One Simple Idea That Explains Why the Economy Is in Great Danger

[Zorro]

To understand why the world economy is in grave peril because of the spread of coronavirus, it helps to grasp one idea that is at once blindingly obvious and sneakily profound.

One person’s spending is another person’s income. That, in a single sentence, is what the $87 trillion global economy is.

That relationship, between spending and income, consumption and production, is at the core of how a capitalist economy works. It is the basis of a perpetual motion machine. We buy the things we want and need, and in exchange give money to the people who produced those things, who in turn use that money to buy the things they want and need, and so on, forever.

What is so deeply worrying about the potential economic ripple effects of the virus is that it requires this perpetual motion machine to come to a near-complete stop across large chunks of the economy, for an indeterminate period of time.

https://www.nytimes.com/2020/03/17/upshot/coronavirus-economy-crisis-demand-shock.html

[Laelth]

1. Obviously.

The greater fear is a deflationary spiral. When people get desperate to earn money, they start selling what they have to sell at ever-cheaper prices. If you knew that you could buy a car tomorrow for a lower price than you could buy one today, wouldn’t you wait until tomorrow to buy the car? Or a week later, when you know that it will be even cheaper than that? Or a month later? Etc.

In a deflationary spiral, the entire economy shuts down due to delayed purchasing of everything except essentials. That’s what we saw in The Great Depression.

-Laelth

[3Hotdogs]

5. About buying that car.

I don't need one. Mine has 113,000 miles and going strong. I plan to trade it in at around 250K miles. That means about 2 years. I drive a lot.

Anyways.... interest rates are 'sposed to go down and the governor is talking about suspending the sales tax. If those happen, I will bite.

[randr]

2. I have been saying this for years

The ultimate force of the economy is the consumer. When spending slows, or stops as is the case today, the market tanks.
One of the first things I realized during 9/11 was that it wasn't the tragedy and loss of lives that mattered to the policy makers. It was that people stopped spending.
This principle is key in understanding how the people can gain control and take back their government. They must use the control they hold over the system to cause spending stoppages to cause policy changes.
Of course we the people are never organized enough to implement any real action. Anyone who would come close to organizing such an effort would be branded as an enemy of the state.
Resistance if futile, we have been assimilated.

[Bok_Tukalo]

3. The Employment

[dalton99a]

4. Kick