It's a official now. Japan in a recession.

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bryanl

Golden Member
Oct 15, 2006
1,157
8
81
Consumption always shrinks economies. But, and this is also another important but, shrinking an economy via consumption is NECESSARY for human life and well being to exist.
If consumption dropped by 20%, how much bigger would our economy be?
 

fskimospy

Elite Member
Mar 10, 2006
84,825
49,526
136
As I said above, you lack the required intellectual tools to be able to understand it.

There are lots of idiots in the world and there are lots of idiotic things said. Why go out of your way to call me an idiot on this particular issue? It is because you’re scared out of your mind about this particular issue, that’s why.

It is not my fault you are acting the way you do, so don’t pin it on me. If you understood basic economics then you would not have claimed that the statement “consumption shrinks economies” is false. You would have claimed that it is correct.

You WANT to believe that your spending money on consumption is what makes the economy go round. It is to distract yourself from the uncomfortable truth that when you spend money on your own consumption, that it is the producer of the good that made the economy grow, not you. In your economic life of working, earning money and consuming, you have not yet intellectually matured enough to learn how productive activity works. You see yourself spending money, and then the world is essentially opaque beyond that.

The spending that grows economies is spending money on capital goods and labor, and other expenditures made for the purpose of making subsequent sales, which is composed of either more capital goods sales, or consumer goods sales.

If you decide to spend money on your own consumption, then you did NOT invest that money in labor or capital goods. I am going to assume you are not so oblivious as to not grasp that triviality.

Now, it is also trivial that it would be impossible if money were ONLY spent on labor and capital. At some point, in order to make such productive expenditures worthwhile, consumer spending MUST occur. But, and this is an important but, just because consumer spending is needed to ultimately make even capital goods sellers earn profits, it does not in any way imply or require that consumer spending grows economies. Consumption always shrinks economies. But, and this is also another important but, shrinking an economy via consumption is NECESSARY for human life and well being to exist. So contrary to your childish interpretation of what I wrote, that this somehow means consumption is an evil, or a bad thing, what it actually the case is that while consumption does shrink economies, it does not mean consumption is an evil. Consumption is necessary for human life and happiness.

You don’t understand basic economics. I am more intelligent than you in this subject, because not only do I understand the basics, and teach the basics, but I read the history of economic thought. That is what makes myself and many other “Austrians” intellectually superior to you. We don’t even need university or college education to be more knowledgeable in economics than you. You clearly wasted your money.

If you understood basic economics you would never have tried to make a number of the arguments you made. If you want to continue making a fool of yourself please feel free. I will continue to stick with real economics.

Economies are measured by their output. Consuming things does not lessen our output. You are now arguing that consumption makes the economy grow less than it would if every dollar were invested. Growing less than it could is not the same thing as shrinking. You also noted that consumption is necessary for investments to have purpose and value. Investment in additional production would not occur if there was no consumption. If consumption is a necessary condition for growth, then it does not definitionally shrink the economy.

Period.

So not only did you not understand that "not grow" does not equal "shrink", but you missed the fundamental point that consumption is necessary for investment and growth. This isn't complicated stuff, you're getting the really basic stuff wrong.

I find it highly unlikely that you have a doctorate in economics at all, much less are teaching anyone. (Particularly at a reputable university) You're right that I'm scared about one thing, and that's that you might have duped some unsuspecting students into paying money to you.

Call me unsurprised that you consider yourself an Austrian, haha.
 
May 11, 2008
20,068
1,293
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Japan has also been outsourcing a lot of its manufacturing to China.

That sucking sound of our jobs going to china is not only affecting us, it is affecting the rest of the world.

The rest of the world is going into a recession because china has our jobs. The end result will be to continue to print money out of thin air.

