Economic theory: What would happen if ...?

[Angela Shelley]

Under the assumption that a large number of households in the US have food supplies ...


What would happen if all of the households in the USA who have food supplies in their homes would begin using up those supplies?

1) These individual households would have more disposable income for a while.

The money could be used to buy other non-food items (good for the economy)
or
The money could be used to pay off credit cards (giving banks more money to loan).


2) Because the demand for food would drop, maybe food prices would also drop.


What do you think?

:-)

[NightWatcher]

1. I think it would work about as good as the calls for a national day of protest

Most people do not have enough food on hand to go long enough to have an effect on the market.

As with the "days of protests" where everyone would stop buying for one day. People would have to buy more the preceeding day and the days after to make up for it and there would be no noticeable change in the market as a whole.

[Angela Shelley]

3. I´m talking about those households which have

food stored in their basements, in the closets, under the beds ...

These households have already purchased the goods, there would be no need to make up for it later.

[NightWatcher]

7. that would be a bad idea to use emergency supplies

what would happen if a disaster were to strike while supplies were low. I build up my supplies as we get into spring and then I eat some of them as we get out of hurricane season. I rotate the stocks of food. I have had times when business was slow where I ate more survival food than I would regularly do.

As for your original question, the US market is too huge to notice and be changed by movements like the one you mention. I was a fan of the idea of days of protest where we stay home, but unfortunately it wouldnt make a mark.

[Angela Shelley]

12. I am not talking about protest,

I am talking about households "finding" disposable income.

[NightWatcher]

I know it's not about protest, but wouldnt the people have to replenish their supplies?

I dont see where it matters if groceries are bought little by little or all in bulk. People still gotta eat. I know that some money can be saved by buying in bulk.

I just dont see this as a viable solution for saving money. It might work for a week or two, but I dont see how it goes beyond that.

I could be wrong, but that's my opinion fwiw

[Angela Shelley]

19. No, they don´t have to replenish their supplies.

I´m not talking about saving money.

I´m talking about "freeing" up disposable income.

Are there enough households with food supplies to make a difference?

[NickB79]

28. They don't have to replenish their emergency supplies?

Personally, I don't think there are enough households with that much extra food on hand to make any kind of difference in the economy, and I don't think that people who DO have enough food to carry out your plan will then turn around to run out and buy new clothes or a nice pair of shoes. People with the mindset to buy in bulk and have a lot of foodstuffs on hand are usually also the ones who are doing it to save money. When they have extra money, they would put THAT into savings instead of spending it, or pay off bills with it.

I should know, as I am one of those people :)

I'm disturbed by the logic in using up all the food you've purchased on sale or in bulk to save money, and then using that savings to buy more worthless consumer crap to keep propping up this economy.

[Angela Shelley]

30. Is there really a difference?

The government will send households a check (creating new debt for the nation) and the people will use the money to "prop up the economy".

Wouldn´t it be better for households to "support the economy" by using the goods which have already been purchased, freeing up disposable income?

I´m not picking on individuals, it´s a discussion about "a concept".

[sam sarrha]

11. this is about ..... Mormons.!!!!

[Angela Shelley]

13. No, it´s about households "freeing up" disposable income

[sam sarrha]

18. this sounds really desperate.. how about not buying chinese crap

[Angela Shelley]

20. I agree with you, buying local is the best alternative.

How many people do you know who have food supplies?

If they would use those food supplies, they would need less grocery money for the next month, and with that money, they could buy something "local", or pay off a credit card, etc.

If a large amount of consumer credit would be paid down, the banks would have more money to loan.

[FogerRox]

2. What is the problem you are trying to fix?

[Angela Shelley]

6. The economy needs disposable income,

and the nation can´t print the money fast enough.

What can individual households do to help the economy?

[FogerRox]

14. OK, the reason the economy is doing what it is doing is because of a policy

put into effect at the beginning of the Reagan White House.

