Tuesday, December 1, 2009

Consumer I

Moral: Wherein the consumer is the sink for the economy. It's an important function, release of pressure.


Earlier, there was a post on a missing link, namely the financiers. Well, actually, even though labor was mentioned before, we have not addressed the consumer part of the macro equation (notice the 'consumption' line on the bottom of the graph).

For one thing, we'll look at the consumer as part of the GDP equation: GDP = C + Inv + G + (eX - i M) Here, we have the GDP being defined as an expenditure-based function of private consumption, business investment, government spending, and the net of exports and imports.

Before proceeding, we need to consider that the GDP has many downfalls, and other methods have been proposed, such as the Genuine Progress Indicator.

In any case, we know that there are many people (growing population) who consume which has an impact on the economy. For the US the past few years, personal consumption has been the largest part of the GDP with a side-effect of a growing debt basis per capita. It makes sense, since people are abundantly there, that the economy would have a human focus. We can say that without even referring to t-issues. Though, fat cats are antithetical to a proper economic model.

How can there be consumer expenditures without wages and rent? That latter is mentioned in the context of arguments about minimum wage. People are due rent just for being here (hey, hold the mud slinging - Marx did have one thing right -fictitious capital! Indeed!).

We'll have a lot to cover, hence this is Consumer I. Who knows how many post there'll be?

For starters, this little picture of Big Ben and his saver sacking ways is from today's Tech Ticker's talk with Howard Davidowitz. There are several things that old Howard says that are right on.
  • Our debt strategy is turning the buck into toilet paper. See image and Tech Ticker discussion. What good is the buck for the consumer if it has no value?
  • Davidowitz lists some current issues: houses are not there as ATMs any longer, unemployment is deep, personal bankruptcies are on the rise, and more.
We'll get to those issues and more, including jobs. For that, the issue is really rent (though, we may need another concept - due to the bias of prior use and connotation limits), more so than wage. How was that not every discussed (something to research)?


01/27/2012 -- Ben will continue to sack the savers; he must love the ca-pital-sino.

12/13/2011 -- McKinsey report shows that households hold over 40% of the world's wealth. Hence, the consumer as the major influence on the economy. Now, consider that the household wealth collection (using income in the U.S. as a proxy) is skewed to a very small bunch.

12/09/2009 -- Cannot sustain the consumer with debt.

12/03/2009 -- We'll have a chain of posts related to the Consumer part of the economy.

Modified: 01/27/2012

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