China is already becoming more and more expensive as an outsourcing utility for companies in other (mainly western) countries. The higher the living degree, the more expensive China is becoming. Wages rise, Environment rules are setup, All sort of taxes come to existence in China to pay for government spending. Etcetera Etcetera. Another decade or two and China will be up to par to western costs and income and then the next country will be presented as a cheap outsource country.
 

xaeniac

Golden Member
Feb 4, 2005
1,641
14
81
China is already becoming more and more expensive as an outsourcing utility for companies in other (mainly western) countries. The higher the living degree, the more expensive China is becoming. Wages rise, Environment rules are setup, All sort of taxes come to existence in China to pay for government spending. Etcetera Etcetera. Another decade or two and China will be up to par to western costs and income and then the next country will be presented as a cheap outsource country.

And china will be hurting very badly if this does indeed happen.
 

Texashiker

Lifer
Dec 18, 2010
18,811
197
106

Thank you for the link.

What does that leave us with in the long term? Not much of an economy.


China is already becoming more and more expensive as an outsourcing utility for companies in other (mainly western) countries. The higher the living degree, the more expensive China is becoming.

That is why china is manipulating its currency.

China plans for the long term.

While wall street thinks about the next quarterly report, China thinks about the next decade.
 
May 11, 2008
20,068
1,293
126
Thank you for the link.

What does that leave us with in the long term? Not much of an economy.




That is why china is manipulating its currency.

China plans for the long term.

While wall street thinks about the next quarterly report, China thinks about the next decade.

I agree, that China should be planning ahead. I also think they have a billion people as consumers. A very large internal market still. But that market can only be if the citizens have money to spend. The Chinese internal market is not yet saturated for decades to come. The next step will be to reduce the pollution and halt it. Cleaner sources of energy. Energy is key. And to provide electrical power for a billion people. They are pumping out coal powered powerplants like crazy. Pollution is going to catch up with them and that is where western tech (from experience) comes in. Expect China to invest heavily in Fusion technology also.
 

mf0611

Junior Member
Nov 19, 2014
24
0
0
Economies are measured by their output. Consuming things does not lessen our output. You are now arguing that consumption makes the economy grow less than it would if every dollar were invested. Growing less than it could is not the same thing as shrinking. You also noted that consumption is necessary for investments to have purpose and value. Investment in additional production would not occur if there was no consumption. If consumption is a necessary condition for growth, then it does not definitionally shrink the economy.

Period.

So not only did you not understand that "not grow" does not equal "shrink", but you missed the fundamental point that consumption is necessary for investment and growth. This isn't complicated stuff, you're getting the really basic stuff wrong.

I find it highly unlikely that you have a doctorate in economics at all, much less are teaching anyone. (Particularly at a reputable university) You're right that I'm scared about one thing, and that's that you might have duped some unsuspecting students into paying money to you.

Call me unsurprised that you consider yourself an Austrian, haha.

Consumption shrinks economies. It is a fallacy to believe otherwise.

You are not adding to the economy by consuming, i.e. destroying, what has been produced. If you want to add to the economy, then you do so by abstaining from consuming and investing in the production of goods. This is not to say that you can abstain 100%, as you must consume in order to live, but consuming nevertheless takes resources out of the economy.

The argument that consumption shrinks economies is not an argument that the sum total of all of your actions causes the economy to go from one overall size of wealth at one point in time, to a smaller overall size of wealth at a subsequent moment in time. For if you are a wage earner, and you save and invest a portion of your income, then your actions taken together result in a net growth to the economy. But your consumption still shrinks the economy because you are taking resources out of the economy in order to sustain yourself.

Now if you are leeching off the taxpayer, and you consume more than what you earn through productive activity, then your consumption shrinks the economy from one moment in time to the next, compared to what it otherwise would have been had you earned the money instead.

I do not care one single iota that you cannot handle my having a doctorate. The fact that you “doubt” it, given what you have written on this forum so far, is really only your self-doubt. You say you doubt me only because you doubt the value of your own schooling.

