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Good analysis. Relying on credit to enable consumer spending happened in the mid 1920s as stagnant wages, and income inequality reduced the discretionary budget
by digitaltrees 6y ago
Good analysis. Relying on credit to enable consumer spending happened in the mid 1920s as stagnant wages, and income inequality reduced the discretionary budget of most consumers. At best spending on credit is a temporary boost to the economy as consumers will eventually be tapped out and spending will stop.
I agree with you, consumer debt isn't the solution, more affluent consumers is the solution. Raise wages, sell better products. Its like Henry Ford said when he gave a very large and controversial raise, your employees should be able to afford your products, if they can't, you might not have a market. As leaders of companies, we should return to the value system of generosity because that will actually support more market activity.
- Fjolsvith 6y agoThis sounds exactly like what's happening in America today. Bring jobs back to the country, which elevates wages due to low unemployment, high worker demand. Bring manufacturing back to the country, which causes better products by them being designed closer to the people who would consume/use them.
- lonelappde 6y agoIs that happening? USAmericans can't afford what they consume; the economics only add up when most the work is imported from subsistence workers and slaves. (I almost said ”offshored" but Mexico and South America)
- michaelbrave 6y agoThis is the opposite of what's happening in America today. Wages have not elevated in decades, there is an odd inflation that is only needs specific (food, housing, education), even the manufacturing that comes back to the country is usually automated so there are very little jobs brought by it.
- deleted 6y ago[deleted]
- Fjolsvith 6y agoThe median income for 2018 was up for the second year in a row. 2017 marked the first year since 2007 that median income in the U.S. rose. [1] 1. https://www.investopedia.com/personal-finance/what-average-income-us/ https://www.investopedia.com/personal-finance/what-average-i...
- digitaltrees 6y agoTwo problems with this analysis and data. 1. These gains aren’t enough to undo the decoupling of wages from productivity that has resulted in real wage stagnation. (See here https://www.epi.org/productivity-pay-gap/ https://www.epi.org/productivity-pay-gap/ ), 2. These wage increases haven’t exceeded inflation so actual household spending power has decreased in real terms. Basically consumers have less ability to spend because more profit is being captured. The problem is this profit capture (i.e. the spread between productivity and wages) is good for companies in the short term but damaging in the long term as the market shrinks due to decreased demand. After a thirty year trend of this dynamic America is reaching a brick wall where consumers will be tapped out and growth will stagnate.
- Fjolsvith 6y agoThe point is that the last two years is a change over the last 30.
- digitaltrees 6y agoBut it’s not though. There were wage increases in the 90s, mid 2000s and then the ones you site. Those relate to the business cycle and don’t undo the structural problems and trends that I highlight.
- Fjolsvith 6y agoWell gosh. You don't undo 30 years overnight unless you have a magic wand.