrong and we headed into recession they were out of options and are now in the process of forever shrinking as they sell off assets to keep up with the debt they created.

Lets say our country borrows and overspend another 2 trillion and grows the debt to 18 trillion.. We will grow - probably around 2-3 percent at best.. Then what? If we stop overspending we now will have $250 billion in interest due each year just to keep the growth at zero.. The economy will recess again as the debt drags it down - so we overspend again to pick it back up.. It will take even more as we have to counteract and even larger debt.. another 2.5 trillion 20.5 trillion total to get us back to 2-3 percent growth? whew! Now we can let it go on it's own.. of course now the debt drag is 300 billion a year.. How do we stop the cycle we have started?

This is the Greek model.. it is killing them.

This is the Spanish model.. they have >25% unemployment

This is the Argentina model.. they defaulted and have been out of world markets since 2001

All of these countries will recover but had they walked away from the debt train sooner they would be in much better positions.

Edited February 6, 2013 by OnMyWayID

[Mr. Big Dog 10,747]

..

Edited February 6, 2013 by Mr. Big Dog

[one...two...tree 2,762]

SuperValu had 40 billion a year in income (now closer to 35 billion as they keep shrinking), they went from $60 a share at one point to under $2.00 a share last year.. Why? Because they leveraged their size through debt and now are unable to lower prices. The competition, who does not have the heavy debt-load, is killing them. The debt load for this company is 6 billion with over 100,000 employees (220,000 at one point - so far the debt has cost 120,000 jobs for this ONE company)... They are unable to expand or build new stores or lower prices because of their debt.

What killed Mervyns? What caused Kmart to implode to almost nothing and become a non-player? Why is sears unable to modernize to complete when other similar companies can? Why did Winn Dixie declare bankruptcy? Debt.. They all have limited options because of their debt load.

Debt is useful tool, but only to a certain point. Supervalu took on the debt making certain assumptions about the future. When those assumptions turned out wrong and we headed into recession they were out of options and are now in the process of forever shrinking as they sell off assets to keep up with the debt they created.

Lets say our country borrows and overspend another 2 trillion and grows the debt to 18 trillion.. We will grow - probably around 2-3 percent at best.. Then what? If we stop overspending we now will have $250 billion in interest due each year just to keep the growth at zero.. The economy will recess again as the debt drags it down - so we overspend again to pick it back up.. It will take even more as we have to counteract and even larger debt.. another 2.5 trillion 20.5 trillion total to get us back to 2-3 percent growth? whew! Now we can let it go on it's own.. of course now the debt drag is 300 billion a year.. How do we stop the cycle we have started?

This is the Greek model.. it is killing them.

This is the Spanish model.. they have >25% unemployment

This is the Argentina model.. they defaulted and have been out of world markets since 2001

All of these countries will recover but had they walked away from the debt train sooner they would be in much better positions.

You have to look at what contributed to the federal debt over the last dozen years - the biggest were the Bush Tax cuts, the two wars and the Medicare Prescription Expansion - all of which were not budgeted for. Our debt problem is money management problem versus a spending problem, so trying to solve it by simply tightening our belts is ignoring the disease.

[I AM NOT THAT GUY 5,715]

You have to look at what contributed to the federal debt over the last dozen years - the biggest were the Bush Tax cuts, the two wars and the Medicare Prescription Expansion - all of which were not budgeted for. Our debt problem is money management problem versus a spending problem, so trying to solve it by simply tightening our belts is ignoring the disease.

The disease is a bloated government workforce that has become a political wing of the Democratic party. The disease is a retired population that controls 80% of the wealth in this country, and is still receiving healthcare benefits and a monthly stipend. The disease is having the largest military industrial complex in the world, by a factor of five or more, that has corrupted Congress. The disease is having the largest incarcerated population in the world.

[Dan and Judy 614]

Chapter 3

"Inflation or Why did that Ho charge Mo this time?"

Lucinda: "That will be $20"

"What" I screamed "last week it was $15"

She explained that overhead had been going up while she was going down.

The crack dealer just jacked up his price, The cop's want more money and

the price of mouthwash is outrageous.

She said: "Inspite of the Keynesian theory that prices and wage respond slowly to changes in supply

and demand, resulting in periodic shortages and surpluses, I'm raising my price Now"!

Me: "Baby, I don't understand. I thought we had something special."

Lucinda: "If you want to understand, You need to read "The General Theory of Employment, Interest and

Money" by John Maynard Keynes."

Me: "####### another John, There are more John's in economics than in the house of the rising sun!

what does his book have to do with you raising your price on me?

Honey I don't want to read no damn book...........You know what I want sweetums

I aint got $20, let's go for $15 for old times sake

Lucinda: "Well if you're too damn lazy to read Ill give you a free demonstration"

Well my ears perked up at "free demonstration"

She picked a wad of bubble gum that had been temporarily deposited on the table.

She burped and popped the gum in her mouth and started to chew with a vengeance.

Lucinda: Now this gum in my mouth is like the US economy. Now when I blow it gets bigger.

It's like everybody is raising prices

and the fed is pumping money into the economy.

She started to blow and the bubble started to grow

Lucinda: " When one person waises prices whew the guy that's buying from him has to whew charge more for his product in

order to whew maintain his standard of wiving."..........

bubble is getting bigger

Lucinda: "then the workers whew have to get waises then the employers have to charge whew more for their products. This is whew

called "The Wage Price Spiral" That's how whew inflation works in our economy" whew.......

bwaaam!!! yes it was all over her face, some in her hair. She gently pulled the pieces off her face

and put them back in her mouth and let out another burp.

Me: Ok cool let's go for $15

Lucinda: NO

Me: Baby we can work something out.

Lucinda: Ok $15 and clean my toilet!

Me: DEAL!!!!

Edited February 6, 2013 by Dan and Judy

[I AM NOT THAT GUY 5,715]

[I AM NOT THAT GUY 5,715]

The watchdog of the economy winding itself up.