Consumption is not necessary for investment and growth. Investment and growth is necessary for consumption. You have the relation precisely backwards. If it weren't for investment in goods, you could not consume those goods. The reason you believe the opposite is because of your philosophical principles you have unquestionably adopted. I mentioned it already to you that you lack the intellectual tools to be able to understand economics. And yet you keep repeating the same fallacy over and over again as if doing so will someday make it true.

To say that consumption is required for saving and investment to occur totally misses the fact of human life that consumption is not a choice. Consumption MUST occur if human life is to exist. Yet consuming does not cause investment. It is quite possible, and for many millennia human life predominantly consisted of, consumption right out of nature, i.e. animals and vegetation, with little if any investment at all.

The reason why the total consumption of primitive societies was so low is not because they just didn’t have a strong enough drive to consume. It is not because they weren’t spending pretty much their entire days searching for food. It is because their saving and investment was so low. They consumed so little because they saved and invested so little.

You are committing what is called the fallacy of composition. You are taking what is true for an individual firm in capitalism, actually a consumer goods selling firm specifically, that the consumer goods seller’s livelihoods depend on consumers spending money on their products, and then you commit the fallacy by then claiming “that relation is therefore also true for the economy as a whole.”

At the level of the economy as a whole, where the concept of “consumption” comes up against the concept of “investment” in the most clear way, the relationship is the other way around. Consumers as such have no choice but to consume. Consumption cannot shrink to zero, or else all human life would end. But, investment can shrink to zero. It is possible for people to only spend money on consumption, and as long as that is the case, there will be no investment and no economic growth. Consumption does not cause investment. More consumption does not cause more investment. At the firm level it does, but that additional consumption comes at the cost of lower investment in total. You can easily grasp this if you imagine every individual on the planet reducing their investment to zero, and increasing their consumption concomitantly, where each individual hopes and expects that their additional consumption spending will “stimulate” more investment. If every individual did this, investment would not increase at all. What is true for this, is also true when the change is less than 100%. If you reduce your investment, you are reducing the amount of goods that are produced. No, your increase in consumption that takes place does not then replace or more than replace that lost investment. Your consumption adds NOTHING to production. The additional revenues that consumer goods companies receive because of what you did, comes at the cost of a reduction is sales revenues that capital goods companies received that they used to receive because of your investment.

The additional nominal investment the consumer goods companies make in response to your increased consumption, will purchase fewer capital goods because of your reduced investment. The prices of late stage capital goods rise, and the prices of earlier stage capital goods will fall. That makes the economy smaller than it otherwise would have been had you continued to abstain from consumption somewhat and invested instead.

Consuming more means investing less, because you can’t spend the same dollar on two different things at the same time. If you spend money on your own consumption, that is money you did not spend on hiring labor, or investing in capital goods that can add to the pie of consumer goods.

The reason you are able to consume the goods you consume at all is because someone, hopefully you, but it could be your parents, or the government, are producing goods, and either selling them for those consumer goods, or you are a self-sufficient consumer and what you produce you directly consume.

I suggested to you that you should read more economics before coming back here to argue, but you don’t seem to be able to take constructive criticism.

Hmmm…do you think that is a major reason why you are making assertions that I am easily exposing as flawed and incorrect? You have an attitude problem. Your problem is that you can’t handle being corrected. You will always stay ignorant that way you know.
 
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mf0611

Junior Member
Nov 19, 2014
24
0
0
Just look at what you said again:
“Investment in additional production would not occur if there was no consumption.”

You say that as if it is possible for there to be a world of human life without consumption. No consumption? Humans would go extinct. What you are really saying is that without human life, there can be no investment.

Even if consumption remained constant in terms of spending, additional investment can be made on the basis of a gradual fall in capital goods as the productivity of labor and capital accumulation rises. Constant real productivity growth does not need constant additions to consumer spending.

As more and more capital goods are produced, that allows for more capital production totally apart from any rise in nominal demand for consumer goods. With bigger and better machinery, more goods can physically be produced without there having to be any increase in nominal costs. That allows for lower prices given a nominal demand for the outputs.

