Wednesday, October 07, 2009

The schizophrenia of Economics

Melinda Pitts defines the problem quite well, though still not citing the base causation of a lack of Consumer Demand for Product. Small Business will not survive if the Public corrals its discretionary Income as Savings for sudden surges in Price from Necessities. Small Businesses rarely provide Necessity Product, though it presents considerable Service industry; they having somewhat of an advantage in the later, with lower Overhead Costs and short Carry Credit. It is still not an environment where added labor would seem rapidly necessary, as Consumers put off even basic Maintenance Costs. The decline in real physical Sales means no Hiring will be done in the immediate future, and if the Christmas Season is poor, will likely mean the end of the Small Business engine for Employment. The decaying dollar will not even begin to bring the Export Sales necessary to counteract the decline in domestic Sales, a great share of which have already been processed.

This Movement has all the creepiness of those economic adventures originally designed in the 1970s. It is a Tax Credit which will not even be considered in an atmosphere of shortening Store hours, and switching full-time Help to Part-Time; all due to lack of presence of Customers. The first comment made must be that there will be absolutely no effect until it is passed. This means it will do nothing for the current Quarter. The new year presents almost no Production or Construction contracts for new Work, probably only about 40% of normal years. The Tax Credit will not take effect until the next Boom starts in real truth; then it will be impossible to get rid off–exactly like nonentity Interest rates. We are getting close to paying Business to not produce, as they have to pay less and less, the more and more that they do less.

There is a serious element of economic thought which wonders whether there is any rational expectations connected to markets. Every burst bubble ending most Booms are always established by irrational expectations. Every Investment advisor suggests that Investors adopt a long-term program of Investment, and the average time it takes for Stocks to return to previous Price after a Recession is something over 3 years; yet, there are always cries of great calamity with every Recession. Economists tear their hair out, trying to find some model to restart the economy, though Recovery almost invariably takes the Ageing of Intermediate necessary Product–somewhere around 3 years. The trouble with the economy may be that We invest with a Trader’s mentality, when worthwhile Investments generally reach real fruition only after about 5 years. I may possibly be in the irrational expectations camp. lgl

1 comment:

marry said...

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