First, a reminder of the central rule: Correlation does not imply causation. Just because things correlate, or are connected, does not mean they cause each other. The economy is really quite simple. You make a product. You sell a product. You buy a product. It all hinges on supply & demand. It also ALL begins with Labor, not capital. "Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." ~Abraham Lincoln You labor, & create wealth. Other people do the same. You trade your wealth. That is the human economy, in a nutshell. If you don't work, you have to take or mooch from those who do. If you rely on swindling & thievery, you do not increase the economy, but are a drag upon it. Let's list some indicators in the economy: Unemployment rate. Trade deficit Interest rates, Money supply, Quantitative Easing, currency manipulation Money velocity Job participation rate Public assistance rate Median income Consumer price index Housing starts Manufacturing inventory The stock market, s&p, djia None of these things CAUSE economic prosperity or decline. They are only indicators. I left some out, that are common among economists, because i see them as manipulated data, to promote a false narrative. The GDP is an example of this. It is touted as one of the MAIN indicators of the economy, but it is a manipulated, faulty data set. It includes all of govt spending, which is a drain on the economy, & does not contribute to any real domestic product. It is NON production, redefined as 'gross domestic product', when it produces nothing. Much of the money shuffling that goes on also just obscures the economy, & the central problems it faces. #3, for example, is not really an indicator of the economy, but a sign of impending doom, when the money shufflers are frantically trying to reboot the system with QEs, interest rate & currency manipulation. They are some of the few CAUSES of economic maladies, & are not really indicators, except to note that when the money shufflers are inserting themselves into these kinds of social engineering programs, it ALWAYS gets worse. Minimum wage is not a factor. Median income is, & in our current economy, it has been on a downward spiral for years. But mandating artificial 'fixes' for intrinsic problems in the economic indicators do not solve anything. They always make things worse. The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy. ... Roosevelt's policies were very destructive. Roosevelt's policies made the depression longer and worse than it otherwise would have been. ~Milton Friedman You see the same thing in the last recession, which some argue we are still in. Govt manipulation of housing created a bubble, & when it burst, it took the whole economy with it. So what 'causes' a bad economy? I see several factors: Increase of govt. More taxes & more govt spending TAKE money out of the economy, & waste it on collective projects, some of which are unneeded or are filled with corruption & fraud. Increase in dependency. As fewer people contribute to the positive production of wealth in the nation, & more people become dependents, the wealth of the nation declines, & so does its prosperity. Fear. This has been the most dangerous historical factor. When the citizens are afraid of hard times, they hunker down, don't spend much, & scrimp & save what they make. This decreases Money Velocity, & stagnates an economy. It is somewhat of a natural corrective process, which weeds out the non essentials in an economy, but it still spreads the gloom to everyone. Govt manipulation of the currency. When bureaucrats take it upon themselves to 'fix' things, they inevitably make it worse. They meddle with interest rates, meddle with the money supply, meddle with everything to try to engineer their control over the lives of the citizens. But it never improves things, except for a corrupt few. Govt regulation, crony capitalism, socialistic mixing of the regulatory collective with the profiteering moneyed elite. This is where Law is turned into an instrument of plunder, as Bastiat wrote of. They use the power of govt to squash competition, promote their cronies, & produce a mad rush to join in with the plundering of the public treasury. It is simple corruption, but it becomes a system that will destroy a nation. So, focusing on a single tree, you will miss the forest. Any single indicator can have a variety of causes, or implications, but combined they show a more complete picture. But too often economics is shrouded in mystery.. obfuscation is used to confuse & bewilder people into thinking it is all too complicated for a common person to understand. But it is simple. The complications are obfuscations from the manipulating looters, who are plundering the economy.. they are looting the treasury, & distracting us with dessert menus. So what can we do, as a nation, to make a vibrant, growing economy? Cut govt to the bone. Relegate it to the basics: Craft fair regulations, provide a stable currency, Defend the nation from aggressors. Wean people off of dependency, & insist on personal responsibility for actions. Change the culture from entitlement to industriousness. Let need & hunger drive people. I am for doing good to the poor, but...I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed...that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer. ~Benjamin Franklin But to do these things, we will have to address the BIGGER problem, that of the foxes guarding the hen house. We cannot rely on the system that rewards looting to regulate themselves. We will have to address the more basic problems of conflict of interest within the system. Professional ruling elite, rather than citizen representatives. The looters of the American producers will not stop on their own. They have crafted a system of plunder to mooch off the working man, & reward those who enable them. Term limits & mandating a balanced budget would decrease this problem. Empowered Citizenry. The looters have been diluting citizenship, flooding the electorate with useful idiots & self interested moochers, who vote for the looters to plunder the treasury. We need to find a way to stop the watering down of the voting citizens, & remove the conflict of interest in the voting process. I welcome any comments, additions, or rebuttal to any of these points. It is long past time for us to let the looters & scoundrels continue to run our collective fiscal matters. They are destroying the nation & the economy, with their delusions, corruption, & dependency. It is time to roust them out, & return to a path of fiscal responsibility, a stable currency, & a national work ethic.
Excellent piece! Well thought out. IMO there are several factors that are choking our economy, many of which you have already listed. Taxes of course take a huge part of the GDP, and government regulation designed to stifle competition is another, but there are also factors such as demographics and an educational system which creates obedient drones instead of intelligent individuals. The biggest factor however is globalization in which the wealthy exploit both the cheap labor of the third world and the prosperous markets of the 1st world. Of course exploitation of this kind can only be temporary because the offshoring of manufacturing eventually turns the 1st world into the 3rd world and destroys the market the wealthy seek to exploit.