As long as the expenditures on capital goods and labor are high enough relative to consumer spending, and this following fact is guaranteed to go over your head, then economic growth can continue without limit. The same expenditures on consumer goods and the same expenditures on capital goods and labor, can take place besides technological progress, innovation, and capital accumulation that go to increase total output with falling unit prices.

You have no understanding of how economies actually grow. You have blindly adopted mantras and crude Keynesian multipliers and circular flow diagrams, and you believe that makes you adequately equipped.
 

fskimospy

Elite Member
Mar 10, 2006
84,825
49,526
136
You have responded to the fact of the fundamental irrationality of your argument by ever longer babbling. Like I said before, you're just competing for a poseur award.

You're dancing as opposed to just admitting you said something dumb. It's the sign of an insecure individual. The type that would lie about having an economics doctorate.
 

Spungo

Diamond Member
Jul 22, 2012
3,217
2
81
In that case, China will have the greatest economy in the world.

This is the only graph you need to know about China's economy:




I'm not passing any judgement. People should place their bets and see what happens. If Keynesians like Nicolas Maduro and Robert Mugabe are correct, the way to capitalize on this is to buy Chinese stocks and real estate because this rapid credit growth leads to a sustainable economy. As Bernanke put it, the stimulus is like putting training wheels on a bike. Eventually you remove the stimulus and the economy keeps going.

If someone has the opposing view that isn't taken seriously by anyone, China's credit bubble should be avoided because there will be a tsunami of deflation when the bubble pops and the bankruptcies start pouring in. According to the people who subscribe to this theory, that's the way banking works. Credit creation leads to inflation, too much credit leads to malinvestments, these wasteful malinvestments are unable to repay the loans, lots of these loans going bad causes credit contraction, that contraction leads to deflation, and people get wiped out in the process. According to these conspiracy theorists, widespread credit contraction is what caused the subprime and sovereign debt crises. According to these conspiracy theorists, the way to prevent credit bubbles from popping is to stop creating them. If the conspiracy theorists are correct, China is about to experience something far worse than the Great Depression.

The mainstream view is that China is the model to follow. They've invested so heavily in infrastructure that they're ahead of the world in a lot of ways. They've built airports, cities, and shopping malls that have never been used, but they will eventually be used when aggregate demand catches up with aggregate supply. China is currently a world leader in solar power. They're also a world leader in wind power. For China's sake, I really hope Keynesian policies work. Economic prosperity would also bring political stability to the region. Countries start blaming each other when their economies go bad.
 

chucky2

Lifer
Dec 9, 1999
10,038
36
86
I for one have enjoyed reading this thread. It's like Nick1.0 and Nick2.0 having a conversation with themselves...
 

Bitek

Lifer
Aug 2, 2001
10,658
5,228
136
I'll just leave this here. Another stunning tale of success for German economics.

Jump in private consumption helps Germany avoid recession in third quarter

BERLIN (Reuters) - A sharp rise in private consumption more than compensated for stubborn weakness in investment to help the German economy post modest growth in the third quarter and avoid a technical recession, data showed on Tuesday.

The Federal Statistics Office confirmed an earlier flash estimate showing a 0.1 percent rise in seasonally-adjusted gross domestic product (GDP).

Private consumption rose 0.7 percent quarter-on-quarter, the biggest increase in three years, and public investment rose 0.6 percent. Overall consumption contributed 0.5 percentage points to growth, while trade provided modest support.

On the downside, investment in equipment tumbled by 2.3 percent, while gross capital and construction investment also fell. Overall, investment subtracted 0.7 percentage points from GDP growth in the quarter.

But in a positive sign for the fourth quarter, inventories were a major drag on growth, suggesting a rebound in the final months of the year.

"We are not in a recession," Finance Minister Wolfgang Schaeuble told parliament after the data was released.

"We don't have quite such good economic growth as we did before but we are performing close to our economic capacity. We can't allow thoughtless chitchat about a 'crisis' to encourage one."

