originally written on January 10th '08

Jan 10 08

The thing about the economy circling the shitter, or going down hill, or
whatever you want to call it, is that the more it is reported the more it
will happen.

This is because the economy doesn't really exist. The economy is what you
believe it to be, and what I believe it to be, and what everyone else
believes it to be. It is a (very powerful) figment of our collective
imaginations.

That isn't entirely true. The reality of it is that some people and
entities have more of an effect on it than others. And some believe in it a
lot stronger than others do.

so heres how it works:

If you think the economy is going to shit, you are less likely to buy
things. You'll want to save that money for later, when you are going to
need it. By not buying things and telling others that the economy is
crashing, you create a negative feedback loop. Suddenly no one else is
buying anything or investing or trading or creating new products/services.
The money flow becomes stagnant. No one is going out to eat anymore. No one
is going to sports games. why? because they think that they'll need the
money for something more important later: such as rent or bills.

The problem with that is that suddenly, all of those people who lived off
of providing you with goods/services aren't making as much money as they
were before. You have actively contributed to the shrinking of their
income. Suddenly they don't have enough cash to pay their bills or go out
or purchase clothes or whatever. Now all of the products and services that
they would have purchased, they are unable to. So they don't.

Reverberate this throughout the entire economy and you have a recession.
Then everyone is fucked.

So if your worried about the economy going to shit, heres what you can do
to fix it (or help to slow its recession): pump money into the economy
-by buying things, renting, going out for dinner or a movie, lending
friends money, etc. convince others that its not as bad as they think it is.
-don't go around spreading ideas about how we're all going to starve and be
homeless. extremism like this can only worsen the situation.

It should be mentioned that this does not advocate spending more than you
would normally just to help the economy. Stay within your limits. Simply
try to not spend less just because you THINK that the economy MIGHT be
receding.

Whether you think it will, or think it won't, you're right.

//this note added on april 2, 2008:
the previous article isn't broad enough. It gives too much importance to
the individual consumer, and not enough to those with huge buying power
(such as corporations and industrialists). It is when these larger influences
start spending significantly less that the economy is really in trouble.
the previous still holds, but it is not the whole picture.

//this note added on aug 10, 2008:
I guess this is called the multiplier effect.