Everyone would like the nation’s economic results to constantly average a good growth rate year after year. However, that’s not possible. When times have been ‘good’ for a while, the seeds for a drop in economic performance are naturally occurring. As business profits increase and home prices rise in good times, more people and companies have entered the industries with increased opportunities. Initially, the effect is good – providing more jobs, new companies, higher household incomes and wealth, etc..
However, until ‘too many’ (a number that can’t be predicted so that it could be avoided) people invest in companies, jobs, technology, homes, etc., it is unclear at what point these investments need to stop to be ‘in balance’. Therefore, at some point, a surplus is created (that is, supply exceeds demand). In other words, the economy has too much ‘wasted’ resources in place to continue at its old growth pace. Price reductions and job loss are the natural economic tools to correct this imbalance over time.
While that can be personally and financially painful (more for a few, than for all), the seeds to correct and reverse the downturn are already being planted. People who previously could not afford to buy a home can eventually afford to buy them at lower prices and probably lower interest rates (since inflationary pressures are dwindling with lower demand), raising their standard of living. Others, who could not afford to start a new business that they previously wanted to create or expand their current business, now have lower rents and possibly lower wages to help them get started and some will take the plunge, creating new jobs. In some cases, the job losses of some industries, because they are no longer needed to the same level as before, will become permanent losses.
That still can be good as most of those human resources are eventually redirected into new and/or growing industries. For example, we lost hundreds of thousands of phone operators in the 1990s when cell phones became popular. However, the new industry for cell phones created more jobs and better jobs than before (in addition to becoming a much wanted and purchased consumer item that delivered valued consumer benefits). This increase in economic activity will grow over time and the good times will be returned. It can be messy – destroying jobs that need to be destroyed and moving people into industries and jobs that need them which in total increases nearly everyone’s standard of living. That’s the business cycle working to produce higher standards of living and doing it better in a free capital market than in any other economic system.
Getting it Right - Welcome
The goal of this blog is to publish my thoughts on a variety of economic and political topics in the hopes that people who find them educational or beneficial will utilize them and/or forward to others who might find them interesting and/or worthwhile to promote to others, possibly including politicians who can push some of these ideas to fruition. The topics in my blog are meant to be of value on a long term basis, not a daily diary or political issue of the day log. If the information posted is useful to you, by all means utilize it and/or forward it as you see fit. If not useful, then merely ignore it. There are no universally agreed upon truisms and too little tolerance between some of those with opposing viewpoints to successfully convince the people with hardened opinions to move away from them. I am an analytical type person who will try to be as factual as I am able.
I disdain the current popularity of name calling and condemnation of viewpoints with no factual alternatives or logical solutions given that I see so often. If you don't have a solution based on fact and logic, then opt out of the discussion because you have nothing to contribute. My background is a degree in Economics from the University of Michigan and 39 years working in middle management jobs for a major retailer. My opinions are forged on the personal experence of life, family, friends, and work as well as triumphs and mistakes that I have made and hopefully learned from. My hope is that this blog helps you.
My first topic will be about personal finance. I chose that one first because most of us work long and hard just to survive but not all of us realize our dreams of becoming financially independent from the labors of our work. Much of our political votes/thinking also focus on the economy and in particular how well we are personally doing financially.
It is relatively simple, without sacrificing the enjoyment of living for 'today' and even at moderate incomes, to retire as a millionaire or multi-millionaire, if you focus on that goal consistently from a young age. It is also simple to ensure that your child or grandchild retires rich. It merely requires a one time gift of just $2,000 invested wisely and the passage of time. Please read my first post on this blog to learn more.
An index/schedule of past and future posts and their dates will always be updated so that it becomes the first post that you see below. If the date of a post that you wish to read is preceded by the word "Posted", then find it below or click on the title in the Blog archive to review.
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