He defended Chancellor Angela Merkel's "grand coalition" government against accusations that it is not investing heavily enough in infrastructure, spending that critics say is vital to help spur growth in Europe.


After the German economy contracted by 0.1 percent in the second quarter, some economists had feared it would sink into a technical recession with another drop in the third, weighed down by weakness in key euro zone trading partners such as France, a slowdown in China and uncertainty from the Ukraine crisis.

But Germany managed to eke out some growth and now appears to be regaining momentum. On Monday, a closely-watched measure of business sentiment from the Munich-based Ifo think tank rebounded strongly, helped by a drop in the euro to two-year lows against the dollar and by a decline in oil prices.

Crisis? Vhat crisis? I zee nuhzing!
 

Bitek

Lifer
Aug 2, 2001
10,658
5,228
136
Meanwhile that nasty Obama is leading the US to ruin...

U.S. third-quarter growth revised higher on consumer, business spending


U.S. third-quarter growth revised higher on consumer, business spending
By Lucia Mutikani
WASHINGTON | Tue Nov 25, 2014

WASHINGTON (Reuters) - U.S. economic growth was far stronger than initially thought in the third quarter, pointing to strengthening fundamentals that should support the economy for the rest of the year.

The Commerce Department on Tuesday raised its estimate of gross domestic product to a 3.9 percent annual pace from the 3.5 percent rate reported last month, reflecting upward revisions to business and consumer spending, as well as restocking.

Spending on residential construction also was raised, helping to offset downward revisions to export growth and government spending.

Economists had expected growth would be trimmed to a 3.3 percent pace.

"This report will go some way in providing further confirmation about the sustainability of the current economic recovery," said Millan Mulraine, deputy chief economist at TD Securities in New York.

The economy had expanded at a 4.6 percent rate in the second quarter. It has now experienced the two strongest back-to-back quarters of growth since the second half of 2003.

When measured from the income side, the economy grew at its fastest pace since the first quarter of 2012.

U.S. stock futures edged up and the dollar rose to session highs against the euro after the data. Prices for U.S. Treasuries erased slight gains.

BRIGHT SPOT

The third quarter marked the fourth out of the past five quarters that the economy has expanded above a 3.5 percent pace.

Data ranging from manufacturing to employment and retail sales suggest the economy retained some of that momentum early in the fourth quarter. Growth estimates for the final three months of the year are running a bit below a 3.0 percent rate.

The United States remains a bright spot in an increasingly gloomy global economy, with Japan back in recession and growth in the euro zone and China slowing significantly.

The brisk economic growth pace also could boost expectations the Federal Reserve will start raising its short-term interest rate sometime in mid-2015. The U.S. central bank has kept its benchmark lending rate near zero since December 2008.

Underscoring the economy's firming fundamentals, growth in domestic demand was revised up to a 3.2 percent pace in the third quarter instead of the previously reported 2.7 percent pace.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 2.2 percent pace instead of the previously reported 1.8 percent rate.

Growth in business investment was raised to a 7.1 percent pace from a 5.5 percent rate, with a stronger pace of spending on equipment than previously thought accounting for the bulk of the revision.
 

Texashiker

Lifer
Dec 18, 2010
18,811
197
106
Meanwhile that nasty Obama is leading the US to ruin...

Every year at this time is the economy gets a boost. This is nothing more than companies gearing up for the holidays.

There will be another boost when income tax returns are sent out early next year.

Come April and May of 2015 the economy will take a nose dive.

We may see some ups and downs, but the overall long term trend is down.

China has our jobs, the middle class is collapsing into poverty, and there is no long term plan to reverse course. Instead of looking at quarters, we need to be looking at decades. The long term trend since the 1970s has been downhill.
 
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senseamp

Lifer
Feb 5, 2006
35,787
6,195
126
Every year at this time is the economy gets a boost. This is nothing more than companies gearing up for the holidays.

There will be another boost when income tax returns are sent out early next year.

Come April and May of 2015 the economy will take a nose dive.

