03-18-2009, 04:00 PM
I want to reply to TORONTOBOY regarding CONSUMPTION BASED ECONOMY.
I should have been specific about what I actually meant by CONSUMPTION.
There is definitely nothing wrong with consumption but if it is healthy. In US case, consumption was not out of disposable income but out of credit cards. So people weren't really spending out of their paychecks or whatever but overspending due to cheap credit available to them, again buying large homes with cheap credit etc. There hasn't been any concept of saving in US atleast for the last one decade. US middle class borrowed heavily under the influence of living a great life. Never thought it would come back haunting the rest of the world.
China on the other hand, which still is in industrial era, has huge savings. It spent it's national income on infrastructure and elevating middle class. Though it still would need another 50 years to come close to US, economically.
What was all the income of US household spent on? Cars, LCD tvs, big homes? now there is no safety net. If all this income was spent on rather creating jobs and improving life of the people, all this mess wouldn't happen.
Now the standard of living will plunge further or has started already, joblessness is growing. With no jobs there will be no taxes.
Businesses will close down because people are now thinking of how to keep the food on the table for their families and a roof on their heads.
All the wealth has evaporated, closely $11 trillion. The biggest investors in US markets were individual retirees. That money is gone. Govt is running a record deficit but surprisingly still spending.
Where is all the money coming from?
Infact I am concerned about myself because if the taxes are raised beyond this point, it will the something like that saying "the straw that broke the camel's back"
Dubai has followed exactly the same pattern or its investors i would say. I think Dubai profited by taking advantage of its abusive immigration policy.But question is what was it supporting all this with? It might still have billions in funds ITSELF, but not the investors who invested there or the workers who lost their jobs. Dubai doesn't tax personal income. So if it wasn't collecting income tax from these foreign workers then obviously it was using it for below minimum wage labor. As a matter of fact illegal labor standards. So if we say that sort of population was propelling its economy, it would be a little exaggeration.
It collected rent on these projects. Loss of rent might not mean anything again, given the size of its wealth. It probably doesn't give a damn about workers living there or leaving. But overall investors confidence will definitely be shaken. Jailing for bounced check or missing car payment? This is ridiculous. PEOPLE LEAVING DUBAI ARE FLEEING DUE LOSS OF JOBS BUT RATHER A BIGGER FEAR OF GOING TO JAIL BECAUSE OF MISSED PAYMENTS AND STRICT IMMIGRATION POLICIES. One can apply this to himself or herself. If a country I reside in has some down time, will I leave after abandoning my property in such a panic? It doesn't make sense to me.
Dubai still lacks safety for investors.
There still is something brewing which isn't clear, but with all the measures exhausted and still no hope for recovery, it is suffice to say CREDIT CREDIT CONSUMPTION BASED SOCIETY is not a good way to go.
BTW last few lines that I added may be irrelevant to TORONTOBOY consumption based economy discussion.
I should have been specific about what I actually meant by CONSUMPTION.
There is definitely nothing wrong with consumption but if it is healthy. In US case, consumption was not out of disposable income but out of credit cards. So people weren't really spending out of their paychecks or whatever but overspending due to cheap credit available to them, again buying large homes with cheap credit etc. There hasn't been any concept of saving in US atleast for the last one decade. US middle class borrowed heavily under the influence of living a great life. Never thought it would come back haunting the rest of the world.
China on the other hand, which still is in industrial era, has huge savings. It spent it's national income on infrastructure and elevating middle class. Though it still would need another 50 years to come close to US, economically.
What was all the income of US household spent on? Cars, LCD tvs, big homes? now there is no safety net. If all this income was spent on rather creating jobs and improving life of the people, all this mess wouldn't happen.
Now the standard of living will plunge further or has started already, joblessness is growing. With no jobs there will be no taxes.
Businesses will close down because people are now thinking of how to keep the food on the table for their families and a roof on their heads.
All the wealth has evaporated, closely $11 trillion. The biggest investors in US markets were individual retirees. That money is gone. Govt is running a record deficit but surprisingly still spending.
Where is all the money coming from?
Infact I am concerned about myself because if the taxes are raised beyond this point, it will the something like that saying "the straw that broke the camel's back"
Dubai has followed exactly the same pattern or its investors i would say. I think Dubai profited by taking advantage of its abusive immigration policy.But question is what was it supporting all this with? It might still have billions in funds ITSELF, but not the investors who invested there or the workers who lost their jobs. Dubai doesn't tax personal income. So if it wasn't collecting income tax from these foreign workers then obviously it was using it for below minimum wage labor. As a matter of fact illegal labor standards. So if we say that sort of population was propelling its economy, it would be a little exaggeration.
It collected rent on these projects. Loss of rent might not mean anything again, given the size of its wealth. It probably doesn't give a damn about workers living there or leaving. But overall investors confidence will definitely be shaken. Jailing for bounced check or missing car payment? This is ridiculous. PEOPLE LEAVING DUBAI ARE FLEEING DUE LOSS OF JOBS BUT RATHER A BIGGER FEAR OF GOING TO JAIL BECAUSE OF MISSED PAYMENTS AND STRICT IMMIGRATION POLICIES. One can apply this to himself or herself. If a country I reside in has some down time, will I leave after abandoning my property in such a panic? It doesn't make sense to me.
Dubai still lacks safety for investors.
There still is something brewing which isn't clear, but with all the measures exhausted and still no hope for recovery, it is suffice to say CREDIT CREDIT CONSUMPTION BASED SOCIETY is not a good way to go.
BTW last few lines that I added may be irrelevant to TORONTOBOY consumption based economy discussion.
