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> If someone doesn't have to spend $1000 on new appliances, it's not like that thousand dollars disappears from the economy. Yes it does. Modern economic syste
by bane 11y ago
> If someone doesn't have to spend $1000 on new appliances, it's not like that thousand dollars disappears from the economy.
Yes it does. Modern economic systems are built on consumerism. Saving large sums of money acts like a vacuum on currency and brings markets to a halt. Flowing money lubricates the economy.
That's basically the sum total of the most recent economic crisis, money wasn't moving, so two presidential administrations through gigantic sums of money at the economy, like spraying it down with WD-40, until it started moving again.
> Either the person spends that money on something else or sticks it in their savings account and the bank loans some of it out for someone else to spend.
The problem is that in aggregate, if nobody is spending money, it doesn't move around at all. If nobody takes out a loan, then that money just sits in the bank. Sitting money means nobody needs to manufacture anything because nobody is buying anything, which means there's no reason to employ anybody, so nobody makes money. Because times are bad, they save what they have even more and spending continues to go down.
Fairly quickly the economy goes into a death spiral, and while plenty of people may have money, there's nothing to spend it on anyway.
China is using the same economic trick that's been used time and time again, in the U.S., Japan, other places, to kickstart their economy. It's dumping money into the economy in huge works projects, mostly construction related, and letting that money slosh around. Japan did it in the 80s, but it's no longer working as well as it once did, because pretty much everything they need to build is built, and the population is shrinking so they need even less things.
- seivan 11y agoI'm far from an expert but this is from the Keynes camp(?)
- nosuchthing 11y agoThat theory is based on the assumption that an economy requires consistent purchase of the same products, so in that theory planned obsolescene is great. Yet, the alternative to consumers continuously replacing "old" gear with slightly newer gear is not that a person just deciding they don't want to buy anything and placing that money in savings, they than have money to buy OTHER things, or for entertainment, travel, festivals, trips to mars, adding a 3rd story to their house, et cetera.
- bane 11y ago> they than have money to buy OTHER things, or for entertainment, travel, festivals, trips to mars, adding a 3rd story to their house, et cetera. Believe it or not, there really is only so many other things that people will buy before you start thinking to yourself "hmmm...I'm not using these things at all and they're taking up space, perhaps I should stop buying useless things". It's like my Steam account, hundreds of games I'll never have time to play and I have no idea why I bought them. So I've stopped paying attention to Steam Sales and Bundles. There's only so many appliances, couches, nick-nacks, clothes, electronic goods that you can fit in your house, and only so much time per year to travel. At some point (and this really happens), you just stop buying stuff you don't need to and it just gets piled into various forms of savings.
- nosuchthing 11y agoThat's great though, once a person has a considerable savings they invest in new and local businesses or other endeavors, else they simply begin buying more high quality items.