1) For nearly 50 years (FDR,1936 to Carter,1980) TOP personal tax rates were between 70 and 91 percent. Reagan dropped them to 28%.
2) Payroll taxes went up from 6.2% to 15.3%.
3) Corporate taxes went down



Regressive taxation taxes working and middle class families out of the economy. After 27 years, this has left only the wealthiest families engaged in the economy.





The solution is to seize political power and return to progressive taxation. A Middle class is a rare thing, occurring only 3 times thru-out history. The first rising of a middle class occurred as a result of the Black Plague. The Black Plague killed about 50% of the worlds population, creating a labor shortage. This allowed that Trades & Craftsman to command a higher wage, which trickled down to the common yeoman, much as the unionization of US labor in the middle 1900's allowed non union labor to command wages akin to union labor. Some have written that the renaissance, without a middle class that had the liesure time to even consider art & music, let alone the time to paint, sculpt, write & perform music, would have never occurred.

The second rising of a middle class occurred in the US colonies in the middle 1700's. Once a few Indians were driven away from an area, there was free land available for farming. In an agrarian society this was a big deal in that you could own your own land, grow & sell your own crops & keep the profits, much as a family owned business does today.

The third rising of a middle class occurred during the Great Republican Depression of the early 1930's. FDR's New Deal brought forward tax progressivity, as well as labor rights earned thru the union movement, such as the Child Labor laws passed in 1937 & 1938, (Kids do belong in school afterall).

The 3 pillars of the Middle class are Progressive Taxation, Labor Rights and Educational Rights. What we have now in this country is the result of those 3 pillars being torn down.

Anything short of taking control of our country does not fix the problem.

[Hydra]

4. I don't have the food for that

So I'd like numbers for how many would actually be able to do that.

As for fixing the economy, we could start by getting rid of Bushco and the damn trickle down s***. Fair wages, killing the oil companies and fixing the healthcare system would just about fix everything.

[Angela Shelley]

15. I agree, the largest problem is at the top.

But let´s say that a democratic candidate is elected president, the military expenses will not be stopped from one day to the next.

What can households do to "free up" disposable income?

[sam sarrha]

5. I'm nominating you for a Nobel Prize in Economics...!!! get a hobby

[Democrats_win]

8. Today's economy: it's what happens when supply side economics fails.

Remember the old rule that supply will rise up to meet demand as prices rise? Today's crooked businessmen have manipulated markets into the Perfect storm of rising prices and falling supplies. We're watching capitalism fail to its own greed. It's remarkable that with all the tax breaks we've given big business, they've done absolutely nothing in return!

Your proposal is ok, but should be described as: consume less, produce more.

Edit: typos

[NightWatcher]

10. George HW Bush was right

Supply side economics is just "voodoo economics"

[FogerRox]

16. Exactly, see my post #14.

Additionally

Thom Hartman wrote , " but the real events of the 1930s and 1940s that set the stage for a second American Middle Class were primarily the Wagner Act, the G.I. Bill, and tax changes ranging from raising the top rate on the most rich to 90 percent to offering an emerging middle class home interest tax deductions."

Hartman known for, amoung other things, quoting Jefferson, continues, "Progressive taxation has a long history: As Jefferson said in a 1785 letter to James Madison, "Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise." Hartman concludes, "Progressive taxation has helped create every middle class in the First World, and without it the middle class will vanish."

Enter Ronald Reagan and the start of full spectrum warfare on the middle class. The opening salvo, the PATCO strike. Busting the Air Traffic Controllers union was the start of a multi front military style operation to drive wages down for all americans. Then we were told that Social Security was going broke, this represents the opening of a second front of the War on the Middle Class that resulted in the doubling of payroll taxes.

http://rdanafox.blogspot.com/2006/11/tax-rates-middle-class.html

[FogerRox]

32. supply side economics fail

Actually the goal of the current supply side economics is to do exactly what has been done, destroy the middle class and move large amount of wealth to the .5% richest.

[Dreamer Tatum]

9. Let's recast your question

What you're really asking is this: what would happen if the demand for food declined? If you envision this as a sustained phenomenon, then output would shrink, employment would shrink, and prices would fall. Interest rates would (probably) go up, too. None of those are particularly exciting propositions.

