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How economies actually behave and how economists think they (or should) behave are too different things. But there are some simple maxims, such as "there are no free lunches" and, "if it's true good to be true, it isn't". Guiding personal choices by maxims such as these will probably do you better than the "conversations" of economists in the press and media.
Sometimes I think people are jumbling up terminology and weaving with facts and figures that makes it seem impossible for a person to understand. Is the economy really that complicated or is it being made more complicated than it really is.
Modern economics is comparable to the Sophists in the ancient Greek world. It is largely an art for pay with nothing to do with the truth.
Its really very simple. A good economy does not discourage or let go to waste human efforts towards prosperity. That is the only variable. If people are not working and being rewarded for it then its not working in the strategic sense. That is where the old concept of economic rent comes in , now in the modern sense monopoly income which allows people to live without any input or effort of their own.
Modern economics is comparable to the Sophists in the ancient Greek world. It is largely an art for pay with nothing to do with the truth.
Its really very simple. A good economy does not discourage or let go to waste human efforts towards prosperity. That is the only variable. If people are not working and being rewarded for it then its not working in the strategic sense. That is where the old concept of economic rent comes in , now in the modern sense monopoly income which allows people to live without any input or effort of their own.
It really is that simple at the heart of it.
Good post.
I think the answer to the OP's question depends on your perspective. Using the car analogy... looking at a car as an object with lights on it that goes forward or backward, turns, stops and honks is not very complex nor complicated. You do not need to know how to build one, how one works, or the proper way to operate one if you want to get it to move.
However, as soon as you put your mind to trying to predict what a car will do under any of a number of different circumstances then things spiral into immense webs of intricacy and complexity.
Furthermore, even once you understand every basic principle of how every part on a car functions...at the end of the day the car is being operated by an imprecise, unpredictable human who may or may not behave according to established norms.
As with the economy, most people try to manage by comparing scenarios and the likelihood of different outcomes based on empirical measurements and observations. Some are complicated, some aren't. Even a complete understanding of the economy in hindsight (assuming that were possible) would not give you the ability to predict the why, when, how, what, and who of its operations and machinations going forward.
the system seems designed to suck from the middle class to give to the top and the bottom. Problem is, the middle class is disappearing so instead they are simply supplying their liquidity by having the federal reserve buy it up and sit on it. Long term implications of this are as yet uncertain...
The stock market does not really represent reality anymore.. it's just a bunch of big banks trading amongst themselves, with funds supplied by the federal reserve. Great big ponzi scheme with stocks a good 20-30% overvalued now.
3M stock, which I own since I work there, is now trading at a PE of 20-21. That is quite high historically. Many other stocks are far more insanely valued. There's not much value left anywhere at this point.
the system seems designed to suck from the middle class to give to the top and the bottom. Problem is, the middle class is disappearing so instead they are simply supplying their liquidity by having the federal reserve buy it up and sit on it. Long term implications of this are as yet uncertain...
The stock market does not really represent reality anymore.. it's just a bunch of big banks trading amongst themselves, with funds supplied by the federal reserve. Great big ponzi scheme with stocks a good 20-30% overvalued now.
3M stock, which I own since I work there, is now trading at a PE of 20-21. That is quite high historically. Many other stocks are far more insanely valued. There's not much value left anywhere at this point.
Nice post here. I agree. stocks are way overvalued. Coming off a P/E of 44 in 1999/2000, we will see some really low P/E ratio's at some point in time. I am talking historically low. Probably like 4 or something rediculous.
The economy is VERY simple. The problem is government and fed reserve f- it up. They put in place subsidies/grants/scholarhips/govt backed loans/ they control the money supply and the cost of money.
This system is SUPER fragile. We also are entering a dollar crisis in the next 10 years. Hyperinflation occurs when you first have a deflation, and then you pump the currency, and your debt interest exceeds tax revenue. No country has grown there way out of debt when the debt passes 90% of GDP.
Every crash in history has been from leverage. You see an increase in money supply, then a "burp" of this money and a contraction.
The fiat currency game has increased volitility.
You know how much crap I got from people when I was saying in 2006/7 about the housing bubble? Looked obvious to me.
stock bubble and bond bubble looks obvious to me right now, and I am the one getting crap for buying gold and silver bullion. sheesh.
Got plenty of silver years ago.. I like palladium and platinum here because of auto-catalyst demand.
Obamacare is another attempt to tax the middle class so they end up paying 25% of their income just for health care alone (assuming they have to use their deductible) ... just another way to try to suck from the middle to keep the top and bottom going. As hypertiger would say, you can only beat a dead horse for so long until it simply won't get up anymore.
With inflated adjusted wages lower than ever for 'living wage' jobs combined with healthcare costs that are through the roof, the real economy is definitely different from the one propped up by quantitative easing.
The inevitable result of all this is that the bubble, which has been reflated by government spending/debt, must burst yet again, in some way, some form, whether it be bankruptcy and liquidation, inflation, or both.
I'm not going to live my life like doom is around the corner though... in the end it's just numbers on a computer screen.
Yes, but how many people are going to buy a car during the future crisis you are more or less predicting?
I guess buying those metals are predicting. I like to call what I do positioning.
It's like you are traveling 100mph on the highway, and you are going to take a left. I am getting to the right side of the lane and preloading the car to make the left so I can make the turn. Others are blind driving down the middle of the road and will have no way of making the turn and will crash.
P/E ratio's are high, Dividend yields have never been this low for the S&P 500. We are looking at a major crash at some point, one larger than 2008 is likely. I can't tell you when, but it is coming.
We know QE1,2,3 failed and so will 4. What will governments response be when the market dumps again? quadruple the money supply again?
If interest rates go up bonds will go down, stocks will most likely go down, housing most likely will go down, gold and silver not sure but would rather sit it out here, and have been raising cash.
we'll see.
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