Self Stimulus (NSFW?)

I think I'm going to fucking lose it if I read one more goddamn article or listen to one more shit-for-brains economist telling us how consumers need to spend more money or banks need to lend more. If there's one thing that we ought to have learned from the past couple of decades it's that you can't spend yourself rich.

Listen, we in the industrialized world still have a great amount of wealth, both that we have built up in real assets and that which we are able to produce. Now there are two things one can do with wealth after one has produced it. First is to consume it, second is to invest it. When we consume wealth it disappears. As much as marketers would have us believe, throwing away your old TV and buying a new one does not stimulate the economy, all it does is shift money around and use up resources while not creating any added value since the new TV is no more productive than the old one which was destroyed, and the money spent could have been put to more productive use. It is a classic case of Frédéric Bastiat's Broken Window Fallacy. On the other hand, when we invest our wealth it creates more wealth. For example, if you sell your TV and buy some yarn to knit a sweater. You have actually taken resources and turned them into something of greater value through your creativity and labor.

Now, over the last couple of decades the pattern in America (and Western Europe for that matter, although mostly to a lesser extent) has been to consume more and invest less, so much so that for a while the official savings rate dropped into negative territory, meaning that the average American was consuming more that he or she was producing. Obviously, that was an unsustainable trend, and yet it still didn't take into account all the money that people thought they were "investing", but was simply financing other people's consumption, or the fact that a lot of these so called investments were actually liabilities. After all, it's not an investment if you can't get the money back, is it?

Real estate, to name the most obvious example, purchased by leveraging a small amount of money is not an investment when the actual utilitarian value is less that the amount of the loan. Lest we forget, a house does not actually make money. Houses have an economic lifespan of anywhere from 15 to 80 years depending on the quality of construction. Meaning that in that time, the amount of money required for upkeep equals that initial cost of construction.

However, this last January the savings rate rose to 5%, the highest it's been in nearly 15 years, but still about half of what it was from 1950 up until 1980. This has economists in a tizzy since they say that the economy is so dependent on consumption. To be fair, they are right that the economy currently depends on consumption, but is that a good basis for an economy? Obviously, it was not a sustainable model so maybe we should be getting away from it.

So what is an investment? It's something as simple as paying off your credit cards, or opening a savings account at the local credit union. When you pay down debts it allows the lending institutions to re-lend that money to someone else, hopefully someone who will put it to good use like starting a small business, or getting an education, or buying a house instead of working at some shitty job and paying rent to a landlord. Same goes for depositing money in a savings account. Another thing you can do is to invest in a business that will actually create something of value, like food or bicycles, or you can invest in local bonds for education and infrastructure projects which actually improve quality of life and opportunity for the next generation. These things, in turn, expand the economy in a real sense. They don't just shuffle paper around and skim percentages off the top. Of course, you have to do due diligence to make sure you're not getting ripped off.

OK so this is all well and good for some middle-class bourgeois asshole like me, but what if you can't make ends meet? Is there any hope beyond expecting a bailout from Uncle Sam? Well there is, and that is the subject of my next rant. Stay tuned.