[Angela Shelley]

17. What I´m asking is this: What can households do

to have more disposable income?

And, are there enough households with food supplies to make a difference?

[nadinbrzezinski]

21. What you can do to have more disposable income

the first thing, too much common sense, is NOT carry any credit card debt.

The interests alone are killers. But that alone could be three, four and five hundred dollars a month.

The second, and I know that sounds like a broken record, live within means.

The third, find another line of employment, if that is possible

Now if you want to have more disposable income and have the land to do it, get a vegetable garden going... that will help

[FogerRox]

23. All important, as is siezing political power.

[Angela Shelley]

24. And what happens when we have the political power,

and military spending is reduced, we are still in debt.

There will still be a drastic need for disposable income?

[nadinbrzezinski]

31. You are confusing Federal Spending with household spending

If you are asking for POLICY solutions here are some.

1.- Change national spending priorities... and that does not only mean reducing the DoD budget, though there are still people in the world that want to do you and me a lot of damage... so there is a limit to how much you can cut that one without putting national security at risk

2.- What obama wants to do (disclaimer, I am not a supporter) forming a national infrastructure bank and creating jobs, that is one way that policy creates jobs and improves our collective lives

3.- Any public sector investment in the common well being, such as the WPA (which I foresee in the future) create jobs, and create income, hence lead to spending and a better economy

My personal view, the best economies are not fully socialist or communists (either extreme ain't gonna work) but a mixed economy, where some sectors (in this case health care for instance) are controlled and managed by the state, while others, manufacturing, are controlled by the private sector. In fact, if you ;look at the economy of the US during the 40s and 50s it WAS a mixed economy and it was a very healthy economy.

[Angela Shelley]

26. Thanks for the good advice.

:-)

[ThomWV]

22. Unless you happen to be a Mormon its not likely there is 3 weeks worth of food in your home.

And for most it might be more like a week's worth.

[Angela Shelley]

25. And I thought that more people had food supplies,

here at DU, it sounds like a large number of households have prepared for the depression with their arsenals and food storage.

[dysfunctional press]

33. we usually have enough food to last us about a month on hand...

although that last week would probably consist of some pretty funky menus.

[HamdenRice]

27. This is not at all as silly a question as it might appear to some. It's the old "inventory" problem

From the early 19th century until practically the 1990s, this was, indeed, considered by most economists on the right and the left, to be the cause of recessions.

The only modification I would make to your scenario is that the old theory focused on businesses, not on households.

The idea was that businesses tended to produce slightly more goods than they sold to make sure they had enough goods in case demand for those goods increased. The goods that they accumulated were called "inventory."

Recessions occurred when businesses accumulated too much inventory and shut down production in order for consumers to "catch up" with production. The problem was that in liquidating inventory, they typically laid off the production employees. If all the production employees in various industries were laid off around the same time, then consumer demand would fall, and the pace at which inventories were liquidated, slowed. In other words, liquidation of inventories became a vicious circle that led to recession.

The whole question of the build up and liquidation of inventories was called the "business cycle."

Until very recently, if you listened to the business news, one of the key indicators was "inventories" -- the concern with how much goods the business sector was accumulating.

With the rise of computers, however, inventories as a predictor of the business cycle, has lessened almost to the point that they ceased to be relevant. In the 1990s, businesses pioneered "just in time" production and delivery. In other words, when someone shops in WallMart, the cash register sends a signal via computer network all the way back to the factory to produce more goods (a bit simplified, but you get the idea), and therefore businesses no longer accumulate inventories in cycles.

The mistake the OP makes is in focusing on households instead of business. Households' version of inventories (what is in your food cabinets) is irrelevant, because people if people stop consuming this week using their inventories, they will probably buy a lot more next week, while businesses have much deeper inventories. Household inventory does not affect the business cycle.

[Angela Shelley]

29. Thank you for understanding my OP

and for your insight.

:-)