bigmacbear | Le freak, c'est chic. (Not!)

In explanation of the current crap economy,

mcfnord wrote in response to a post in

badrobot68's journal:

What has happened is people here and around the world freaked out and cut their spending way back. Furthermore, banks have freaked out. These are the two freakouts that need to end as part of our recovery.

I'd add that we're now in the phase where general employers are freaking out, which only makes matters that much worse, because employers freaking out and announcing layoffs gives their employees that much more reason to freak out themselves.

Now in times like these people act in their own self-interest by saving money under the reasonable assumption that one never knows when one's employer is going to freak out like everybody else. The basic problem is that leads to the Paradox of Thrift in which the individual self-interest in saving is actually in conflict with the wider economy's interest in spending.

These are but two parts of the vicious circle that makes economic downturns feel like they will spiral on until the world comes to an untimely end. But that cannot happen indefinitely on the grand and global scale. Simply put, while individuals may decide that life in these new and strange circumstances isn't worth living, for most people, survival instincts will kick in. Plus there will be a core of positions that will always need to be filled -- and some need even more people the worse the economy gets.

So there is a limit to how low the economy will go. And while it will certainly suck -- and not in a nice way -- for large numbers of people, it won't be "the death of America" or "the death of capitalism" or even "the death of American capitalism". The nation has been through this before. It will be ugly and inconvenient and will probably hang around a lot longer than one would wish, but anyone who can keep one's head while all around are losing theirs will be better off in the long term.

Oh, and as for the title tune, Le Freak was written because of the band's rejection from Studio 54 one fabulous New Years' Eve, and the famous "aaahhh... freak out!" was originally "aaahhh... fuck off!"

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IMHO another reason why the economy is a mess everywhere is that people aren't making enough to get ahead. Look at the number of part time jobs that have exploded over the past 20 yrs vs. full time with no benefits, or contact work that keeps people on the edge. Companies being too greedy to pay people a living wage, and offer some decent benefits.

So what do consumers do? They borrow and in most cases heavily. When you no longer have access to that money, and everyone wants to collect than you have a economic stalemate. No one has any real savings to get ahead.

...isn't keeping your head saving money and therefore continuing the problem?

Totally agree with your statements as I have said some of the same in that very same thread.

Don't get me wrong, savings in and of itself is good for it gives you something to fall back on in hard times, but what was brought up here is that many people, such as myself aren't making enough to really and truly save much, consistently. Which is why I'm going to work on moving up and see if I can get on at T-Mobile since they are still growing supposidly and if I can eek my income to roughly 30K a year, I'll be OK for the next little bit.

Something I read I think back in Nov was how CEOs began getting paid ridiculously high incomes on Wall Street and thus apparently began the cycle of uber CEO etc pays all over the country, which has I think caused wages for the lower peons to stagnate like they have and in yesterdays PI I think it was, a story of how the FBI knew of the corruption on Wall Street as far back as 2002 but they were stretched so thin due to "other pressing matters" by the Bush Administration that they could not delve into it so it was left to fester until it all exploded and fell apart.

As you can see, there is no simple, easy answers here for it seems a multitude of forces were at work to bring the economy to this state - add to that, greedy people like you and me who felt the need to buy and buy and nicer and nicer, despite the economic realities of their earnings.

Edited 2009-01-29 15:17 (UTC)

True. The slow strangulation of the labor market has been going on for a long time -- Thom Hartmann pegs it to the Reagan administration in general and the PATCO strike in 1981 in particular.

I wonder whether anyone ever thought through the idea that starving your employees of cash -- and your employees turn out to be someone's customers and vice versa -- could have anything but dire effects on the economy as a whole. Of course, the almighty focus on the short term prevents this from happening.

That's why it's called a paradox. ;-)

I would say that people without savings do need to save, regardless of the thrift paradox, as the personal consequences of not doing so are pretty dire.

But I'm pretty much a contrarian in these matters, having just bought a house and still shopping (although at a slower pace) for those things necessary to get settled in. I'm only able to do that because I saved the proceeds of the house in Rochester (NY) while renting for three years.

Well I'm trying to engage in the Phish tour stimulus program but that's proving problematic.

At least I have a wedding (albeit a cheap one) being planned to funnel some money to some people...

Le freak, c'est chic. (Not!)

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