Economic decline?
The opposite of Economic Growth is Economic Decline. Both can be considered exponential functions with computable rates.
How could you measure economic decline? I must admit I don't know enough, or think clearly enough, to really say anything, but I do recognize somehow inflation must be taken in consideration.
The government measures GNP growth if the economy is selling more goods and services. But what if inflation is increasing the cost of things, is that growth? I'd call it decline.
So you'd have to measure growth of GNP minus growth of inflation. If the GNP grows by 5% in 2007, and inflation grows at 4%, then the GNP is really only growing by 1%, or perhaps at least something like that?!
And apparently growth of debt has something to do with the money supply, due to the fractional reserve system. A bank can loan out say 90% of its money, and that money can be paid to someone else who can redeposit it to a different bank. In the end, this can multiply the money supply by a factor of 10. So the willingness of banks to loan out money control how much money is available.
And since banks want to make a profit, they have to loan out money at an interest rate above inflation. So the higher the risk of inflation, the higher the interest rate a bank will charge, and the more borrowers have to consider if they can afford the debt, or so they should think!
I don't know how it all works together, but I accept if LESS cheap energy is available, there'll be less energy available for economic activity. So less energy means prices must rise and inflation must rise, and there'll be less consumption, leading to surpluses, and discounts in the short term, which keep prices down, even if businessess are selling at a loss.
On the other side, if products can't be sold for a profit, businesses will stop production and an overshoot can cause shortages.
Anyway, I accept there must be a decline of economic activity as cheap energy disappears, but I'm just trying to imagine what it looks like. Will it simply be that inflation will eat our prosperity and we'll all make do with less, and then jobs will change away from areas where demand falls due to prices?
And I have a fear of debt, although in some ways debt seems safer place to be during a depression, at least if there's inflation, and you have fixed interest rates. It is hard for me to imagine at all how people take risks LOANING money at all, at long term fixed rates, with fears of inflation.
I read somewhere that a skyrocketing stock market can be a sign of an impending depression, and the DJ passing 1400 is something. Lots of money flowing into too few opportunities. Trying to earn money from money seems like a HORRIBLE game to play, I mean if your sole purpose is to stay ahead of inflation.
I imagine higher oil prices are now hurting demand in poorer countries, so their pain is a precursor to ours, when supply can't keep up, OR when our "line of credit" dries up finally.
I guess I can see economic decline will be visible by unemployment at least. I sometimes imagine unemployment is not a bad thing, if you're prepared. There's lots of neglected work, simply because it can't compete with higher paid work. Anyway unemployment needn't be bad if a person's debt is low, and cost of living is low. Not to say this state is easy to reach, only that it is the place people ought to be looking for, given an uncertain future.
I wish I could see more.
How could you measure economic decline? I must admit I don't know enough, or think clearly enough, to really say anything, but I do recognize somehow inflation must be taken in consideration.
The government measures GNP growth if the economy is selling more goods and services. But what if inflation is increasing the cost of things, is that growth? I'd call it decline.
So you'd have to measure growth of GNP minus growth of inflation. If the GNP grows by 5% in 2007, and inflation grows at 4%, then the GNP is really only growing by 1%, or perhaps at least something like that?!
And apparently growth of debt has something to do with the money supply, due to the fractional reserve system. A bank can loan out say 90% of its money, and that money can be paid to someone else who can redeposit it to a different bank. In the end, this can multiply the money supply by a factor of 10. So the willingness of banks to loan out money control how much money is available.
And since banks want to make a profit, they have to loan out money at an interest rate above inflation. So the higher the risk of inflation, the higher the interest rate a bank will charge, and the more borrowers have to consider if they can afford the debt, or so they should think!
I don't know how it all works together, but I accept if LESS cheap energy is available, there'll be less energy available for economic activity. So less energy means prices must rise and inflation must rise, and there'll be less consumption, leading to surpluses, and discounts in the short term, which keep prices down, even if businessess are selling at a loss.
On the other side, if products can't be sold for a profit, businesses will stop production and an overshoot can cause shortages.
Anyway, I accept there must be a decline of economic activity as cheap energy disappears, but I'm just trying to imagine what it looks like. Will it simply be that inflation will eat our prosperity and we'll all make do with less, and then jobs will change away from areas where demand falls due to prices?
And I have a fear of debt, although in some ways debt seems safer place to be during a depression, at least if there's inflation, and you have fixed interest rates. It is hard for me to imagine at all how people take risks LOANING money at all, at long term fixed rates, with fears of inflation.
I read somewhere that a skyrocketing stock market can be a sign of an impending depression, and the DJ passing 1400 is something. Lots of money flowing into too few opportunities. Trying to earn money from money seems like a HORRIBLE game to play, I mean if your sole purpose is to stay ahead of inflation.
I imagine higher oil prices are now hurting demand in poorer countries, so their pain is a precursor to ours, when supply can't keep up, OR when our "line of credit" dries up finally.
I guess I can see economic decline will be visible by unemployment at least. I sometimes imagine unemployment is not a bad thing, if you're prepared. There's lots of neglected work, simply because it can't compete with higher paid work. Anyway unemployment needn't be bad if a person's debt is low, and cost of living is low. Not to say this state is easy to reach, only that it is the place people ought to be looking for, given an uncertain future.
I wish I could see more.
posted by Ares Olympus at 11:20 AM
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