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BA Deere
Honored Advisor

How the Economic Machine Works.

This 30 minute explaination is the best that I have heard of what is wrong and what needs to be done economically in this country. I can not find any fault with it.

 

http://www.youtube.com/watch?v=PHe0bXAIuk0 

 

 

Credit drives the economy MORE than productivity does.

 

 

Okay, "deleveraging" is what happens ...when lowering interest rates no longer stimulates the economy, that is kind of where we are right now.  Here is the problem, "wealth redistribution" is what generally happens as a result of deleveraging...jump to 23:30.

 

The video contains many lessons pertaining to the recent "farm bubble" cycle that is ending.

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9 Replies
hanktbd
Senior Contributor

Re: How the Economic Machine Works.

Interesting that he believes that the Fed is doing a good job of walking that fine line between allowing another depression like in the 30's and creating runaway inflation like the Weimar Republic did. Let's hope he is correct.

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BA Deere
Honored Advisor

Re: How the Economic Machine Works.

Yes, it`s quite a perpetual motion machine that man has developed.  I would prefer a partially hard money backed system that wasn`t so "debt based", the guy that made the video is a hedgefund trader and to understand what he is explaining is what separates the "1%" from the rest of us.

 

If "politically" the deleveraging is handled by "wealth redistribution", that is where things could really go badly.

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sw363535
Honored Advisor

Re: How the Economic Machine Works.

The final statement ------ " In the long run increasing productivity matters most" ------------  the big problem that cannot be ignored.

 

If real productivity is not present there is no good outcome.  

 

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Palouser
Senior Advisor

Re: How the Economic Machine Works.

A sluggish economy limits productivity. Productivity benefits from a strong consumer economy (in our case) and stimulates investment in workplace technology that increases productivity. Factories and businesses only partly staffed result in lower productivity. Increases in technical investments lowering the number of employees but selling the same amount of widgets increases productivity but increases unemployment.


Obviously it is a Gordian knot when the economy can't gather momentum, like now.
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sw363535
Honored Advisor

Re: How the Economic Machine Works.

You stimulate thought Palouser, as always,

 

Does this explanation even work---------- or how will it work, when the consumer has nothing to sell of value---- Labor?

 

Or

 

Can the economy grow enough to carry itself with much less labor involved?

 

 

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too close for comfort
Senior Contributor

Re: How the Economic Machine Works.

Hi Pal: A quick question. How does an economy recover when so much of it's productivity has been out sourced to a totally different economy?

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k-289
Senior Advisor

Re: How the Economic Machine Works.

The experts wanted  " cheap " consumer goods  =  oriental junk  = " imported plastic " purchased with plastic "  = the chickens have come to roost and the expert hand wringing goes on ---

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Palouser
Senior Advisor

Re: How the Economic Machine Works.

Answers? Sorry for posting irregularly but I've been down on the border in AZ hiking and playing and out of touch much of the time.

If more goods are produced with less labor I think investors would benefit but the middle class will continue to shrink. Then you don't have buyers for the widgets. Not a good formula for a consumer economy
Higher educations and more technical training may be part of the answer. But I don't see how you avoid a permanent result of very low class laborers. This becomes a systemic problem. Very wealthy = investors, middle class = technicians, the rest = working poor. Could become the plantation system with a small middle class (foreman/technician/engineer).

If everything is imported then the balance of payments becomes a problem. We are a consumer/service oriented economy. Our services have to be worldwide to make up for shrinking manufacturing.

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sw363535
Honored Advisor

Re: How the Economic Machine Works.

Reminds me of a day I spent in South Africa several years ago

 

 

 3 million thinking nothings wrong and 42 million hoping for the house maids and gardeners job.s

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