ADONDE VA LA ECONOMIA USA? P.1

ADONDE VA LA ECONOMIA USA?  P.1

Hugo Adan.. Dec 19

BASIC CONCEPTS ON ECONOMY

1-Ley de la oferta y la demanda. La oferta refiere el seller, el que vende y la demanda refiere el comprador o consumidor. LEY: Si la demanda crece: sube el precio y si la oferta crece baja el precio.

2- La Demanda del Consumidor solo crece si A- si hay trabajo available o disponible; B- si suben los ingresos y/o salarios y C- si no hay recesión (subida artificial de precios). IN SHORT: el capitalismo depende de la capacidad de gasto del consumidor (spending) y esto a su vez depende de A_B_C. Esto en lo referente al labor, trabajador o consumid

3- Pero el capitalismo depende también del factor CAPITAL disponible en un Estado-Nación. Esto es, depende del factor  D : Gasto Estatal que garantice best Health and Educ for all; E: Apoyo a Inversion productiva del Capital privado; F: correcto balance comercial (or trade) entre Export--Import; G de la estabilidad del sistema Econ. Un sistema estable o sostenible debe mostrar: g-1. baja volatilidad; g-2. alta capitalizacion productiva, lo que a su vez depende de High Tech available y g-3. Control o regulación de los ciclos boom & burst (lo que supone mínima interferenc del capital especulador like WS u otra bolsa de valores) y alta particip de un Estado Central que favorezca el interés nacional, y no la especulacion privada). Hay otros factors: see Bloomberg rept.

….

ESCUELAS ECONOMICAS:             KEYNESIAN vs. AUSTRIAN ECONOMICS

Que factor determ-growth?                   Spending               Savings & Production                                                   

1 KEYNISIANS

1.1 para los keynesianos es la capacidad de gasto del consumidor (or Spending) la clave del crecimiento económico. Lo inverso, el ahorro es lo que lo hace decrecer.

Son por tanto 4 los factores que deciden el crecim del GDP (gross demestic prod):

A-Consumer expending.              B-Goverment expend               C-Business Investmt     D-Net Export

1.2 Para Keynes any amount of savings unlikely to have any impact in his own income. It doesn’t affect also the consumption & income of other individuals. It is imposible for all individuals to simultaneously save any given sum. So it is irrelevant for Nac Growth

1.3 To Keynes, la demanda agregada (suma total de costos y gastos) es la clave in “Any Business Cycle” . Estos ciclos refieren el predominio espiritual de dos animal, the  spirits of bears & bulls. The 1st Moment in Business Cycles: El Bear drives the consumer confidence dawn, causing a decrease in expending (this could be a start of Ec crisis: with stagnation & deflation) and increase in savings. The 2^nd moment of the cycle is definitely the time of real crisis with layoffs & ‘sticky’ wages (salaries congelados) it cause expending to drop & can spiral the econ into depression The 3^rd moment, the Govt or Fed must step in  with spending (selling WMD in US case) and reduce interest rate in order to spark the rest into doing the same (sell and buying).

As we see, the basic rule of Economics come into place in this stage: stimulate the offer & demand, create sellers and buyers. BUT, what the FED or central Govt can do it at internat level cannot be replicated at domestic level. It is the time when the Productive capital (middle classes in invest) need more support. It doesn’t happen now but it happens with FDR (1935) in the previous recession.

1.4- The Govt boost aggregate demand (C Economic Expending, G Govt Expending, I Business Investmt, NX Net Exports) by increasing the Govt section of GDP thorugh public works and National Project (some Prof said that we are in this stage, other totally disagree).

1.5- Normality restored:  the new spending circulates causing increase demand and companies to hire. (We didn’t got it yet said an analyst. We will never got it said other, the implosion is coming and WW3 may be the en end result of Keynesian experiment.

What the role of inflation in all these cycles?.  To Keynes, inflation is the general increase of prices and a steady rate around 2.5 is necessary for a growing economy. What about the same for wages of the labor (not concern in Keynes Theory)

In short: for Keynes “the right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump, but in abolishing slumps and thus keeping us permanently in a quasi-boom. John Maynad Keynes.

….

In Part 2 we will see THE AUSTRIAN ECONOMICS: Mises Institute

….

----