The economy is not coming back

where_the_wealth_goesWhen the economy gets ill, people claim it’s a recession and then a depression. What they can’t do is tell you why this happens. The answer is simple: the economy is re-adjusting its own value after having been oversold.

Unlike energy, value can be destroyed. If you build your economy up and claim it has value, a clock starts. That clock runs during the time your economy has to deliver on that value. No delivery, and people figure it’s a scam.

This is not much different from how we treat new marketplace entries. If a new restaurant shows up and advertises its quality food, we wait for someone to report back about how great it was. If no one does, we avoid it.

Ten years into a burly recession, the talking heads say the boom days are not coming back. They didn’t warn us, because long-term thinking isn’t news.

The pleasant fiction is that what goes down must go back up. The complex reality is that we squandered the value we added to our economy over the past sixty years. It can’t come back because it was spent on dead-end targets.

Look at all that was given us. The postwar world gave the Allies a huge wealth boost. A Baby Boom came of age in the 1960s. Then a boom in cheap Asian labor. After that the internet boom. And what remains of these?

When you have “wealth” it must be put into a form that makes more wealth, or it dissipates. Holding on to wealth is impossible; it needs to become part of something that regenerates, or it falls out of relevance.

We could have built ourselves into the most powerful nations on earth. Instead, following what “the people” wanted, we wasted our wealth on other things. Both government entitlements and private spending on irrelevance crushed us.

Government wasted wealth on civil rights programs that didn’t work, crusades to end poverty, welfare and entitlements, and many well-intentioned programs and hiring a vast army of bureaucrats.

Private citizens wasted wealth on themselves. They bought luxuries, had vacations, partied hard, and saved nothing. Now they’re in depth up to their thyroids and have no savings to speak of. Retirement: never.

This is what happens when you sacrifice wealth. For a while, you have a lot of it. Then it goes away with a big flushing noise. After that, the economy compensates by dropping actual value minus the artificially inflated.

People don’t like to think about it that way. They like present tenses that imply a future without doubt. As in, “now we’re rich, and we never have to do anything again.” That attitude leads to poverty, as history now shows us.

9 Comments

  1. NotTheDude says:

    Will we have to start at the bottom and work our way back to wealth? We won’t have the resources to live ‘well’ anymore soon. That should mean a drift back into a more sound minded way of life.

    1. unkempt says:

      Ideally we’d have a slow, controlled deflation and economic contraction, leaving the country more business friendly and the average dickheads twenty dollar bill worth more, setting us up to grow again from a stable place

      What’s going to happen is we won’t stop and take a breather, we’ll keep driving on head first, and run into a brick wall leaving us broken and crumpled. The worst is yet to come.

  2. Hank says:

    Are there any studies on the quality of American schools in the 60s? I am curious if the failure of civil rights coincides with the lowering of standards to accommodate all comers. You can’t just open to schools to anyone and then flunk students who can’t keep up with the curriculum, so authorities wanted to seem fair and diluted the curriculum. This made schools no longer competitive, and then the process repeated with colleges until high standards had been replaced by low standards across the board.

    Our social wealth has been gutted too, and our healthy systems that allow our next generation to more easily succeed. We traded all that so that some people could get votes.

  3. “We” as Western Civilization are over. If we first reset all our suicidal policies, perhaps we could even begin the process of rebuilding wealth.

    1. That is not to say, don’t have hope, or to be pessimistic, but to take your allegiance and hope away from cancerous institutions.

      Instead place your hope in your own allegiance to reality. Your family’s allegiance. Your community’s.

      Do not be surprised as those around you become upset, angry, and spiteful as their remaining wealth seems to magically disappear (from their perspective), while to us it is obvious that it has already gone.

  4. EvilBuzzard says:

    I respectfully disagree. The economy will not come back if…

    we continue attempting to assuage symptoms without curing the disease. If we punish malinvestment rather buying all the consequences and socializing those losses, we’ll pull the collective head out of the collective rectal orifice in short order. It just requires all the Stupid Keynesian Tricks to fail first.

  5. Owl says:

    People who know about investing should recognize what’s really going on with the economy.

    If we pretend the economy is a stock, what we’re encountering is support: not for the usual marketplace reasons of not wanting to sell below what you believe is a correct value, but via government scrambling.

    The current regime is like a deadbeat dad feeling guilty and suddenly trying to buy love from his kid by being willing to offer anything. Try as he might, no toy or whatever that he could possibly pick will solve the actual problem: him never being around, which demonstrates that he obviously doesn’t care as much as he’s trying to get his child to think.

    The leftist government is scrambling to try to prop up economic numbers because it hopes that will put a smile on our faces and make us love them enough to vote for them again.

    We here out in reality aren’t stupid, gullible children: we know that the only way things at home will really improve is if Daddy fundamentally changes into something far better than what he currently has been.

  6. lisacolorado says:

    This is a great, true article. We’ve thought we were investing when in fact we were all indulging.

    What is wealth? Intelligence, information, money, possessions, status, skills, education in real, working subjects.

    All of that can be taken away, thought, with a sharp blow to the cranium.

    All of those things rest on a foundation of our connections with others who will be there for us if we get that blow. For that foundation to be strong, some of us have to be strong while others get weak, and there has to be a bond of giving as our powers grow and wane, so we can all be held up.

    For that reliable bond to happen, we have to build the foundation on a substrate of decency. When there’s no understanding that we are to be decent, honest and bound to give, the foundation of connections can be crumbled.

    The economy won’t come back but it was probably not on the best footing already anyway. We need to find new ground.

    1. crow says:

      Sounds like insurance. Give something in the belief you’ll get something back. It only works if you believe in the payout. And if you believe you should get one.
      I’ve never operated like that.
      If I believe in something, I give to it, with no strings attached.
      If it gives back to me, I am pleasantly surprised.
      But I don’t expect it to.

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