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SomeBodybuilder7910 t1_j3ac2m7 wrote

Ok, some dude on YouTube said something stupid. Wow how fascinating! Yeah let's make a video about that and post it to r/videos because so many will enjoy that...

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StarkRavingNormal t1_j3agdkf wrote

If this dude lives in a major US city he could easily think that. You need to make a lot more money to live in like New York City or Las Angeles. So if this dude is say living in Seattle and thinks this I would give him a pass because around him he probably isn't wrong. Maybe even guessing low.

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mywan t1_j3ar18a wrote

No, they aren't. Aside from the fact that very few people could live like I do there's purely economic reasons why it's economic suicide. Economics is driven by the balance between supply and demand. If we have the productive capacity to increase supply but workers aren't paid enough to purchase that supply then production must get cut to match the repressed demand. This not only cost jobs it drives the entire economy down to the level that the pay (demand) can't support. It creates a demand constrained economy.

And economy can also be supply constrained when worker pay exceeds some threshold relative to capital returns. This actually happened back in the 1970s, as is why the Reagan revolution happened when it did. But where are we in that ratio at present? This graph is a few years behind but it tells the story. We live in a demand constrained economy. Thus providing fewer opportunities for businesses to invest in more production in spite of capital being flush with cash beyond all historical precedence. Which cuts economic growth. Especially compared to 1950s and 60s.

In effect not only is our economy smaller than it could be with the same productive capacity it growth is also slower. And all that capital is being spent on rent seeking rather than actually increasing productivity. Because pay is too low to support the demand need to grow that productivity.

Up until the 1980s economist were mostly settled on the tenet that the economy was demand driven. The data from the previous several decades had convinced them of this. So they overheated demand, driving inflation and even stagflation, to the point that it created a supply constrained economy. After Reagan economist became mostly convinced the economy was supply side driven. Especially given the computer revolution that was pumping massive investments and productivity growth. But they also froze out wages. Which meant workers couldn't actually afford to buy up all this excess productivity once the investments were done and companies wanted all the ROI. Instead seeking more wage suppression to maximize profits even more. Thus hurting demand even more.


So no, they are not full of shit. Not even when you ignore that my strategy would not be acceptable to any but a very tiny minority. Things will change sooner or later. I'm just afraid that when it does there will be no sense of balance (again) when it happens.

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