Walk Out On The Debtor Cycle

Welcome to the world, 2009. With economic recession, complacency, factory closing, layoffs, government dependence? Welcome indeed.

We’ve all seen the commercials; most Americans now suffer from credit trouble. For those of you who don’t, we’ll be with you shortly. If not, then you’re extraordinary or lucky. What I wonder these days is if this is the rational path for capitalist expansion. Sure, credit is a valid idea, I want something, I agree to pay and you agree to give it to me for a fee. If I fail to pay you get it back. That’s all well and good. It helps the economy to continue moving when buying power is low. Since the system continues moving, then manufactures continue to see profit, so the job market remains healthy and companies expand.

This is all assuming we all continue to pay. But what happens when we fail, or worse, when so many of us fail that the industry becomes defunct.

Think about this, every American goes out and buys a car on credit. The Auto Industry seeing a sudden jump in demand expands their production. Then months down the line, the Americans all default on the loans. The Auto Industry and the Banks would be caught with the excess product and the returned product. Furthermore, all the profit margins the Industry believed were there suddenly disappeared.  Sounds a bit like the ‘never count your chickens before they hatch’ adage.

What is seems like these days, is a cycle in which one person’s job is dependent upon another person’s ability to have credit. And since the “credit bubble burst” less and less people have maintained good credit, therefore, less people have jobs. Those people then lose credit and the cycle continues in its downward spiral.

So my question is when did we become credit dependent? Why is it that no one pays cash for a big ticket item anymore? I mean in all seriousness, why doesn’t anyone save up to buy a car anymore?

The theory as I see it is, in order to wrestle with diminished spending power we have given the country the ability to pretend they still have spending power. What does that solve? Well, in the short term, it causes a rise in demand. That means that manufacturers need to increase production, meaning more jobs. The problem is that the demand is real in terms of product, but false in terms of profit. The manufacturer is being paid with IOU’s granted by banks. The long term is that when an individual exceeds his limitations, and that bank has to take back that product, someone is left holding the ball. So what happens when a large percentage of the population exceeds their limitations? I think we all know how that turns out, I mean we’ve been living it for a little over a year now.

At this point it seems that this cycle has pushed us to an excessive point of production, on a rather feeble amount of true buying power. And when the bubble burst, the profits all turned into dust and the company had exceeded its budget.

So now what? No one wants to be left with the bad debtor.

What it comes down to is that when buying power is down, production should also go down, not up, as the credit glitch has allowed. What I mean is that supply and demand should be based on actual demand, and not just demand.

The big question is how do we fix it? No clue.

I’m open to suggestions and discussions.

Drop a comment and lets address it.

We the People

There are times when I feel it’s important to draw attention to the matters at hand, rather than the matters we are all guided to talk about. The immediate bull rancor of the bureaucrats, the politicians, the CEO’s, and the media is the economy.

Now, I’m no economist and I have no intention of dragging anyone through a mind numbing explanation of how spending money essentially can aid our economy. While it is a factual statement, there are restrictions on it. The biggest is, the only way to help our economy is to spend money within our economy. Meaning we should reduce our dependence on imported goods. All of this, however, is grossly distant from the point I wish to make.

In the 1978 radio series “The Hitchhikers’ Guide to the Galaxy,” Douglas Adams drifts by several uniquely factual ideas. Most relevant of which is the point late in the series when the impetuous Zaphod Beeblebrox contacts his great grandfather Zaphod Beeblebrox the 4th. The ornery elder then points out the simplest premise in any democratic government.

“The president’s job is not to wield power, but to draw attention away from it.”

Within the series Zaphod, Arthur, and Ford Prefect eventually do find the one man in the universe that actually does wield the power. The existentialist gentleman, who theoretically rules the galaxy, is a rather detached man in a cabin who has named his cat “the lord.” This too is unimportant.

The idea I’m trying to reach, in a rather eventual sense, is that our government, while considerably more real than its fictional counterpart is essentially the same sort of smoke and mirrors.

John Locke, in his essay “Two Treatise on Social Government,” discussed the idea that the power of a government to rule was vested in the consent of the people to be governed. For those of you who aren’t avid historians, the founders of our country were profoundly influenced by the writings of John Locke. Those works were written nearly 100 years before our war for independence.  Again, I’m moving away from the point.

Ultimately, the government that leads us is based on our consent to its rule. Now, I in no way encourage abolishing our government. I would rather encourage the people to recognize and utilize our role in process.

The premise in theory will work unilaterally across all fronts. The government’s power rests solely in us, without us it has no purpose. Therefore we must discover ways to show our dissent. The problem with this is quantity. As individuals we all have the ability to write congressmen, to march on capitals with signs, and yes, to record our opinions on blog sites and editorial columns. But in these forms we fail to gather a large enough cohesive group to effect change.

We, ourselves, are partially to blame for this. Our culture is a vast mixing pot of immigrants. From the four corners of the Earth we have brought different behaviors, religions, ideas, and colors. Eventually, when we trace the power of the government we will find that these differences are the mechanism by which they keep us complacent.

Understand this; if a large enough group of people came together against a specific policy, there is no lobbying group that could save that policy. So the vested interest of the special interest groups is to stay stronger than the people, thereby supplanting their voice for ours. They do this by keeping us divided.

Have you thought about your division today? What separates you from the people you work with or interact with on a regular basis? Are you really that different?