We may see some ups and downs, but the overall long term trend is down.

China has our jobs, the middle class is collapsing into poverty, and there is no long term plan to reverse course. Instead of looking at quarters, we need to be looking at decades. The long term trend since the 1970s has been downhill.

This is where you put the numbers to prove all the claims you are making.
 

Bitek

Lifer
Aug 2, 2001
10,658
5,228
136
Every year at this time is the economy gets a boost. This is nothing more than companies gearing up for the holidays.

There will be another boost when income tax returns are sent out early next year.

Come April and May of 2015 the economy will take a nose dive.

We may see some ups and downs, but the overall long term trend is down.

China has our jobs, the middle class is collapsing into poverty, and there is no long term plan to reverse course. Instead of looking at quarters, we need to be looking at decades. The long term trend since the 1970s has been downhill.

This is where you put the numbers to prove all the claims you are making.


Seriously. From the quoted article:

"BRIGHT SPOT

The third quarter marked the fourth out of the past five quarters that the economy has expanded above a 3.5 percent pace.
"

We are more likely to feel negative effects from fools in Europe than our own hand, unless the congress or fed did something hasty or foolish (like shutdown/threaten default again)
 

Texashiker

Lifer
Dec 18, 2010
18,811
197
106
This is where you put the numbers to prove all the claims you are making.

Since 2001 we have lost 2.8 million jobs to China.

http://thinkprogress.org/economy/20...owered-american-manufacturing-by-296-percent/
This dovetails with a report from the Economic Policy Institute that the U.S. has lost 2.8 million jobs to China since 2001.

A few years after nixon established communications with China toy manufacturers started offshoring production.

When my brother and I were kids in the 1970s, my brother liked playing with miniature hotwheels and matchbox cars and trucks. If you look on the bottom of the toys to see where they were made, early 1970 those toys were made in the USA. By the late 1970s they were made in China.
 
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senseamp

Lifer
Feb 5, 2006
35,787
6,195
126
Since 2001 we have lost 2.8 million jobs to China.

http://thinkprogress.org/economy/20...owered-american-manufacturing-by-296-percent/


A few years after nixon established communications with China toy manufacturers started offshoring production.

When my brother and I were kids in the 1970s, my brother liked playing with miniature hotwheels cars and trucks. If you look on the bottom of the toys to see where they were made, early 1970 hotwheels were made in the USA. By the late 1970s they were made in China.

That's manufacturing, not economy as a whole.
 

alkemyst

No Lifer
Feb 13, 2001
83,967
19
81
Since 2001 we have lost 2.8 million jobs to China.

http://thinkprogress.org/economy/20...owered-american-manufacturing-by-296-percent/


A few years after nixon established communications with China toy manufacturers started offshoring production.

When my brother and I were kids in the 1970s, my brother liked playing with miniature hotwheels and matchbox cars and trucks. If you look on the bottom of the toys to see where they were made, early 1970 those toys were made in the USA. By the late 1970s they were made in China.

At that same time the entire cars were made much cheaper. They call the original 16 cars the 'sweet 16', they had the redlined wheels that actually had bushings in them.

I had almost all of them (in played with condition), I gave those and my entire Star Wars, GI Joe/Planet of the Apes (12") and legos to my first wife's younger brothers.
 

Texashiker

Lifer
Dec 18, 2010
18,811
197
106
That's manufacturing, not economy as a whole.

Didn't you make a comment awhile back about manufacturing not adding anything to the economy?

I asked you a question in that thread and you never answered.

Who is more likely to contribute to the economy:

Person 1 - factory worker who owns a home, has kids, buys stuff for home, produces a product for consumption, sends children off to college.

Person 2 - low wage retail worker who lives with mom and dad.

Person 3 - someone who receives welfare.

Those 2.8 million jobs we sent to China contributed to the US economy downward spiral. The only way to end that spiral is to get those jobs back.

This is the same thing Japan is running into. Instead of building factories "in" Japan, they are outsourcing.
 
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