Posted On July 25, 2023
Why do we go through “Economic Contractions?” (EC’s) They used to be called “recessions” (which is now a forbidden word in the USA). In worst case they are called “depressions” (which is more forbidden).
The reason for EC’s is merchandising.
Merchandising Explained (Simplified)
Merchandising is the act of transferring (selling) a product or service to an entity in exchange for currently accepted substitute for money, a.k.a. currency units. This entity can be a person, a company, a government. The currency units can be dollars, RMB’s, EU dollars, Pounds, rocks with holes in them, etc. Merchandising leads to mass production of “goods.”
The reason merchandising leads to EC’s is due to the fact every market that sells products is a bubble market. Once a shovel is sold to every single ditch digger, no more shovels can be sold. The sales go up very fast, peak, then come down fairly quickly. (This is a simplification. Shovels are broken, and are replaced. New ditch diggers enter the workforce, and so shovels are sold to them.)
The number of shovel producing people needed for production goes up quickly, peaks, then drops quickly. This automatic decrease in the number of shovel makers needed leads the manufacturers to tell the shovel makers to go home. They have to live on savings after that point.
Ditch Diggers Have Been Merchandised
Once this idea caught on, the process of investing currency units into companies whose purpose is to create shovels and sell them to ditch diggers was given the title of Capitalism. Unfortunately, once all the shovels needed are made, the company fails, and the investor is left with an empty factory and no income.
To solve this problem, interviewing ditch diggers became a necessity to find out what they want. At that point, the information regarding ditch diggers becomes merchandisable. This information is bought and sold. The ditch digger is merchandized.
The shovel maker then creates a slightly different shovel that can be sold as a brand new item which has its own bubble market. These makers start advertising and do their best to convince you that you NEED this new shovel or you will loose everything and die a horrible, shovel-less death. From this, Obsolescence and “new model” marketing is born.
If you have a lot of shovel makers, eventually their sales synchronize and fall into the same pattern at the same time. If the shovel makers are only selling to local markets, not much harm is done to a nation’s economy. If the market is nation wide, then the entire nation notices the fact that shovel makers are out of work.
These shovel makers go out to restaurants less. They stop buying shovel paint. They stop buying shovel handles. They put off fixing their house until absolutely necessary. If they have a work vehicle, they do not replace it.
At this point the people in restaurants have less income. The shovel paint factories start laying off workers. The lumber mills stop producing as much lumber and start laying off workers. Soon the entire economy is in contraction (the R word). If it gets bad enough, the “D” word is used.
Debt Based Shovel Buying
In order to prevent the previous scenario, shovel makers and banks got together. The banks agreed to lend currency to people so they could acquire new model shovels. This increases the amount of time that the sales in the shovel market go up, but also increases the slope down for sales in the shovel market. This leads to steeper drop in sales once the full market for shovels is satisfied. The whole nation is affected, and the contraction becomes a “D” instead of an “R.”
Eventually the banks and shovel makers realize these outcomes will happen and start adjusting timings and interest rates to keep the markets good enough for the investors in the shovel factory and the banks to transfer the maximum amount of currency before the inevitable contraction.
Once you move the local market to a national market, the effects are compounded and affect a nation. Once you move the national market to a global market, the effects are compounded even further, and affect the whole world. We are in the world phase of a contraction.
Debt Based Contractions Are Worsened By Lenders
Once the banks and lending institutions realize that everyone and their dog has a shovel, and sales are collapsing, they slow their lending money for shovels. At that point, shovels are unaffordable for ditch diggers. They are still paying off the last shovel purchased, or they have to let the lending institution have it to satisfy their debt. At this point, lending institutions see shovels as a bad problem, and stop lending to all but the very best customers. Interest rates become very high.
This abrupt lending stop kills the shovel market in an unnatural fashion. Sales drop to almost zero. So, rather than keeping a few shovel makers on their staff, many shovel makers start closing factories. The drop in income for customers of former shovel maker employees causes companies to lay people off, and the problem grows in magnitude rapidly.
The world is currently in the phase where lending institutions are cutting off all lending to shovel makers. Contraction of the entire world economy is occurring, and the pace of contraction will speed up. A world “D” is unavoidable unless lending institutions start lending quickly.
If lending institutions do start quickly making loans at good interest rates, the contraction may stop at the “R” phase before beginning to level out. Unfortunately, with national populations decreasing, the “R” phase may be permanently baked into the world economic system.
Solutions To Contraction
The only economy that is more or less immune to these issues is a “cash” based agricultural economy. Food is always needed. It always sells. There is no overall bubble market. However, even agricultural economies need some fabricated items, so that part of the economy will go through up and down cycles.
The best way to avoid severe contractions is to run everything on a “cash” basis. Unfortunately, that does not fit into the current paradigm of a debt based society. In addition, with debt based digital currency and using societal scores, purchases can be controlled to achieve governmental goals.
Recently, in China, once a person was in an area that was not allowed, the phone screen indicated a problem and all digital currency transactions were stopped. This was used to try to prevent the spread of the 19 virus. This wonderful mechanism for implementing other social engineering goals has not escaped the notice of governments worldwide. This is behind the strong move to CBDC (Central Bank Digital Currency) for all governments and banks.
What can you do to avoid Economic Contractions affecting you? Not much. The best thing for you to do is to run on a “cash” basis as much as you can, without using credit. Pay off as many loans as you can, and only buy items you have the currency for. Use as much paper currency as you can, for as long as you can.
This, of course, is almost impossible for many people. For some, then, the only way to start on the correct path is bankruptcy. Unfortunately, bankruptcy is a painful, expensive, and life altering step. It should only be taken if there is no other way out.