Ummm, I was just wondering

Listening to the radio and reading the news.  I keep having these unanswered questions run into my head.  I’m gonna put this out there in the hopes that I won’t look too incredibly ignorant or short-sighted, or unimaginative.

The Big Three American Auto makers see their sales numbers drop so much that they’re facing total collapse.  Actually all the car makers are seeing their sales numbers drop.  But here’s the thing. Lots of families have enough cars. Cars are running reliably longer. Some families have extra cars.  I’d like a new car, but I don’t need one.  So I’m not going to buy one.  If the cars last longer, maybe everybody who needs a car has one already, or can buy a used one.  Maybe the number of new cars sold just can’t keep going up for ever.  Or is that crazy talk?

And sales of electronics and gadgets, they’re in a slump as well.  Could it be that everyone already has enough TVs?  And is it a tragedy if a company sells  the same amount as they did the same time last year?  I mean to ask isn’t it good enough for a company, say… Target, to sell groceries and sell soap and sell toys, just enough to pay the salaries and wages of their employees and provide a service to the community, maybe give a chunk to charity.  Why is it such a disaster for them to just break even and cover expenses from year to year?

New home sales are down. Existing home sales are down.  Do they have to keep going up every year? My house is 117 years old.  It’s drafty, but it’s beautiful and decent shelter.  New houses are being built, but most of the old ones aren’t getting torn down.  So maybe we have enough houses for a while.  There’s no new land being generated, so this is a no-brainer for an industry that can’t keep growing every year.

Maybe our population is growing enough that we need an increase in new home sales every year, but as near as I can tell (as evidenced by the two vacant houses on our block) we have enough houses.  I haven’t done the math… But is our population increasing enough to support an increase in new homes every year forever?

And finally, can someone explain to me where all the money went?  That theoretical money I had when my house was worth $500k? Did it exist? And if it did, where did it go?  If it didn’t exist, are we just starting to figure out that an immense percentage of the American economy was imaginary?

If you can help me with these puzzles, be gentle.  I’m not dense in every way.  Just a few.

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4 thoughts on “Ummm, I was just wondering

  1. Linda says:

    My sister always used to be puzzled about the millions of dollars of Iowa topsoil that was reported lost after windstorms. So it gets blown away, doesn’t it land somewhere?

  2. Maggie says:

    It’s not exactly the same thing, but here’s what I’ve been wondering about: My husband and I make precisely the same amount of money that we made 6 months ago, and neither one of us is planning to retire for at least 15 years, plenty of time in which retirement accounts to fully recover. Our expenses are not different (except perhaps that gas is a significantly smaller portion of our budget than during the summer when it was $4.00 a gallon). Why do I feel poorer?

    And what the hell right do I have to say that I feel poor when I am richer than 99 percent of the people in the world?

  3. Terry McDanel says:

    The answer to the top soil question is something i know about. And that is easy. It is mostly in two places, behind dams in the Mississippi and in the Mississippi delta. I am not certain of percentages between the two but i would bet on the dams.

    I would guess that feeling poor is psychological and what is causing micro-economists to lose sleep right now.

    Lisa’s question is very interesting and something i gave a lot of thot to when i was in college, but i still feel very ignorant about, because tho economics is interesting i never spend time reading about it. But what little i think i know is this:

    I think this is the distinction between expanding markets and mature markets. A lot of the higher interest rates in speculative investments, stock market or other places, are based on the principle of expanding markets. It is possible that earlier in 2008 Chinese who always dreamed of buying cars were buying them. So cars became a more valuable commodity that could sustain higher investments and perhaps higher returns. But eventually, as you pointed out Lisa, markets always become saturated. This saturation is called a mature market and it fascinated me when i was in college because everything always read about American economics assumed growth which any bright elementary student can tell you always has limits. It was interesting because i never read any discussion of what happens to capitalism when those growth limits were reached.

    I have always been a big fan of Marxism, but that theory was based on the idea that markets could never become mature because the social/political system would break down first. Apparently Marx was wrong about that because he underestimated the combined effect TV and the Republican & Democratic parties.

    Now any good American economist would argue two things. Economic downturns is not the same thing as a saturated market. The Chinese will eventually start buying cars again, from somebody, maybe Chinese if they are smart enough. And secondly advertising and government manipulation/corruption can always generate a new need to replace the saturated market. CB Radios leads to cellphones.

    But the fact remains the markets have to mature eventually. So it would seem that we are fated to live in a world of illusory need. I have had this argument with my students many times. They cannot imagine being happy without all the things they believe they need. And our whole educational system is geared to support their beliefs.

    So much for a liberal education.

    Hope this is relevant. Not certain it is.
    Good question tho.

  4. lisa says:

    Terry, I found your comments enlightening, as I do frequently. Thanks. I didn’t know that a saturated market and a mature market and people who already had enough stuff were all sort of the same thing. I’m always impressed by your ability to come up with specifics.

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