10,000' view of economics

[gregulator]

<disclaimer>I do not proclaim to be a well informed student of economics, so take this with a grain of salt.. it is more a point for discussion, hopefully without political agenda. This is not some well thought out thesis, but rather open ended ideas for thought.</disclaimer>

So the USA has a finite amount of circulating currency (ha!). This currency exchanges hands between citizens for goods and services. To acquire wealth, the people must provide some good or service that is desirable. In theory, the wealth flows to areas of the economy that are the most beneficial (which likely changes as people's needs/wants change). But there is some common baseline average of wealth accumulated by each citizen that can provide for all the basic needs. There is also some baseline level of movement of the currency. The only way for this self-sufficient circle/cycle to be broken is to:

A) Move the currency outside the self sufficient cycle (ie outside the USA).
B) Stagnate the movement of currency (individuals/government/corporations), eliminating a portion of the wealth from the cycle.

The only way in increase overall wealth in the system is to

A) Create more currency
B) Acquire currency from other places outside the self sufficient cycle

Obviously economics in the current world are MUCH more complex than this, but at a basic level, is this evaluation correct? During boom cycles, the USA receives an influx of outside wealth, and perhaps a more rapid exchange of wealth, and during a bust, money flows out of the country and exchanges stagnate?

If our country was 100% self sufficient in terms of goods/services (ie no need to import ANYTHING), would we not see boom or bust cycles (provided we didn't stagnate our own exchanges of currency)?

 

[a777pilot]

The only truism about economics is that if you take all the economists in the world and laid them end to end, you could never reach a conclusion.

 

[piasabird]

Just watch the Kudlow Report.

You can no longer consider the USA to be a fishbowl. Most corporations are multinational with sales all over the world. All business is global.

When you buy an automobile in the USA almost no car is totally manufactured and built in the USA. So Made in the USA Means almost nothing.

Even companies that produce goods make money through investments when things dont go well. Companies also invest in each other. Some companies are making a profit only from their investments.

Buy low sell high.
Repossess other people's property.
Buy rare items and hold them for a long time.
Interest rates on loans (Usury).
Speculation
Futures

 

[wuliheron]

The issue isn't economics, the issue is investments. Economics is two kids trading baseball cards. Investments is you buying a house and a car on credit. In this case the American people and the American government made bad investments. The economy is going down the toilet, the rich are getting richer, the poor are getting poorer, and fewer people want to invest in anything. In response the government is gridlocked and funneling as much money into the banks as humanly possible threatening to topple the whole house of cards.

 

[a777pilot]

Run! Tell Chicken Little that the sky is falling.

 

[QuantumPion]

<disclaimer>I do not proclaim to be a well informed student of economics, so take this with a grain of salt.. it is more a point for discussion, hopefully without political agenda. This is not some well thought out thesis, but rather open ended ideas for thought.</disclaimer>

So the USA has a finite amount of circulating currency (ha!). This currency exchanges hands between citizens for goods and services. To acquire wealth, the people must provide some good or service that is desirable. In theory, the wealth flows to areas of the economy that are the most beneficial (which likely changes as people's needs/wants change). But there is some common baseline average of wealth accumulated by each citizen that can provide for all the basic needs. There is also some baseline level of movement of the currency. The only way for this self-sufficient circle/cycle to be broken is to:

A) Move the currency outside the self sufficient cycle (ie outside the USA).
B) Stagnate the movement of currency (individuals/government/corporations), eliminating a portion of the wealth from the cycle.

The only way in increase overall wealth in the system is to

A) Create more currency
B) Acquire currency from other places outside the self sufficient cycle

Obviously economics in the current world are MUCH more complex than this, but at a basic level, is this evaluation correct? During boom cycles, the USA receives an influx of outside wealth, and perhaps a more rapid exchange of wealth, and during a bust, money flows out of the country and exchanges stagnate?

If our country was 100&#37; self sufficient in terms of goods/services (ie no need to import ANYTHING), would we not see boom or bust cycles (provided we didn't stagnate our own exchanges of currency)?

The dollar is not fixed, but if it was (i.e. if we were on the gold standard) then any time productivity outpaced the expansion of currency you would have deflation.

Wealth is normally always increasing (except for natural disasters, war, etc). Wealth is created by productivity. Productivity is generally always increasing as technology is increasing. Inflation/Deflation affect currency, not wealth.

Boom & bust cycles are caused by human nature, there is no getting around them via economic policy (except by creating a perpetual bust with no boom perhaps).