The story of the economy

I will give a simple view of the current economy.

Supply and demand - with very few exceptions (fads like iPhones and Beanie Babies) supply follows demand.

For the last 20 years, the American consumer has been on a buying spree, fueled by artificially low interest rates and availability of cheap credit.

Cars, houses, consumer electronics, vacations; all purchased on credit, without a corresponding savings to back them up, led us to this economic bubble.

As we overspent the economy went into overdrive and incomes, home values, government, health care all spiralled up as no one cared about the end of free money.

Well the end has come. Jobs have been cut, salaries are frozen if not going down, home values have crashed, and next; government jobs, salaries and benefits will have to be cut to bring things back into balance.

Once that happens, and people get their savings and lifestyle back into balance, then the economy will start to properly grow.

There are new factors that will affect this however. Technology will create a problem as it displaces traditional jobs. Education and especially mathematical and scientific knowledge will be necessary for the worker of the future.

The question is, what to do about the person who cannot work and will not continue to learn.

That is for another post.

ChrisZ (10 min)